For the sixth straight quarter, Intel Corp. (NASDAQ: INTC) has posted record sales, partly due to a 22% increase in sales to PC makers. Does that indicate that the PC makers like Dell Inc. (NASDAQ: DELL) and Hewlett-Packard Co. (NYSE: HPQ) are revving up sales as well? Somebody is buying — and presumably selling — all those chips.Server chip sales grew 15% from the same period a year ago, and the only dull spot for the company was in the fast-growing market of mobile devices. There, Apple Inc. (NASDAQ: AAPL) and smartphone makers like HTC Corp. and Samsung Electronics that use the Android operating system from Google Inc. (NASDAQ: GOOG) drove down sales of Intel’s Atom microprocessors by -32% year-over-year. The Atom chips are primarily used in netbook computers, a niche that has been demolished by smartphones and tablets.
China’s Lenovo has moved past Dell to be the number 2 PC company, trailing only HP. Acer is number 4 and Asus is number 5. The top five garnered 60% of PC sales in the third quarter, with Asus growing 18.5% year-over-year and Lenovo up more than 25%. Dell lost more than -1% and Acer dropped -23%, mainly because it needed to dump inventory.
If Acer’s inventory issues have been cleared up, then the upsurge in Intel sales could be an indicator that PC sales will rise in the current quarter. Dell’s problem is that it has been losing sales to businesses, and the company’s shipments in the US fell -7.2% in the quarter. Apple, which also uses Intel chips in its Macs and MacBooks saw a sales rise of 21.5% in the quarter. That bump is likely due to a halo effect from iPhone and iPad marketing and sales.
Intel’s marketing and general expenses are up by more than $1 billion in the first nine months of the year, and rose by $500 million in the third quarter alone. That number will likely rise again in the fourth quarter as the company puts substantial marketing effort behind the new Ultrabook computers due in the next couple of months from 11 vendors.
Intel expects to 65 different Ultrabook models from many different vendors next year. These low-profile, light-weight, sleek machines are aimed at buyers for Apple’s MacBook Air and Intel has begun spending heavily promoting the machines. The company expects Ultrabooks to account for 40% of the consumer PC market by the end of 2012.
For all its boosterism of the PC market, Intel must have figured out that it has to get a significant share of the mobile device market in order to thrive two or three years in the future. The company’s Other Architecture group posted an operating loss of -$140 million in the third quarter, more than half the groups total nine-month operating loss of -$209 million. Quarterly sales have grown in the group to $1.4 billion, but expenses have grown faster. That is almost surely due to higher marketing costs. Fortunately for Intel, it can afford to spend the money.
As for the PC makers, they face a continuing battle for revenue and margin. That is not likely to change. HP is apparently re-thinking ousted CEO Leo Apotheker’s decision to sell off the company’s PC business. Dell, of course, is trying to take advantage of that, especially in China and in the business market. Still, it is highly unlikely that either HP or Dell will be able to match Intel’s performance.
EPS estimates for HP’s current quarter, ending this month, are $1.13, down from $1.33 in the same period a year ago. Dell is expected to post EPS of $0.47 for its current quarter, also ending this month, up slightly from EPS of $0.45 in the third quarter of 2010.
Intel’s shares are up more than 4% this morning, at $24.37, in a 52-week range of $18.90-$24.48, after setting a new 52-week high earlier this morning.
HP’s shares are up more than 0.5%, at $48.32, in a 52-week range of $35.58-$73.40.
Dell’s shares are down about -0.5%, at $16.30, in a 52-week range of $12.99-$17.60.
Apple’s shares are down nearly -4.5%, at $403.38, in a 52-week range of $297.76-$426.70, after the company missed both EPS and revenue estimates in yesterday’s earnings report.
Paul Ausick
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