Corporate demand for new PCs has led to a boom in orders for Intel’s chips, whose first quarter net income jumped 29 percent, topping analysts’ projections, and its own expectations.Intel earned $3.16 billion in the first quarter, compared with $2.44 billion last year. Revenues were up 25 percent from last year at $12.8 billion, and higher than the $11.6 billion expected by analysts.
The result sends a strong message to the consumer electronics world that there’s still a huge demand for traditional PCs, despite the threat posed by tablets.
Intel has recently faced several challenges from competitors most notably in the mobile gadgets market, with smartphones and tablets.
As many as 21 million people are expected to buy tablets instead of laptops this year, and that the number could jump to 26.5 million in 2012, according to Goldman Sachs.
As a sign of the strength of its brand, last year’s iPad, let alone the iPad 2, is expected to be so successful it will make more money for Apple than the company’s entire Mac division by the end of this year.
Adding to its own competitive woes, however, Intel was also responsible for a serious product blunder in January, when a design error in a new chip delayed production of new PCs.
Meanwhile PC demand in the US and Europe is also weakening due to the emergence of tablets, and economic worries. And demand in Japan has fallen following the March 11 earthquake and tsunami.
Although tablets still have a long way to go before they catch up with the PC base, the highly desirable gadget is catching up fast.
The PC market is worth around $250 billion, while overall tablet sales in 2011 is expected to be around $35 billion.
Tablets this year should also account for around 60 million units sold, while PCs have a base of nearly 370 million units sold.
Worryingly for Intel, however, PCs have been around for 30 years, while tablets only came along last year.
Gartner also forecasts that Apple will continue to beat the drum for its surging media tablet device for years.
And with Apple designing its own chips for the iPad, as well as other tablet makers opting for chips from its rivals, Intel has less opportunity to penetrate the market.
Nevertheless Intel recently launched its Oak Trail processor aimed at the smartphone and tablet market, as it tries to become a relevant player in the space, but it is a late entrant to the game, which has already galloped ahead.
However, it’s trump card is that chief among Oak Trail’s abilities is improved battery power, which according to sources, will be enhanced further in follow on models to take tablet power consumption from 7.5 hours to potentially weeks and months.
Meanwhile Intel maintains tablets aren’t cannibalising the computer market, one of the main reasons being that tablets are a ‘niche’ product aimed at ‘consumption’, rather than ‘creation’.