Intel is starting to get poor report cards from its chums in Wall Street who are a little worried that the chip maker is not doing enough to deal with falling PC sales.
Intel shares are down 3.5 following a couple of negative notes based on a perceived weakening of the PC market.
The guts of the reasoning is no longer that Intel is failing to make piles of dosh from the mobile market, but rather that it is cannibalising its sales of desktop and laptop microprocessors with sales of cheaper Atom mobile chips.
Poor Intel just can't seem to woo Wall Street: first it said Chipzilla's stuffed because it can't make money out of mobile, and then when it does it's downgraded for eating its lucrative PC market. This sort of unfair reasoning should be left to journalists.
According to Reuters, Patrick Wang of Evercore Partners cut his rating on the shares from Equal Weight to Underweight, and slashed his price target from $22 to $20. Wang wrote that cannibalisation of PCs by tablet computers and a breakdown of demand in emerging markets will produce a 10 percent decline in PC unit shipments this year, worse than the six percent decline he'd previously predicted.
The argument is that PC sales are continuing to weaken and there's no sign this problem is going away. While Chipzilla might have done well on the mobile front, it is going to be a long time before that cash matches what it earns from PCs.
To make matters worse for Intel, the tablet and smartphone market is going to be saturated by 2014 and so any moves on Atom will have come too late.
Wang cut his estimate for this year to $52.8 billion in revenue and $1.80 per share in net profit from a prior $53.2 billion and $1.85. For 2014, he projects $54.6 billion and $1.90, down from a prior $55.25 billion and $1.98.
Other analysts said that any bounce in Q3 from Haswell sales won't be able to offset the weakening PC market.
What's strange is that no investors are wondering why the PC market is so stuffed. There are a lot of companies sitting on ancient Windows XP computers which must be fire hazards by now, even if they are not software security nightmares.
Companies cannot replace these PCs with tablets or anything so low powered. Even if they were plugging such hardware into the cloud to keep software demands down, the hardware must be getting close to death.
Analysts seem to be playing down Microsoft dumping Windows XP support in the very near future, when companies will have to upgrade their hardware to run later versions of Windows.
The only other choice is to prop up aging hardware using Linux, but such a move would be problematic. Intel is coming out with some new chips and that could result in a surprise hardware boom.
In this case, Intel will be in a stronger position and certainly have done all it can. If it had not planned for this outcome, then the analysts would equally be moaning that Chipzilla failed here too.