Intel Corporation (NASDAQ:INTC) has taken a leap from just being a chip designing company for PCs to making chips compatible with mobile. Will this giant leap help the chip maker to end its struggle or force the chip maker to do some extra work? Some of the picture will become clearer with the upcoming earnings report from the company.
What to Expect?
According to analysts, the technology giant will record $12.9 billion in sales and earnings per share will come in at 39 cents, in the second quarter results due on Wednesday. The estimated figures are less than the corresponding quarter figures of last year of $13.5 billion and 54 cents.
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In the upcoming conference call, investors will be interested in knowing Chief Brian Krzanich’s outlook for the company.
New Chips May Benefit Intel
New chips for mobile made by Intel Corporation (NASDAQ:INTC) seem to be better positioned than rivals. Intel has tried to enhance the battery life by designing its latest “Atom” processors, which has an edge over technology from ARM Holdings.
Korean Electronics giant Samsung said recently that its new Galaxy tabs will sit on Intel chips, which reflects the superior technology provided by the chip maker.
However, according to research firm Strategy Analytics, the Galaxy Tab powered by Intel Chips will garner only a 1 percent share of the global tablet market this year, according to a report from The Wall Street Journal. Apart from Galaxy Tab, smartphones sitting on Intel chips will also constitute to just 1 percent of market share worldwide.
Intel Corporation (NASDAQ:INTC) is undoubtedly the supreme power in the PC chip market, but in tablets and smartphone segments it does not have much presence. Making the situation worse is the fact that smartphones and tablet chips are less profitable, and competition is high.
Server chips had served Intel better than before when operating margins increased 47 percent, in 2012, compared to 38 percent in PC chips. However, Evercore analyst Patrick Wang has said that low priced chips designed by ARM technology will soon enter the market, which can hurt Intel’s profit.
Shrinking PC Sales
Intel Corporation (NASDAQ:INTC) right now is struggling with declining PC demand due to which profit is declining along with shrinking market share.
PC market seems to be on the verge of ending. For the second quarter, shipments declined 11 percent versus last year, according to Gartner. Intel will witness a decline in its profit even if PC shipments become stable, as the PC manufacturers are shifting towards lower priced devices powered by cheaper chips, which could compete with tablets.
PC is still a dominant contributor to Intel’s profits, contributing around three-fourths of the operating profit.