Intel Corporation (NASDAQ:INTC) recently reported earnings for its first quarter. In terms of year over year numbers, Intel reported declines of 3% in revenue and 25% in net income. Given the downturn in the PC industry, the declines in revenue and earnings are not surprising. According to the IDC, global PC shipments fell 14% in the first quarter of 2013.
According to netmartketshare, Windows 8’s market share in desktops climbed from 2.7% in February to 3.2% in March. While the OS has posted consecutive months of gains in market share since its launch, its adoption trajectory is significantly lower than Windows 7. In over the same amount of time, Windows 7 reached 10.5% market share.
Furthermore, research firm Gartner forecasts a continued slow market for the desktop and notebook PC market up to 2017. Gartner forecasts that desktop and notebook PC shipments will decline from 341 million units in 2012 to 272 million units in 2017.
Confidence or arrogance?
In its earnings call, Intel Corporation (NASDAQ:INTC) outlined a few factors that give it confidence for the second half. CFO Stacy Smith stated
“In the second quarter, we will launch Haswell, enabling a new wave of ultra-sleek designs across multiple form factors by our customers. We believe the combination of an improving macroeconomic environment, Haswell coming to the market; ultramobile form factors like Ultrabooks, convertibles, and tablets; and touch-enabled devices leads to a return to growth in the second half of the year.” (seekingalpha)
A lot of Intel’s confidence stems from Haswell. Haswell is Intel’s “tock” innovation in its tick-tock model for microprocessors. The “tick” in Intel’s model is advancement in manufacturing technology, while the “tock” is a new microarchitecture. Haswell is a new microarchitecture that will use Intel’s 22nm process. While chip manufacturer’s projections for new processors should always be taken with a grain of salt, Intel expects that Haswell will result in touch-enabled Ultrabooks in the $499 to $599 price range, with $599 being the common price.
That is a big reduction from today’s prices. Currently, most Ultrabooks cost at least $800. In addition, Intel expects that Bay Trail will probably result in touch enabled notebooks priced as low as $200. Bay Trail is Intel’s upcoming Atom SoC, which is expected to be released in the second half of 2013. Intel will launch Haswell in the second quarter.
There are a couple of ways to think about this. It could be argued that Intel Corporation (NASDAQ:INTC) is being arrogant for thinking that its new processors will suddenly produce growth in the second half of the year. While that could be argued, Intel actually has some valid points.
If Intel and vendors deliver…
If Intel Corporation (NASDAQ:INTC)’s new chips allow vendors to sell touch-enabled Ultrabooks at $499 and touch-enabled notebooks for as low as $200, the company could very well see renewed growth in its PC Client Group. Touch is becoming a bigger part of computing, and Windows 8 is designed for touch use, so touch enabled devices at that range would likely be competitive. The prices of desktop touch-enabled PCs should come down too.
In addition, the company is entering the Google Inc (NASDAQ:GOOG) Android market in tablets. Android is really becoming the standard OS for mobile devices, and that includes tablets. The IDC projects that Android will reach 48.8% market share in tablets for 2013, which is higher than the 46% projected for iOS. This gives Intel broad potential. While Gartner expects traditional desktop shipments to decline, it expects that overall computing device shipments will rise 9% year over year for 2013, and a lot of that growth is expected to occur in the tablet and ultramobile market. It could be a good second half for Intel’s PC Client Group. Finally, Intel is doing well in servers, so if Intel’s PC Client Group delivers then overall growth should happen.
Keeping it in perspective
While the second half of the year could be good, investors should keep it in perspective. Despite Intel Corporation (NASDAQ:INTC)’s projections, the PC market is struggling majorly. Also, Intel does not expect its presence in smartphones to be revenue significant for the year. Finally, those price points mentioned by Intel might not happen. So while it could be interesting, investors should take Intel’s projections with a grain of salt. Regardless, Intel’s management sounded very confident, and Haswell is definitely something investors should keep a close watch on.
The article Intel Expects Revenue Growth in 2013 originally appeared on Fool.com and is written by Alvin Gonzales.
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