Intel earnings reveal weaker chip sales offset by a growing datacenter business
The one obvious black mark on the company’s third-quarter earnings were sales of its Atom processors into tablets. Intel sold 8 million tablet chips, a 39 percent drop compared to a year ago.
Overall, Intel reported net income of $3.1 billion on revenue of $14.5 billion, which represented a 6 percent drop in profits against flat revenues a year ago. Analysts expected revenue of $14.2 billion and and 59 cents per share, which Intel exceeded.
The company’s two main divisions tell the story: Intel’s business is built upon the enterprise first and foremost. Intel’s Client Computing business reported operating income of $2.43 billion, down 20 percent, on revenue of $8.08 billion—a 7.5 percent drop in revenue. Profits at Intel’s Data Center Group, however, jumped 9.3 percent to $3.86 billion, while revenues also jumped 12.3 percent to $3.86 billion.
Intel, however, pulled off the neat trick of seeing the average selling price of its products jump by 15 percent in its PC business, while the actual number of chips fell a significant 19 percent from a year ago. That almost certainly means that Intel is capturing the high end of the PC market, ceding the low-margin value space to AMD. Specifically, notebook chip volumes dropped 14 percent, while desktop chip volumes fell by 15 percent. But prices rose 4 percent and 8 percent, respectively.
Intel, however, is predicting a rather conservative fourth quarter, expecting revenue of $14.8 billion, plus or minus $500 million. That’s just a 2 percent increase from the just-reported third quarter, and relatively flat with the $14.7 billion Intel reported for the fourth quarter last year.