Intel and PC makers are clearly placing a lot of importance and hope on Microsoft's (MSFT) Windows 8, set to be released later this month. Initially, there was plenty of optimism surrounding the new operating system, which is seen as a radical change from previous versions of Windows, but this has waned recently.
Even Intel CEO Paul Otellini has been drawn into this issue recently, reportedly saying that Microsoft should have waited with Windows 8 until it's completely ready. Intel, however, described the news report as "unsubstantiated."
On a GAAP basis, Intel earned 58 cents a share on revenue of $13.5 billion. The average estimate of analysts polled by Thomson Reuters was for earnings of 49 cents a share on revenue of $13.23 billion in the third quarter.The problem was with fourth-quarter guidance, as the world continues to move into a post-PC era, where Intel is less dominant. Intel expects revenue of $13.6 billion, plus or minus $500 million. Non-GAAP gross margins are expected to be between 57% and 58%, plus or minus a couple of percentage points. Analysts polled by Thomson Reuters are looking for $13.74 billion in sales. Intel has always struggled with the performance and cost of its -x86 architecture, as these chips generally consume more power and cost more than those with ARM-based architecture. ARM Holdings (ARMH) designs intellectual property for the chips, then companies such as Apple (AAPL), Qualcomm (QCOM) and others manufacture the chips to their own specifications. Microsoft recently announced pricing for its Windows RT Surface tablet, but not the Windows 8 tablet. The primary difference there is that Windows RT uses ARM-based chipsets, something Intel is just starting to acknowledge as a major competitor. It may be too late, however. On the earnings call, Otellini was repeatedly asked whether the PC growth (or lack thereof) is a structural shift, or if it's just economic-based. "I think it's a bit of each," Otellini said. "Clearly, we saw a softening in the consumer segment. The surprise there was China, which had been very strong, turned weak on us. However, having said that, we believe that when the numbers are all in, we believe PCs grew at half the seasonal rate in Q3, and will do so in Q4 as well. We'll know a lot more about the Windows 8 launch effect 90 days from now."
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