U.S. consumers and businesses bought 71.3 million PCs, representing a drop of nearly 5 percent over 2010, when they bought more than 75 million, IDC said. So much for the year.

And the fourth quarter, traditionally one of the industry’s strong points, wasn’t much help. Shipments of PCs in the fourth quarter declined by nearly 7 percent, according to IDC; Gartner said they fell by 6 percent. Hewlett-Packard saw its U.S. shipments drop by 25 percent in the IDC report; Dell by 5 percent; Acer by 14 percent; and Toshiba by 2 percent.

HP’s flirtation with spinning off its PC division last year hurt sales, as businesses and consumers lost confidence in the company. The main beneficiary of that appears to have been China’s Lenovo, the world’s No. 2 PC maker, which saw its shipments, on a global basis, surge by 37 percent, though it’s not much of a player in the U.S. market.

For the full year, HP saw its shipments fall by nearly 5 percent; Dell’s fell by more than 8 percent; and Acer’s fell 30 percent in the U.S.

So who grew? Apple. It saw its shipments grow by 18 percent in the quarter, according to IDC, and by 21 percent in the Gartner report. As of the end of the year, IDC said, Apple’s share of the U.S. market amounted to 10.7 percent, which is up from 8.8 percent a year ago.

This according to Samsung CEO Choi Gee-sung, who claimed, at the Consumer Electronics Show this week, that his company will ship more handsets than its Finnish rival this year, to become the world’s top mobile phone company. And while that might sound like CES braggadocio, Gee-sung may well be right. Certainly, Samsung seems to be quickly closing the gap between the two companies.

In the third quarter of 2010, Samsung shipped 71.6 million handsets to Nokia’s 117.4 million, claiming a 17.2 percent market share to Nokia’s 28 percent, according to Gartner.

A year later, Nokia continues to lead, but not by quite as much. In the third quarter of 2011, Samsung’s handset shipments rose to 78.6 million. Meanwhile, Nokia’s declined to 105.4 million. Still a big gulf there, but one that seems to be narrowing considerably.

Samsung expects to sell 374 million handsets worldwide this year, up from the 325 million it sold in 2011. If it pulls that off, and Nokia’s sales slip a bit more than expected — right now, analyst projections call for about 388 million — Samsung may well unseat Nokia, ending its 14-year dominance of the mobile phone market.

The new forecast calls for companies and governments to spend a combined $3.8 trillion on information technology, which would amount to growth of 3.7 percent from 2011. The previous forecast had called for growth of 4.6 percent.

For perspective, the difference on a dollar basis is about $100 billion, which is certainly real money, but when you consider the various puts and takes affecting the projected spend, it makes a certain amount of sense.

Gartner says that all four of the major technology sectors it tracks — computing hardware, enterprise software, IT services, and telecom equipment and services — will see their growth rates slow this year.

You can probably guess why: The uncertain global economy, the euro zone sovereign debt crisis and the disruptions on the hardware supply chain from last year’s flooding in Thailand on hard-drive production have all teamed up to perform a triple whammy on the tech sector. The Thailand problem will probably last until well into 2013, Gartner’s Richard Gordon says in a statement, echoing what Seagate CEO Steve Luczo told AllThingsD in an interview in November.

Telecom equipment spending will probably suffer the least, Gartner says. Sales in that sector will grow by nearly 7 percent to $475 billion, followed by the enterprise software market, which will grow by 6.4 percent to $285 billion. The chart at the right, which I screengrabbed from Gartner’s handout, breaks down the revised outlook by each sector versus what the previous growth outlook had been.

Gartner also trimmed its average annual growth projection for IT spending through 2015. It now expects spending to grow by about 5 percent on average, down only slightly from 5.4 percent, but in the wider scope of a few trillion dollars, a fractional change still amounts to hundreds of billions of dollars.

That has yet to happen. And if it ever does, it won’t be anytime soon: Gartner projects that by the end of 2015 digital music revenue may hit $7.7 billion worldwide, while CD sales will still be around $10 billion.

But there’s something else that really struck me about Gartner’s newest numbers. Take a look and see if you can figure it out:

Catch it? Took me a minute, because I couldn’t figure out what “Personalization Services” were. What kind of name is that for a $2.1 billion industry?

Here’s the English-language definition, via Garnter’s PR team: “The ringtones and ring-back tones that consumers pay for to use on their mobile devices. Typically, these can be acquired directly from service providers and synched to the mobile phone over the air, or can be acquired via a PC or connected device and then synched to the mobile phone.”

To sum up: More than 10 years after Napster, one of the key pillars of the music business is ringtones, a business that peaked around 2005, when some of you would have recognized the image at the top right of this post.

If you’re reading this, you probably haven’t paid for a ringtone since 2007, and you probably don’t know anyone who does. But there it is, generating two-point-one-billion dollars.

