Intel Investors Could Feel PC Strain

NEW YORK (TheStreet) -- Intel (INTC), which reports its second-quarter results next week, could feel the strain of a slowing PC market.

The latest PC shipment figures from influential tech research firm Gartner reveal a year-over-year decline of 0.1% in the second quarter of 2012 with businesses weighed down by economic uncertainty in many parts of the globe. Weakening consumer interest also impacted the PC market, according to Gartner, as smartphones and tablets grow in popularity.

With PC chips making up 65% of Intel's first-quarter revenue, analysts have voiced their concern about the potential impact of a slowing PC market. Even the power efficiency and graphics performance of Intel's new Ivy Bridge chip and its championing of Ultrabooks, or super-skinny laptops, are unlikely to provide a near-term boost, according to Sterne Agee analyst Vijay Rakesh.

"We believe current consensus for Intel for the second quarter and third quarter of 2012 could be a challenge," he said in a note released on Thursday. "While Intel started Ivybridge-Ultrabook promotions late in the second calendar quarter of 2012, overall PC is still down and Ultrabook end-market sell-through could be slow ahead of Win8."

Analysts surveyed by Thomson Reuters are looking for Intel to report second-quarter revenue of $13.57 billion and earnings of 52 cents a share, compared to $13.1 billion and 59 cents a share in the prior year's quarter.

"Worldwide PC demand remains subdued," added Nomura Equity Research analyst Romit Shah. "Gartner indicated yesterday that PC shipments were flat in the second quarter, year-over-year, extending a streak of seven consecutive quarters of flat to single digit growth."

Microsoft (MSFT) confirmed this week that its eagerly-anticipated Windows 8 operating system will be generally available in October. The software will be released to PC manufacturers during the first week of August.

There have already been indications that the PC market is impacting chip makers. Earlier this week, for example, Intel's rival AMD (AMD) cut its second-quarter guidance, citing softer-than-expected sales in China and Europe along with weak consumer demand for PCs.

Nomura's Shah also warns that Average Selling Prices (ASPs) for chips are under pressure as well.

"We see evidence that ASPs are softening," he said. "Our research indicates that aggressive pricing on Core i3 Ivy Bridge parts contributed to AMD's miss on Monday. We also believe earlier in the quarter that there were price cuts to support lower price points for Ultrabooks."

Shah lowered his Intel third-quarter estimates to revenue of $14.3 billion and earnings of 61 cents a share from $14.5 billion and 63 cents a share respectively. The analyst also cut his 2012 forecast to revenue of $56 billion and earnings of $2.36 a share from $57 billion and $2.47 a share respectively.

Intel shares dipped 2.44% to $24.77 on Thursday.

--Written by James Rogers in New York.

Follow @jamesjrogers

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