Tablet Boom Leaves Intel Out In The Cold
Intel, the world's largest computer chip-maker, has announced a plunge in profits and predicted weak sales ahead, partly as a result of its failure to break into the tablet market.
The company said a weak global economy also combined to curb corporate spending on computers in its third quarter, resulting in a 14% fall in profit to $2.97bn (£1.8bn) compared to the same period last year.
As Intel had previously warned revenues fell, by 5%, while revenue from PC chips fell 8% in line with reports from research firms IDC and Gartner that said worldwide PC sales had fallen more than 8%.
The shift away from PCs toward tablets is a threat to Intel because most tablets do not use Intel processors but cheaper chips similar to the ones found in smartphones.
Intel wants to get its chips into tablets. The launch of Windows 8, Microsoft's new operating system, on October 26 gives it a chance to do so since the software is designed both for PCs and tablets.
But Intel's expectations for the Windows 8 launch are muted - as are its hopes for the Christmas period.
Normally, PC makers ramp up production for the holiday season but Intel CEO Paul Otellini said he expected that increase to be halved this year, in part because manufacturers are cautious about how consumers will take to Windows 8.
The new software is a radical departure from previous Windows versions in terms of how people are expected to use it to control their PCs.
"I'm very excited about this new operating system," Otellini said, but "we haven't had a chance to really judge how consumers will embrace this in the PC space."
Intel's shares fell 3.5% in extended trading in New York after the release of the results.
IBM also disappointed investors by announcing a flat performance over the same period - seeing a similar fall in its share price in after hours trading.