And Gartner thinks ringtones won’t die off anytime soon — four year from now, it thinks it’s still a billion-dollar business. Meanwhile downloads, dominated by Apple’s iTunes, are going to grow ever so slowly. Which means that if digital music is ever really going to take off, it’s going to be up to subscription services like Spotify, which up until now haven’t gained any real traction.

Gartner figures that will change, and who knows? Perhaps the Facebook fire hose that’s spraying Spotify at the social network’s 800 million users will work. So far, the signs are encouraging.

But if that doesn’t work, things are going to look as grim as ever — a flatlined CD business, a slow-growth download business controlled by Tim Cook, and … Crazy Frog.

[Image via Wikipedia]

Many industry pundits have talked about the Consumerization of the Enterprise — the idea that enterprise users expect the mobility, integration and ease of consumer technologies in their work lives. People often cite the move to user-purchased mobile devices like the iPhone or user-provisioned collaboration services like Box, DropBox and Yammer as evidence of this phenomenon. And because many of these services have freemium models, IT departments are finding that huge numbers of their employees are already using these services for business purposes in addition to personal ones. So in many ways, consumer expectations are driving the ways enterprise CIOs think.

But what about the other side of the phenomenon? Eddie Murphy’s character Billy Ray Valentine influenced Dan Aykroyd’s character, Louis Winthorphe, III, as much as the reverse. What’s less discussed — but equally fascinating — is the impact of enterprise requirements on the consumerization trend.

Many of the aforementioned start-ups initially focused entirely on end-user needs, providing simple user interfaces and sign-ups, and building multi-million user customer bases in the process. But as these vendors switched focus from user acquisition to monetization, they realized some IT department requirements are legitimate, and more importantly, are barriers to sale.

The most recent example: Box. Box founder Aaron Levie probably never imagined his company would be working with enterprise IT directors in designing his product roadmap when he started his file sharing company, but nonetheless it recently announced partnerships and integrations around identity federation, mobile security, e-discovery, and other IT-centric areas.

In contrast, DropBox has continued to focus heavily on end-user adoption with limited IT focus. Indeed, their total reported user counts dwarf those of Box or any other service. Yet the CIOs I’ve spoken with had a proliferation of users on DropBox and Box when they decided to standardize on a collaboration service. Despite the fact that their companies may have had more DropBox users, Box’s enterprise functionality tipped the scale in its favor. So while user adoption gets you in the door, without some enterprization you don’t get the sale.

Similarly, for Google’s Enterprise team, bringing Gmail to companies involved a lot more than just learning how to charge for the service. Google has spent the past several years trading places with Microsoft, investing in policy management, security, compliance and other IT-centric functionality to address early inhibitors to adoption. And it has worked. Analyst firm Gartner now sees Google as a viable alternative to Exchange for enterprise collaboration.

Indeed, even in the truly consumerized world of mobile devices, iPhones and Androids don’t roam free in most large companies. Many security-sensitive organizations are investing in Mobile Device Management (MDM) solutions like those from Good, MobileIron, Zenprise and Symantec, to bring enterprise manageability to smartphones.

The Enterprization of these traditionally consumer apps is going to center around three legitimate enterprise requirements:

1. Data ownership: While enterprises are excited to leverage the flexibility and fluidity of cloud apps, the idea of an enterprise’s intellectual property spread across hundreds of cloud services, many times in user-provisioned accounts where the enterprise has no access, is scary. What if the company is involved in a lawsuit and has to put a user’s data on legal hold? How can the company recover data if the cloud service loses it? And most importantly, how can the company get its data back if it wants to change services? Tough questions if the data is trapped behind a user’s personal cloud account.
2. Data security: Similarly, the thought of sensitive customer information living in cloud accounts where users choose passwords like “password” or, for the more secure, “password1,” is nerve-wracking to a security officer. How can the company ensure that its data is protected with strong passwords? When an employee leaves, how can the company revoke access to all cloud apps at once? Without company administrative rights, the enterprise is dependent on the judgment of the user.
3. Data compliance: Whether data is stored on your G:\ drive or in Gmail, if it’s work-related, for the most part the same compliance rules apply. While SOX, FRCP and GLBA are not as sexy as FourSquare, Angry Birds and AirBnB, they are still critical for most companies. How can companies meet regulatory requirements around searchability, records retention, logging and other areas?

The real challenge as start-ups address the needs of enterprises is to maintain the core value that earned users in the first place. If they add every feature IT asks for, will the products lose their usability? If they make it easier to lock down access to the systems with two-factor logins when you can’t remember one factor, will users revolt? If these tools were used to get around IT, will the fact that they can now be monitored scare users away?

Time will tell. But this grand experiment would make the “Trading Places” brothers proud. And a lot more than $1 is at stake.

Nick Mehta is CEO of LiveOffice and has served in senior operating roles in the enterprise and consumer technology markets for much of his career. He spent more than five years at Symantec Corporation and Veritas Software Corporation (now Symantec), where he served as vice president and general manager of the Enterprise Vault information archiving and discovery software business.

