Intel released its quarterly earnings report today, which revealed a 90% drop in profits compared to the same quarter last year. I’m no economy major, but if I try to work through the jargon I believe they’re saying that their profits dropped by 90% over a year period.
Considering how much of a lead they have on rival AMD (also hurting) and the immense popularity of Atom-based netbooks, this comes as a surprise to me, though apparently not to industry analysts. Must be all them books an’ learnin’ they got!
Total revenue is down by a fifth, from $10.7bn during 4th quarter last year to $8.2bn this year. Costs appear to have remained static, as the loss in total revenue is similar to the loss in profit. They are predicting revenue to fall next quarter to $7bn-ish, which means they’ll either have to cut costs to stay profitable, or take the hit.
In raw numbers of processors, what’s happening though? Let’s just think about the value that they’re creating and put numbers aside.
Coca Cola’s price per unit volume has doubled over X number of years, while consumers have had 5-7 times the money. I forget the number of years, Warren Buffett said this though, I’d say he’s a reliable source. So the price of Coke relative to income has actually gone down.
Yes, Intel is seeing a new trend where their lower priced atom chips are selling very well and cutting into their higher priced markets, but I would imagine that in the long run, people will consume more processors. That might not happen right now in an instant, but once we see these chips make their way into cameras, camcorders, our cars, anything you can think of, I think Intel’s overall revenue will increase.
There are a lot of assumptions there, however I see the possibility of Intel turning into the Coca Cola of processors. There’s no doubt that they’ve come very far, but the market for devices that use their products, in my opinion, is only beginning. Personal computing was the first step, but as we see more devices with specific purposes, I think that will really drive up the volume they sell.
Very insightful; I agree. The age of ubiquitous computing is going to be verrrrry profitable to Intel, and as there’s no way they can really lose too much value, I see them weathering this downturn just fine. In fact, I see them bouncing back BIG afterwards, with everyone wanting to get in on a sure thing. That’s good I think, hardware companies are undervalued.
I don’t think we should be blowing “Taps” for Intel just yet, but the days of $8+ billion dollar profits are long gone, I believe.
People are gravitating more and more towards more compact “bargain” processors with the economic climate being what it is (and that climate probably not significantly changing for at least a few years).