Intel financial results show Atom sales dropping

CHIPMAKER Intel has posted modest growth in profit for the second quarter of 2011 with sales of Atom processors diving.

Intel's second quarter 2011 financials show the firm doing well even though PC sales are under threat and it continues to be absent from the fast growing smartphone and tablet markets. Intel posted revenue of $13bn, which was up 21 per cent from the same quarter last year, however its $3bn profit is just two per cent higher compared to the same period in 2010.

In fact, looking at Intel's financials, it is only when you look at the non-GAAP figures that the financials look rosey. However even that can't hide the fact that margins dropped six per cent, or 5.5 per cent if you prefer the non-GAAP figures.

Paul Otellini, CEO and president of Intel said of the results, "Strong corporate demand for our most advanced technology, the surge of mobile devices and Internet traffic fueling datacenter growth, and the rapid rise of computing in emerging markets drove record results. Intel's 23 percent revenue growth in the first half and our increasing confidence in the second half of 2011 position us to grow annual revenue in the mid-20 percent range."

Although Intel reported growth in its architecture, PC and data centre business units, further evidence that netbooks were losing out to tablets came in a 15 per cent decline in the money Intel earned from its Atom processor and chipset business.

The fact that Intel's GAAP profit was largely flat in the second quarter of 2011 is somewhat concerning, given that the firm is seen as a barometer of the PC industry. Perhaps what is more telling is that its PC and server businesses are doing just fine but it is having to contend with higher costs and a declining embedded business as it fights ARM-based chips in the mobile devices markets.

Intel's figures shouldn't give rise to panic, since after all the firm did increase its revenue substantially, but everything is far from perfect. The fact that its profits are not rising nearly as fast should give the firm and its investors some cause for concern for a firm that traditionally likes to flog products that have high profit margins.

Update
Intel got in touch with The INQUIRER to say that the drop in margins was due to the costs of migrating to a new process node and that it was "entirely cyclical around this time ahead of a new manufacturing process".

Earlier this year Intel revealed its 22nm 'tri-gate' process that will enter production in 2012. The costs associated with the transition from 32nm to 22nm are high, but not surprisingly so, and it just goes to show how much chip makers bank on newer processes producing higher yields and lower manufacturing costs. µ