That’s the latest from research outfit Gartner, which says Apple’s tablet will command 73.4 percent of global tablet sales this year and the majority of them until at least 2014.

By comparison, Android tablets will account for just 17.3 percent of sales in 2011. And while that’s an improvement over the 14.3 percent they claimed in 2010, it’s 28 percent lower than the share Gartner projected last quarter.

Why? Because competing against the iPad is a thankless task — so far, anyway.

“This is because Apple delivers a superior and unified user experience across its hardware, software and services. Unless competitors can respond with a similar approach, challenges to Apple’s position will be minimal,” says Gartner VP Carolina Milanesi. “Apple had the foresight to create this market and in doing that planned for it as far as component supplies such as memory and screen. This allowed Apple to bring the iPad out at a very competitive price and no compromise in experience among the different models that offer storage and connectivity options.”

But the market should balance out a bit more over time, particularly if Google resolves some of the issues troubling Android tablets. By 2015, Gartner figures sales of Android tablets will hit about 116 million, compared to 148 million for Apple.

“So far, Android’s appeal in the tablet market has been constrained by high prices, weak user interface and limited tablet applications,” Milanesi said. “Google will address the fragmentation of Android across smartphone and tablet form factors within the next Android release, known as Ice Cream Sandwich, which we expect to see in the fourth quarter of 2011. Android can count on strong support from key OEMs, has a sizeable developer community, and its smartphones application ecosystem is second only to Apple’s.”

There are a billion and a half PCs in the world and while Gartner change their estimates here and there, they also estimate there will be two billion PCs in the world by 2014. So when I look at that, I think the idea that the PC is no longer here is complete nonsense.

Michael Dell, in a video interview on FT.com

Not that it would have ever come, anyway. Because HP is no longer the innovator it once was. In fact, some would argue that innovation at HP is dying — if it’s not dead already.

“The market worries about the precise fate of HP’s PC business,” says Christopher Marlett, CEO of boutique investment bank MDB Capital, which specializes in intellectual property. “But the real story with HP is that it’s no longer an innovative company.”

According to Marlett, innovation at HP has been in decline for years now, gutted by leadership that tried to bolster profits by cutting R&D. According to some reports HP’s research and development budget used to be 9 percent of revenue. These days it’s more like 2 percent. So much for those “7 Immutable Laws of Innovation” …

“Look at the number of patent applications that HP has filed in the past five years,” he says. “The company has really just fallen off the cliff as far as innovation is concerned. And it cannot afford to do that. It has to innovate, because you can’t buy your way to relevance in this industry.”

HP certainly couldn’t. As Apotheker said last week the ramp-up on the webOS hardware business it acquired from Palm was far too long and the hundreds of millions of dollars in losses it was generating was a real drag on the company.

“HP’s hardware business is eroding; the brand is losing relevancy,” says Marlett. “Frankly, HP should probably shoot its hardware division in the head and bury it … or sell it to Dell.”

In other words, it’s no longer “HP Invent,” it’s “HP Divest.” HP’s hallowed culture of innovation is a skeleton of what it once was.

Thank God for the printer business, right?

Maybe. Marlett worries about that as well.

“The printer business is eroding too,” he insists. “Not only is there competition, but HP can’t maintain the same margins on ink cartridges that it has in the past. Then there’s new technology being developed that will revolutionize the entire printer space. But again HP hasn’t been innovating, so they’ve really got nothing in the pipeline. Don’t get me wrong, the printing business is a good business to focus on, but HP needs to work hard to protect that franchise. Really, it’s desperation time for them. They’ve got to begin innovating, because they’ll never acquire their way to shareholder value.”

That’s a bleak assessment of a once great technology icon and one that Marlett says is a good lesson for the industry. “The lack of a robust product pipeline, the acquisition spree that they are trying to rationalize — this is what happens when innovation stops. This is the big story.”

Perhaps. Or perhaps it’s just a bad chapter in a longer one.

Gartner analyst Michael Gartenberg maintains that all is not lost on the HP innovation front and that in the end, things may not be quite as bleak as they seem.

“There’s been a lot of consumer innovation at HP, driving forward initiatives such as touch on Windows 7, working on new categories such as living room PCs and services such as mobile printing,” Gartenberg observes. That said, he concedes that there is uncertainty around HP’s strategy going forward. “As HP transitions, it does raise questions about what their role will be in the growing consumer technology marketplace.”

[Image credit: Chart courtesy MDB Capital]

What gives? The research firms don’t have access to the same kinds of sales-channel data that Intel does, especially when it comes to emerging markets. Namely Brazil, Turkey, Russia and other rapidly developing revenue streams.

