Intel Reports 4% Decline in Personal Computer Supply Shipments

There are some early signs of a return to growth in the PC market.

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Intel Corporation just reported their third quarter results with revenues of $15.8 billion, up 9 percent year-over-year on non-GAAP gross margin of 64.8 percent. Intel also reported non-GAAP operating income of $5.1 billion, net income of $3.9 billion and EPS of 80 cents. The company generated approximately $5.8 billion in cash from operations, repurchased $457 million in stock, and paid $1.2 billion in dividends during the quarter. Intel's restructuring initiative is still on-track, accelerating the company's transformation to a company powering the cloud and billions of smart, connected devices.

Buried within the supplemental information of this report is some evidence of stabilization in personal computer shipments. Intel and other PC suppliers have been facing a tough consumer environment for a few years and this third quarter provided the first glimmer of hope for a return to growth. Client Computing Group Platform revenues were up 5% year over year. This occurred despite unit volumes being down 4% in that same time period, buoyed by a 6% increase in average selling prices.

Client Computing Group revenues of $8.9 Billion remain the largest segment of Intel's income statement. Data Center Group revenues were $4.5 Billion, up 10% year over year. Internet of Things Group revenues were $689 million in the quarter, up 19% year over year. PC component sales, which comprise over 50% of Intel's sales, continue to overshadow the company's new efforts to diversify into faster growing spaces. Another interesting development is that Intel has also stopped reporting percentage declines in their struggling tablet platform. 

Client Computing Group Notebook, Desktop and Tablet Platform Key Drivers

Q2 2016 compared to Q2 2015: 

- Notebook platform volumes increase 4%
- Notebook platform average selling prices increased 3%
- Desktop platform volumes decreased 6%
- Desktop platform average selling prices were flat
- Tablet platform volumes decreased

First nine months of 2016 compared to the first nine months of 2015: 

- Notebook platform volumes decreased 1%
- Notebook platform average selling prices increased 2%
- Desktop platform volumes decreased 5%
- Desktop platform average selling prices increased 2%
- Tablet platform decreased.

Intel still faces a tough road ahead as they push towards cloud and mobile initiatives while continuing to be a market leader in the struggling personal computer industry. The uptick in notebook platform shipments should put some investors at ease as the company completes its restructuring process. Intel acquired Altera earlier this year, and those synergies should start to show up in the company's 2017 results. Shares of the company fell over 5% in afterhours trading after running up prior to the earnings release.

Asif Khan is the CEO and majority shareholder of Shacknews. He began his career in video game journalism as a freelancer in 2001 for Tendobox.com. Asif is a CPA and was formerly an investment adviser representative. After much success in his own personal investments, he retired from his day job in financial services and is currently focused on new private investments. His favorite PC game of all time is Duke Nukem 3D, and he is an unapologetic fan of most things Nintendo. Asif first frequented the Shack when it was sCary's Shugashack to find all things Quake. When he is not immersed in investments or gaming he is a purveyor of fine electronic music. Asif also has an irrational love of Cleveland sports.

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