Why That Shiny New iPad Won’t Wreck Intel’s Quarter (This Time)
Apple’s iPad — which skips Intel’s processors for Apple’s own A4 design — is selling well. Intel’s real problem, however, is that the economy is doing worse.
Weaker consumer spending explains why Intel, the world’s largest semiconductor manufacturer, revised its third-quarter revenue forecast to $11 billion — give or take $200 million — from between $11.2 and $12 billion on August 27.
Yet Intel is still doing better than it had been: analysts estimate Intel’s quarterly net income will surge more than 50% compared to the year-ago quarter when it reports third-quarter results Tuesday afternoon.
Intel will report net income of $2.87 billion, or 50 cents a share for the quarter ending in September compared to $1.86 billion, or 33 cents a share during the corresponding period a year ago, according to analysts surveyed by Thomson Reuters. Analysts estimate sales will rise to $10.99 billion from $9.39 billion over the same period a year-ago.
That’s thanks to new processors, introduced earlier this year, that have let Intel scoop up most of the spending on new PCs and servers as the economy rebounded.
Of course, Intel is too big to escape what happens to the rest of the economy. if consumers stop buying PCs, and hopes for a rebound in business spending don’t materialize, Intel will suffer.
The wild-card: smart phone processors built around designs licensed from ARM could start carving out chunks of Intel’s business.
Intel has a plan to seize that market with its low-cost, power-efficient Atom processor. if that plan fails and tablet sales — now just a sliver of the overall computer market — continue to boom Intel could start to lose ground regardless of where the economy goes.
But not yet. Apple will sell 12 million iPads this year research firm iSuppli figures, with Samsung and Research In Motion set to hustle out tablets built on smart phone processors, too.
Even if Apple sells 28 million iPads next year, as some estimate, that’s not much compared to the roughly 250 million processors so far this year, according to Mercury Research. Most of Intel’s sales are in markets tablets won’t touch, such as desktop PCs and servers. Netbooks, which compete most closely with tablets (how much is still to be determined) are worth about 10 million units a quarter.
That could make ARM-based processors a problem for Intel’s business if tablet sales continue to surge and ARM succeeds in placing processors built around new designs in servers and more powerful personal computers. But that won’t happen this year.
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