Intel CEO Paul Otellini called this “channel revenue” during the conference call with analysts. Channel is industry lingo for the business Intel does that’s not with major PC manufacturers like Apple or Hewlett-Packard or Dell, but instead goes through indirect sales channels to smaller companies that make PCs with lesser-known brands geared toward specific markets.

This channel revenue grew 17 percent during the quarter, Otellini said, because demand for PCs remains healthy in these countries. Turkey and Indonesia were both up 70 percent over last year. India was up 17 percent. Russia, 15 percent. China, 14 percent. Latin America as a whole was up 12 percent.

But then there’s Brazil. Otellini said it’s growing like crazy and is on track to become the world’s third-largest PC market next year, after the U.S. and China.

This channel business in emerging markets helps explain at least part of the dichotomy between the results that Gartner and IDC report in their quarterly market surveys — both of which show a market that grew by less than three percent — and Intel, which saw sales in its PC division grow 11 percent.

Later, Otellini and Chief Financial Officer Stacy Smith addressed this issue in response to a question from Evercore analyst Patrick Wang. You can hear their exchange, which runs less than three minutes, below.

Intel-q2-2011-call by ahess247

It turns out worldwide spending on IT by companies is proving surprisingly resilient given the circumstances, according to a new forecast by the market research firm Gartner. The firm expects overall tech spending to grow by 7.1 percent this year, representing an upward revision from a previous forecast of 5.6 percent.

In dollar terms that works out to a total forecast of $3.6 trillion. Of that, Gartner expects $419 billion to be spent on computing hardware, $268 billion on enterprise software, $846 billion on IT services, and $2.1 trillion on telecommunications. (It’s fun to type the word “trillion” and not be referring to federal spending.)

“It is a bit surprising that we have not seen a more significant impact on our global IT spending forecast as a result of the Japan earthquake and tsunami, but despite widespread concerns about disruptions to the supply of critical components in the initial aftermath of the natural disaster, there has not been a dramatic impact on overall IT spending,” Gartner’s vice president for research Richard Gordon said in a statement.

Spending on cloud services is a big factor in the forecast. Gartner says cloud-related spending is growing four times faster than IT spending, and will reach $89 billion this year. However, it’s informative to note that despite that intense growth, cloud spending amounts to less than three percent of the overall IT spend.

Even so, cloud category punches above its weight in importance. Gartner says that software-as-service applications — Salesforce.com is a classic example — account for about $10 billion, or about 10 percent of spending on enterprise software. More from Gartner here.

Though it remains the world’s leading handset maker, new metrics from Gartner reveal an ugly decline in its reach. Over the past few years Nokia’s global market share has fallen to 25 percent, roughly the same level it was at in 1997. Between the first quarter of 2010 and the first quarter of 2011 alone, the company’s share declined 5.5 percentage points.

This during a period when worldwide mobile device sales spiked 19 percent year over year to 427.8 million units, Android grew its market share to 36 percent from 9.6 percent and upstart rivals like Apple sold 16.9 million iPhones, more than doubling the number it sold during the same quarter last year. A nasty revelation for Nokia, particularly coming as it does little more than a month after HTC soared past it in market cap.

Intel CEO Paul Otellini criticized third party research firms–he didn’t mention any names, but he was talking about Gartner and IDC–for giving the idea that the PC industry is on the wane, when their information isn’t as complete as Intel’s is, especially in emerging markets.

While they’re forecasting the market to grow in the single-digit range this year, Intel sees the PC market growing in the low double-digit range, Otellini said, and he expects it to continue into 2012. “I want to be clear that our views differ from some of theirs,” he said. The PC market is getting more complex, and at nearly 400 million units sold per year, it’s bigger than it’s ever been. The research firms don’t see as much data as Intel sees. “While some channels–like PCs sold through consumer retail outlets in mature markets–have deep visibility, other channels, especially in emerging markets, are not well-reflected” in the forecasts from the research firms.

I wonder what Gartner and IDC are going to say in response to that? It seems Otellini has just called their research methods worthless.

Otellini also talked about a forthcoming announcement in May around manufacturing process technology. Having sold its first 32-nanometer processors at the start of last year, it’s time to start thinking seriously about the move to the next manufacturing node, and also the one beyond that. The next is 22 nanometers, and the one beyond that is 14, which should hit the market about 2013 or so. Intel says its going to spend between $9.8 billion and $10.6 billion in fiscal 2011 on capital expenditures as part of bringing up the new technology, and another $15.7 billion in combined research and development plus management and general costs.

Otellini and CFO Stacy Smith both talked about the implications of that shift, and both talked about some big announcements around process technology coming in May. “What we’re realizing is that competitive advantage is becoming very important,” CFO Stacy Smith said. “We’re getting paid both for differentiating, and in terms of pricing.” Pressing the manufacturing nodes forward–which is something Intel does better than anyone else in the world–will indeed give it an advantage not only over its distant rival Advanced Micro Devices in the PC world, but also give it a better chance of combating the persistent competitive threat from ARM chips that not only rule the world so far in smart phones and tablet, but which are starting to show up in mobile PC roadmaps.

