Intel Corporation (NASDAQ: INTC) is due to report earnings next week and the trend of earnings has been nothing short of extremely disappointing from technology companies. We outlined all of the big tech warnings to demonstrate this and now we have a report showing caution in Intel from Stern Agee’s Vijay Rakesh.
The report noted, “Gartner reported C2Q12 PC Shipments down 2.8% q/q or down by approximately 1.5M units q/q, we believe on weaker consumer despite an improving HDD supply. We believe current consensus for INTC for 2Q and 3Q12 could be a challenge. While Intel started Ivybridge-Ultrabook promotions late in C2Q12, overall PC is still down and Ultrabook end-market sell-through could be slow ahead of Win8.”
Today’s research also noted that Intel has been “a consistent executioner with strong product cycles and a manufacturing-technology push.” Rakesh believes that second quarter PC shipments slowed down sequentially with weaker China-Europe sales with some top U.S PC manufacturers showing double-digit PC shipment declines. That is not good news for the likes of Dell Inc. (NASDAQ: DELL) and Hewlett-Packard Co. (NYSE: HPQ).
Gartner reported last night that second quarter PC shipments were down by 2.8% on a quarter-over-quarter basis. Gartner’s report showed that global PC shipments in the second quarter were 87.46 million units, but some of the major U.S. PC OEMs are down 7% to 10% sequentially. The improving hard-disk drive supply situation apparently did not drive an improving PC shipment environment.
Stern Agee’s Vijay Rakesh gave a Back of the Envelope synopsis: “That is approximately 1.5 million units of Desktop+Notebook+Netbooks at $105 to $120 blended average sale price opportunity per unit, which would imply industry PC processor sales were down about $180 million sequentially.” If Advanced Micro Devices Inc. (NYSE: AMD) revenues are down $100 million as projected, that removes about $80 million or so elsewhere.
Our issue is a bit different from what Stern Agee is hanging on here. We already expect that the second quarter saw a slowing at the end of the quarter. The numbers tell you that and the wave of warnings from technology players was too broad to simply be one-off situations. Still, our big concern is how the current slowing is broadening out in the BRIC nations and in other emerging markets and we do not see how Intel can maintain the current expectation for the third quarter.
The wild card we see is Microsoft Corporation (NASDAQ: MSFT) and the Windows 8 rollout. It is possible that PC sales and shipments are slowing at the same time that PC manufacturers and OEMs have to keep ordering processors while they ramp up inventories ahead of the Windows 8 push. If that turns out to be the case, perhaps Intel will escape the trend of lowering guidance by very much.
JON C. OGG
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