Intel in Atomic damage control mode

Intel-logoIntel reported its second-quarter earnings on Wednesday and the general consensus is that the numbers were weaker than expected. Net income was down 29 percent, while sales of PC chips, which make up about two thirds of Chipzilla’s revenue, were down 7.5 percent. Sales fell five percent to $12.8 billion, missing analysts’ forecasts by $100 million. 

Intel is also very cautious moving forward. It said current quarter sales will be in the $13 billion to $14 billion range and the full year should end on a flat note.

Intel’s outlook is a bit more pessimistic than what the Street had expected. This indicates that the PC slump in the first half of the year may have been deeper than thought, but it also may be a way of giving CEO Brian Krzanich more breathing room for his mobile push, as he won’t be under as much pressure to chase numbers in the middle of a leadership transition and a terrible market.

Although the numbers weren’t particularly surprising, it appears that Intel has already shifted into damage control mode. It might be the result of new leadership, or other underlying factors, or just the sheer lack of confidence in the PC industry expressed by analysts and investors. 

It did not take long for Intel execs and spinners to start working their magic.

During an analyst call, CEO Brian Krzanich said computer makers already have 50 designs for 2-in-1 hybrids, based on Haswell chips. He used the opportunity to talk up Silvermont as well, saying it is a unique design that can handle anything from ultra-mobile devices to the datacentre. He mentioned Intel’s Galaxy Tab 3 design win as well. Krzanich also repeated his plans for a significant reorganisation of Intel, that should “flatten the organisation” and improve decision making.

Intel spinners were quick to assign talking points.

In an interview with CNN, Peter Gleissner, European director at Intel, said the slump was caused by macroeconomic difficulties and product transitions. The less vague parts of the interview were eerily similar to what Krzanich had to say. Gleissner said Intel is very well positioned to be competitive and it is working on new form factors, such as 2-in-1 devices. He also mentioned the Galaxy Tab 3 design win.

Gleissner went a step further.

“Yes we were late to the mobility era,” he said, in an unusual display of candour.

He described Atom as much more than a frugal low-end chip, claiming Intel started transitioning to mobile many years ago and it is now coming to fruition.

“All this is now helping us to create a second key architecture, the Atom architecture,” he said.

All this Atom talk from Intel execs comes as a surprise and smacks of a cheap way to appease Wall Street. There was hardly any mention of Haswell, despite it launching in Q2 – and its tame influence on sales. Intel chose to focus on something investors and market hacks may find a bit more interesting, that is, upcoming Atom products, rather than big cores, server parts or Ultrabooks.

Perhaps we are reading too much into this, but it is hard to say whether Intel’s decision to stop worrying and love the Atom is the result of panic or new leadership. We would bet on the latter.

Calling Atom Intel’s “second key architecture” is amusing to say the least.

The original Atom was introduced in 2008 and it was treated like a bad smell, with ridiculous hardware restrictions imposed on netbook makers and little willingness to come up with updated parts, which always seemed crippled at launch. A year later Intel also killed off CULV chips, which could have led to cheap, thin notebooks, but they were apparently deemed a threat to ultra-expensive Ultrabooks.

There are simply too many “what ifs” for Atoms, netbooks and tablets. Intel could have had better netbooks and touch enabled hybrids years ago, but they weren’t cash cows and Intel was happy to see them killed off.

Intel never liked high-volume low-margin chips and five years ago the humble Atom was practically a bastard child stuck with a conservative family. Now, it’s apparently Intel’s “second key architecture” and we can only wonder how the mobile landscape would now had Intel taken it seriously back in 2007/08.

As it stands now, we reckon ARM and Apple owe Paul Otellini a thank you note.