Otellini said while demand for PCs among consumers in the US and Western Europe remained soft, demand was strong in emerging markets. Demand for servers–the big surprise of the day–and PCs at business were also strong. He also said that Intel recovered quickly from the design flaw discovered last month in the Sandy Bridge family of chips. He also said that Intel sustained some damage to sales and marketing offices in Japan, but “nothing major that would hinder our ability to service our customers.” Intel is seeing no disruptions in its supply chain as a result of the earthquake there.

He talked at length about Intel’s sales to cloud providers, calling it a “major driver” of the company’s growth. Sales in the Data Center Group grew 32 percent year on year and were led, Otellini said, by sales in China. Sales of Intel chips into storage systems were also strong, up 45 percent over last quarter and 65 percent year over year.

My liveblog from the conference call–joined just a few minutes late–is below.

2:40 pm: Joining a tad late after a technical glitch. Intel CEO Paul Otellini is talking.

Our views differ from the views of the analysts. The PC business is a global industry, it is 400 million units a year. Some channels, especially those in emerging markets, aren’t very visible to research firms. Basically he’s slamming IDC and Gartner for their pessimistic views. “Our projection for 2011 remain in the low double-digit range.”

“We see no reason for 2012 to be materially different from what we see in 2011.”

He says to expect an increase in Capex around the 22- and 14-nanometer manufacturing technology. “We see a need for more features [on chips],” he says.

CFO Stacy Smith is now talking.

The company fixed the Cougar Point problem–referring to the “design errors” found on a chipset accompanying the Sandy Bridge processor–and completely mitigated the revenue impact that was expected.

2:44 pm: First quarter significantly better than our expectations.

Sandy Bridge boosted average selling prices.

Acqusitions of McAfee and Infineon wireless business added about $500 million of the $2.5 billion in new revenue seen year over year.

The Cougar Point impact to gross margin was about 3 percentage points. That explains the 1 percent quarter on quarter drop on that important figure.

First quarter puts us on track to exceed financial goals for the year. Expect another year of double-digit revenue and earnings growth.

We are making some critical investments in process technology that will have a very rapid ROI or return on investment.

Q&A is getting started.

2:48 pm: Glenn Yeung from Citi: Help us understand the emerging markets and growth seen there.

Smith: Emerging markets are well over 50 percent of business. The dynamic is one of economics. Desirability of the technology is high and affordability is high. The price point of a PC is within 1-2 months of income. Penetration rates are so far pretty low.

Otellini: My comment on the channel strength for Sandy Bridge is emerging markets. Most of the machines sold with Sandy Bridge are white boxes in emerging markets. Those markets are still surging in terms of notebooks.

2:50 pm: Yeung with a follow-up. He’s asking about the investment in process technology. Otellini used the word “revolutionary” to describe the 22-nanometer leap that’s coming. He’s asking him to shed some light on what he means by that.

Smith: The Capex number is driven by a few things. Unit growth and ability to meet demand at 22-nanometer and 14-nanometer technology. It give us performance cost and power efficiency advantages. The biggest single chunk of the Capex is with the development fab for 14 nanometer, we’re going to make that fab bigger. That will allow us to bring more products to 14-nanometer technology and ramp it faster.

Otellini: On the process technology, only a teaser today. We’ll be disclosing that technology in early May. When you hear that announcement you’ll understand why that phrase is appropriate.

2:52 pm: Question about how we should think about seasonal trends in the second half of the year.

Smith: We closed McAfee and Infineon, and they added half a billion in Q1 and should add another half a billion in Q2. The second quarter is usually kind of flat compared to the first, which is in line with the pattern we’ve seen over the last five years. We’re not seeing anything that would cause it to be any different than before. Second half tends to be about 2-3 points higher than the first in terms of revenue.

Otellini says to expect to see a lot of tablets with Intel chips demonstrated at Computex. Google’s Android Honeycomb source code will ramp over the course of the year for a number of customers.

Losing Nokia, Otellini says, “took a lot of wind out of our sails” around landing Intel chips in smart phones. Intel has redeployed resources from that. “I would be very disappointed if you didn’t see Intel based phones 12 months from now.”

2:56 pm: Question from BMO. For the total PC market, what is the percent the third parties companies are missing?

Otellini: They are all over the map. Gartner is at 6 and IDC at 7 percent growth for the year, and we’re seeing low double-digit growth.

Q: What about Medfield, the phone processor. What are the metrics that are getting customers interested in it? Is it the fact that you’ve been able to make it competitive with ARM chips?

Otellini: Its both. The product is very good in terms of performance, especially in media processing. And the power envelope is right where you want it to be.

2:58 pm: Question from UBS: You called out storage as up 45 percent within the Data Center Group. We’ve seen this group grow faster than we thought. What’s the longer term growth?

