Can Intel Dig Its Way Out of This Hole?

CompChipUnsurprisingly, Intel’s (NASDAQ:INTC) first-quarter results showed more evidence of the death of the personal computer.

The chipmaker maybe doing the best it can to remain optimistic, as CNNMoney reported Tuesday, but the numbers revealed the stark truth. Research firm IDC reported several days ago that worldwide PC sales plummeted last quarter by 14 percent from the year-ago period — which was the worst yearly decline since IDC began tracking PC sales in 1994. For the past several quarters, IDC has reported that the results were the worst on record.

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Like one would expect after looking at the IDC data, Intel announced that the revenue generated by its personal-computer chip business fell 6 percent from the year-ago quarter’s results. Reflecting the havoc wreaked by the drop in chip revenue, the company’s overall revenue fell 2.5 percent to $12.6 billion, while net income fell 25 percent to $2 billion.

In its earnings press release, Intel attempted to draw investors’ attention to one of its its success: the company’s data center business, where sales increased approximately 8 percent from last year, to $2.5 billion. Intel even managed to offer a solid guidance for the upcoming quarter, and investors responded. Shares inched up slightly in after-hours trading, before pushing down into the red…

When Apple (NASDAQ:AAPL) released its tablet computer, the iPad, in April of 2010, the computer industry was turned upside down, and the reverberations of that event are still being felt. The tablet has increasingly made mobile computing devices the computer of choice, and while Intel and its rivals have tried to innovate out of the sales slump, the data continues to reflect a worsening situation.

As part of its innovation efforts, in 2011, Intel unveiled the Ultrabook — its design for a incredibly-slim notebook computer. Other PC manufacturers released their own versions, but sales were disappointing. Even Microsoft’s (NASDAQ:MSFT) Windows 8, ushered into the computing world via its in-house designed tablet, received a lukewarm response. IDC vice president Bob O’Donnell said that the Windows 8 launch “not only failed to provide a positive boost to the PC market, but appears to have slowed the market,” according to CNN. He added that the operating system’s “radical changes” to the user interface, including the removal of the company’s iconic start button, were misguided.

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With computing trends shifting increasingly toward mobile devices, Intel is working to develop chips for mobile devices, but it lags its competitors in that arena, including ARM (NASDAQ:ARMH). In fact, until about one year ago, Intel did not manufacture any chips for smartphones, and the company still has virtually no market share in the United States. But Intel does believe that its new 22 nanometer mobile chip design will change its fortunes when it is released this fall, especially as the chip will incorporate 4G-LTE capabilities.

“We are working with our customers to introduce innovative new products across multiple operating systems,” said Intel’s outgoing Chief Executive Officer, Paul Otellini, in the earnings press release. He has announced plans to retire next month, but the company has yet to name his replacement.

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