Intel CEO: Company 'Treading Water' In Sluggish PC Market, Buoyed By IoT, Data Center

Intel CEO Brian Krzanich told investors during Tuesday's third-quarter earnings call that the company was "treading water" in a struggling PC market by reaping the benefits from its Data Center and Internet of Things segments.

Despite the dual release of Microsoft's Windows 10 operating system and Intel's sixth-generation Skylake processor, creating innovation opportunities for OEM partners, the Santa Clara, Calif.-based company still has to wait awhile before the PC market turns around, said Krzanich.

"Some of these transitions will take some time, and I'm cautious to say how fast and when," Krzanich told analysts during Tuesday's earnings call. "Customers have the ability to do Windows 10 upgrades today, but new systems will not be available on the shelf until later this month. Enterprises will go quicker to Windows 10 than prior OS generations, but still ... enterprise upgrades will take longer, into next year. This is a great opportunity, and we should see improvement, but it will be over time."

[Related: IDC: PC Market Has Yet To See Windows 10 Windfall]

Intel posted third-quarter earnings of 64 cents per share on sales of $14.47 billion, for the third quarter. The earnings beat analyst expectations of 59 cents a share, driving sales of $14.22 billion, according to a consensus estimate from Thomson Reuters, but sales were still flat from the same quarter last year. Intel's shares rose 28 cents, to $32.32, after the earnings were reported.

The results come as market research firm IDC said PC shipments dipped 10.8 percent from last year's third quarter, as the market faces a transition period in the midst of a major operating system upgrade clouded by challenging financial conditions.

Microsoft, Hewlett-Packard Co., Lenovo Group Ltd. and others have announced new Skylake-based devices, but they won’t hit shelves until later this fall.

Despite a grim PC outlook, Intel's Data Center segment and Internet of Things segment continued to show strong growth. While Intel’s Client Computing group, hit by weak PC sales, was down 7 percent from the year-ago quarter, the company's Data Center group revenue was up 12 percent, and its Internet of Things group was up 10 percent from the same quarter last year.

Jack Narcotta, industry analyst for Technology Business Research, said Intel's efforts in the Internet of Things market in particular are important for the company. "The Internet of Things is beginning to gain wider commercial traction. … Intel missed the boat with mobile, and they don't want to miss out on this next wave of technology," he said.

System builder partners, for their part, remain optimistic about the dual innovations from Intel and Microsoft and what they mean for the overall PC market.

"I think it is great that Microsoft and Intel are working together in this way," said Jon Bach, president of Puget Systems, a Kent, Wash.-based Intel system builder partner. "The mobile PC industry had stagnated, and to continue to improve, it needed a kick. … We've seen great progress on high performance, ultra-mobile computing in the last few years, and a lot of the credit goes to Intel and Microsoft for leading the way with that innovation."

In the coming fourth quarter, Intel estimated in a statement that revenue would be $14.8 billion, with a projected margin of 62 percent. That estimate is similar to the expectations of analysts polled by Thomson Reuters, who estimated revenue of $14.83 billion.

PUBLISHED OCT. 13, 2015