Otellini: We recognize that this group has had phenomenal growth. Expect a deep dive on that at the analyst meeting and on the market for Xeon class chips today and tomorrow. (No mention of Itanium-based servers, by the way. -ed.) Traditional servers, we’re out-growing the market by a factor of 2-3x. We think a big piece of the market is high performance and cloud, and the conversion of other parts of the data center from proprietary to Intel-based designs, you see growth that is representative of all the growth of the Internet. We’re benefiting quite well.

UBS asks about the transition from 22 nanometers to 14 nanometers. Is there anything that is driving the speed now in terms of moving to 14 nanometers and what can you do at 14 versus 22 nanometers?

Smith: I’m going to punt for another few weeks. More to say around 22 nanometer and the secret sauce there, and it will carry into the 14 nanometer node.

What we’re realizing is that competitive advantage is becoming very important. We’re getting paid both for differentiating and in pricing. As we get out to 22 and 14, we’re going to bring capabilities to process technology more quickly than we have before. 22 nanometer will intercept with smart phones and notebooks more quickly, and we’ll get paid for performance and cost over the long term.

3:03 pm: Chris Danely of J.P. Morgan asking about factory utilization rates. He wonders if there may be shortages coming.

Smith: We’re running not too hot, and not too cold. Not anticipating shortages. We have responsibility to respond if demand is hotter, and if demand is less, we now have the tools to respond to both circumstances.

Danely: It seems as though perhaps some of the OEM customers have a more tempered forecast. What’s the difference?

Otellini: We won’t characterize specific customers. I think those who are more enterprise centric than those who are focused on consumer markets in the U.S. and Europe are seeing numbers closer to ours.

Smith: The elephant looks very different depending on what part you’re looking at. Mature markets look tough. Emerging markets look pretty good.

3:06 pm: Question about how much Sandy Bridge accounted as a percentage of sales.

Otellini: Doesn’t want to get into that level of granualarity. He calls it the fastest manufacturing ramp.

Smith: More than 50 percent of my CPU inventory is Sandy Bridge. That’s a good indication of the next few quarters.

3:07 pm: Smith says he’s seeing a little upward tick in component costs, including some impact from Japan.

Average selling prices have a very rich mix. Sandy Bridge ramped at a higher end of the price range, and the mix is going to come down a little.

3:09 pm: CLSA Securities with a question: What’s driving the demand? Is it Windows 7 on corporate PC?

Otellini: In the middle of last year we saw the market recover. The most recent data we have is that 75 percent of enterprise PCs are running WIn XP. If you think about a 3-4 year refresh cycle, we’re not even halfway through it. The combination of the Win 7 machines look good.

Question from Goldman Sachs: If I think about this third-party data issue. Is the Gartner and IDC data really off by 20 percent?

Smith: That misses how much inventory levels came down in the fourth quarter. We were worse off than seasonal. There was a significant bleeding off of inventory ahead of Sandy Bridge release. When we go off and do our looks across the channel we see inventory levels being healthy, and that says something about the health of the supply chain.

Q: That’s a little different than just the third-party data is wrong. Is it just really off?

Otellini: The comments I made were on third-party data year on year. I think our experience is that on an annual basis our numbers are closer than theirs. They correct over the course of the year to be aligned.

Smith: When I talk about Q1, you also can’t lose sight of the fact that Q1 was a 14-week quarter.

3:14 pm: Hans Mosesmann, Raymond James asks about the foundry strategy. What part of the incremental capex is part of that?

Smith: It’s not a driver of our capex. We’re interested in talking to some very specialized companies. We’re not building a broad-based foundry business, and it’s not part of our capex number.

Otellini again teases about a forthcoming announcement on process technology.

3:19 pm: Question from Credit Suisse: Asking about the weakness in consumer sales in the U.S. and Europe. Is it because of tablets?

Otellini: It’s a little bit of everything. Add one more thing. In 2009 and in the first half of 2010, consumer market for notebooks was strong contrary to GDP at the time. I think people bought a lot of machines and we’re just early in the cycle. A consumer refresh isn’t what you’d expect in a mature market right now. Clearly some tablet cannabilization is impacting that. But the bigger impact is macroecononomc.

Q: What inning are we in in the enterprise upgrade cycle?

Otellini: Top of the fourth, three on, no outs.

3:22 pm: Question about notebook and desktop mix going into Q2.

Smith: What we saw was an inventory burn in Q4 that led to units being slightly above seasonable. Q2 looks pretty seasonal.

Q: What do you expect of total wafer production in 2011? Is it consistent with PCs?

Smith: Wafers will grow faster than total available market as we move to the new process.

Craig Ellis, Caris and Co. asks: Are you expecting any change in the mature markets for PCs?

Otellini: I don’t think it has to happen. We don’t build it into our numbers.

Now a question about design wins on the tablet front, and what OS Intel will be stronger on versus others.

