With PC sales as terrible as they’ve been, it should come as no surprise that Intel Corporation (NASDAQ:INTC)’s second-quarter earnings results failed to excite investors. For the quarter, the company reported revenue of $12.8 billion, which represented a decrease of 5.1% year over year. As far as net income is concerned, it declined by 29% year over year, thanks largely, in part, to the softening PC market. The icing on the cake was that the company lowered full-year revenue guidance, which it now expects will be flat on the year, as opposed to up a few percentage points. It’s worth noting that the company expects its third-quarter gross profit margin will be 61%, which represents a 2% sequential increase from the second quarter.
Rounding out the results, Intel Corporation (NASDAQ:INTC)’s PC client group experienced a 7.5% year-over-year decline in revenue, driven by volume declines in desktop and notebook processors ahead of the Intel Haswell refresh. Additionally, its data center group reported flat year-over-year revenue growth, thanks to relatively unchanged volumes and prices. After going through the conference call, I get the sense that Intel executives continue to place their emphasis on the company’s future prospects, thanks to its technological advantage.
The market will decide
With a new CEO in place, Brain Krzanich drove home the importance during the conference call for Intel Corporation (NASDAQ:INTC) to create compelling products suitable for all computing segments, and letting the market decide where the future of computing goes. Investors should take this to mean that the company has placed a greater emphasis on Intel Atom-based products, which will become the company’s key player in the high-growth ultra-mobile segment. In other words, compelling products like Intel Bay Trail are only just the beginning for the company’s renewed Atom emphasis.
The investor fear with this approach is that Intel Corporation (NASDAQ:INTC) Atom products become so great, they will cannibalize its more expensive Core family of processors. But, like the late Steve Jobs, Krzanich also doesn’t fear cannibalization. In his words, “At the end of the day, the market will go where the market goes and better to have a product like Bay Trail that we can play no matter where it goes rather than miss that market.”
A key selling point
Since Intel Corporation (NASDAQ:INTC)’s x86 architecture is compatible with both Google Inc (NASDAQ:GOOG) Android as well as Microsoft Corporation (NASDAQ:MSFT) Windows, it gives device makers an opportunity to “buy in bulk” across product lines, and leverage a greater economy of scale. Additionally, having a single product and architecture that works with two operating systems invites the possibility of a more streamlined manufacturing process. When also taking into account the expected performance gains of Bay Trail against the ARM Holdings plc (ADR) (NASDAQ:ARMH) competition, these factors could allow Intel to make inroads in the mobile computing space, assuming Intel doesn’t charge too much of a premium over the competition.