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Intel sales, profits slide for 2012, but data center business growing

Continued weakness in the PC market hit the chip maker

Intel saw sales and profits drop in 2012, as the company was hit by a slide in demand for personal computers and its continued inability to make it big in the smartphone and tablet markets, but its data center business continued to grow.

The world's biggest chip maker reported revenue of US$53.3 billion for the year, down 1.2 percent compared with 2011, and posted net income of $11 billion, down 15 percent.

At the same time, Intel reported fourth quarter results. Revenue slipped 3 percent and net income was down 26 percent from the final quarter of 2011, and while earnings per share slipped from $0.64 to $0.48, they were $0.03 above a consensus estimate from analysts polled by Thomson Financial.

Full-year revenue from its PC client division, which accounts for more than half of all revenue, fell 3 percent year-on-year.

The root of Intel's PC client problems lies in the declining market for PCs, where it has traditionally been the market leader, and the rise in popularity of tablet computers, where it faces much stronger competition.

Worldwide PC shipments fell 5 percent in the last three months of the year compared to the same period of 2011, according to an estimate from Gartner. The market amounted to 90.1 million units, it said.

Much of the drop is being blamed on tablet computers, which rather than emerging as a new class of machine that takes a place in the home between smartphones and PCs, is becoming a replacement for a PC, said Garner.

In the tablet market, Intel faces competition from companies like chip makers relying on chip designs from competitor ARM.

However, Intel's data center business recorded better results. Sales rose 6 percent to $10.7 billion as demand for its server chips climbed.

"We made tremendous progress across the business in 2012 as we entered the market for smartphones and tablets, worked with our partners to reinvent the PC, and drove continued innovation and growth in the data center," said Paul Otellini, Intel president and CEO in a statement.

"As we enter 2013, our strong product pipeline has us well positioned to bring a new wave of Intel innovations across the spectrum of computing," he said.

For the coming year, Intel said it expects to see sales rise in the low single-digit percent range.

Intel stock initially jumped on the announcement of the results, which came just after the close of trading on the U.S. NASDAQ market. In after-hours trading, the company's stock is currently at $22 per share, down from its close at $22.68.

Martyn Williams covers mobile telecoms, Silicon Valley and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's e-mail address is martyn_williams@idg.com


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