Otellini: I don’t have an update. We’ll do a number count on May 17. It’s 35 or so. The bulk of the units this year will be Android-based.

3:28 pm: That’s a wrap. We’ll see you back here for Q2 results on July 20.

For openers, the first quarter of the year is always the one that’s seasonally slower, as consumer PC sales slow down. And they are, as we saw in the latest estimates from Gartner and IDC last week. Of the $43.6 billion in sales Intel reported in 2010, nearly $25 billion or 57 percent of sales was derived from the sale of microprocessors into PCs. Add in another $6 billion and change for sales of chipsets and motherboards and Intel’s exposure to PCs jumps to 72 percent. By comparison, its Data Center segment, which sells chips used in servers, accounts for $8.7 billion or less than 20 percent of sales. If the PC market is slowing, then it’s hard for Intel not to slow down. However, its technology, its market strength versus rival Advanced Micro Devices, and its best-in-the world manufacturing efficiency allows it to roll with whatever punches the marketplace throws. Plus, Intel does a lot of business with Apple, which continues to boom.

For today’s report the focus will be less on Intel’s results–unless there’s a surprise–than on what Intel says about its guidance for the second quarter. The consensus view of analysts calls for Intel to report Q1 sales of $11.6 billion, which would be a year-on-year increase of 12.6 percent, and 46 cents in per-share profits versus 38 cents a year ago. The consensus view on Q2 calls for $11.87 billion in sales and a profit of 45 cents.

Here is where the analysts start parting company with each other. Hans Mosesmann of Raymond James passes for an Intel bull, seeing Q2 sales at $12 billion and profits at 49 cents. He argues that after accounting for Intel’s acquisitions of McAfee and the wireless chip unit of Infineon, if Intel issues guidance that is in line with seasonal exceptions (Q2 is usually a slow quarter for consumer PC sales as well), that would be a sign that most everything is on track.

There are other optimists out there, some more cautious than others. Take last week’s note from Doug Freedman at Gleacher and Co. He reminded clients that Intel had to fix a manufacturing glitch with its Sandy Bridge chip, one that caused some PC shipment schedules to slip. Though Intel made short work of the problem, Q1 ended “weaker than expected,” he says; he forecasts microprocessor unit sales to fall by 8 percent from Q4, which is in line with seasonal patterns. He expects Intel to report sales of $11.7 billion and a per share profit of 48 cents, but has a more positive outlook on Q2, with sales at $12.2 billion and profits at 49 cents.

Then there are the pessimists. Michael McConnell at Pacific Crest Securities says the consensus numbers are too high, and trimmed his own expectations. He’s calling for Intel to miss, with sales at $11.6 billion. Between the Sandy Bridge problem, the earthquake in Japan, and the acquisitions, there are “too many moving parts,” he says, for Intel to hit its numbers, let alone beat them. Despite relatively strong sales of chips into notebooks and a slight rise in the average price that PC makers pay for those chips, McConnell writes that Intel’s implied guidance for a decline of about 7 percent in chip sales is “likely to prove optimistic.”

Moreover, he sees Q2 estimates at too high as well. First of all, the quarter is at 13 weeks, one week shorter than Q1. Second, the ramp-up of PC makers turning out machines with the Sandy Bridge chip isn’t enough to offset other factors. He expects Intel sales in Q2 to hit $11.7 billion. Overall, he expects Intel to grow its core PC business by only 6 percent this year, well below Intel’s projection. We’ll see how it all shakes out later today. Check back this afternoon. I’ll be covering Intel’s results and the conference call.

In a repeat of a trend seen last quarter, both firms report that the market shrank in the first quarter of the year. This would constitute the first market contraction in six quarters, and the first since the onset of the recession. They differ, however, on the size of that contraction: IDC pegs it at 3.2 percent since the first quarter of 2010; Gartner at 1.1 percent.

To be fair, let’s remember that the first quarter of the year is always seasonably slow for PC purchases because two things tend to happen in the fourth quarter: Consumers splurge on gifts for family and frankly for themselves too, and take advantage of crazy deals offered by retailers desperate to clear out their inventory. On the business side, some CIOs take the opportunity to use up unspent funds in their budgets, and get employees starting off the new year with a fresh new machine at their desks. However, this tendency is just as often offset by the start of a new budget year. Whichever way you slice it, the first quarter is always weak on consumer sales though a bit stronger on the enterprise side.

So what happened? The iPad 2, for one thing. “With the launch of the iPad 2 in February, more consumers either switched to buying an alternative device, or simply held back from buying PCs,” is how Mikako Kitagawa, principal analyst at Gartner, put it. “We’re investigating whether this trend is likely to have a long-term effect on the PC market.” Ya think?

Bob O’Donnell, IDC’s vice president for Clients and Displays, wasn’t quite as willing to blame the iPad: “Slower than expected commercial growth in the first quarter failed to offset the ongoing challenges in the consumer market,” he said in a statement. “While it’s tempting to blame the decline completely on the growth of media tablets, we believe other factors, including extended PC lifetimes and the lack of compelling new PC experiences, played equally significant roles.”

Jay Chou, another IDC analyst put it much more succinctly: “‘Good-enough computing’ has become a firm reality.”

The picture gets no better when you look at regional results. IDC says shipments declined in the U.S. by 10 percent. Gartner pegged it at 6 percent. It was, Gartner noted, the third consecutive quarter for year-on-year declines in U.S. notebook sales. Shipments in Europe contracted too, and Japan, which was already expected to be a weak market this quarter, has other things on its mind since the devastating earthquake and tsunami. Asia was the only bright spot, where shipments increased by 5.6 percent in IDC’s forecast and 4.1 percent in Gartner’s. China, IDC noted, failed to reach double-digit growth, and consumers in India, Gartner says, were distracted by the Cricket World Cup. Okay, then.

So how do the numbers look? Since IDC’s forecast is the most dire, I’ll start there:

The worldwide demand for PCs was 80.6 million units. Hewlett-Packard sold 15.2 million; Dell, which just made it back to second place, shipped 10.3 million; Acer 9 million; Lenovo 8.2 million; Toshiba 4.8 million; while “others” clocked 33 million. All vendors except for Lenovo saw declines. The worst decline was Acer’s, whose shipments fell nearly 16 percent. (Now we know why its CEO Gianfranco Lanci lost his job.) Lenovo, on the other hand, saw its shipments improve by more than 16 percent.

Demand in the U.S. was 16.1 million. HP led with 4.3 million, Dell 3.7 million, Toshiba 1.6 million, Apple 1.4 million and Acer 1.3 million. Unnamed others sold 3.7 million. Acer saw its shipments fall by an alarming 42 percent. Apple and Toshiba posted gains of 9.6 and 10.4 percent respectively. HP and Dell both saw declines.

Now let’s look at Gartner’s numbers (remember that each firm tracks the market a little differently):

Gartner pegged the worldwide market at 84.2 million units. It says HP sold 14.8 million, Acer 10.9 million, Dell 10 million, Lenovo 8.2 million, Toshiba 4.8 million. (Clearly there’s a difference in how they see Acer and Lenovo’s performances.)

In the U.S., Gartner estimated the market at 16.1 million units. By its reckoning, HP sold 4.2 million, Dell 3.6 million, Acer 1.8 million, Toshiba 1.7 million, Apple 1.5 million, others 3.3 million.

According to research firm Gartner, at least through 2015.

Analysts at the firm estimate that Apple’s iOS operating system will be on more than half of tablets in the world for the next three years, although Google Inc.’s Android will grow steadily. By 2015, they say, iOS will be on 47.1 percent of tablets, with Android on 38.6 percent and Research In Motion’s QNX tablet system on 10 percent.

Any projections that look so far in the future should be taken with a grain of salt, especially when they concern such a rapidly changing industry. Apple Insider pointed out recently that Gartner has radically revised its predictions about the smartphone market over the past couple of years. But the predictions offer some interesting theories about how the tablet market will pan out.

Read the rest of this post on the original site

But by 2015, those market rankings will have changed quite a bit, with an entirely new OS leapfrogging its rivals for the number two spot: Microsoft’s Windows Phone 7.

Gartner says that Microsoft’s new alliance with Nokia will drive WinPho 7 from a 10.8 percent market share in 2012 to 19.5 percent market share in 2015, roughly equivalent to the share Nokia’s Symbian OS holds today.

iOS by that time will have fallen to third place with a 17.2 percent share, and RIM’s BlackBerry OS to third with an 11.1 percent share. That’s an impressive gain for Microsoft, but a bit of a disappointment for Nokia which essentially ends up treading water. Said Gartner, “though this is an honorable performance it is considerably less than what Symbian had achieved in the past underlying the upward battle that Nokia has to face.”

Oh, for the record, Gartner was saying something entirely different just six months ago. So take this latest attempt to slap a four-year forecast on a landscape that changes as quickly as the smartphone market’s does with a grain of salt.

UPDATE: Great analysis of all this over at Asymco.

Here’s a sampling: Fairchild Semiconductor is up nearly 5 percent in after-market trading. Analog Devices is up a little more than 4 percent. Maxim Integrated Products, 5 percent. Linear Technology about 3 percent. On Semiconductor more than 5 percent. Intersil, 8 percent. STMicroelectronics, 3 percent. You get the idea: Investors are clearly hoping that another acquisition is soon to happen in the world of analog semiconductors.

TI was already the big gorilla in the analog business. It’s a $42 billion business and TI accounted for about $6 billion worth of analog sales in 2010, and the analog business amounted to 43 percent of TI’s business last year. With this acquisition it goes from being a chip company that supplies the microprocessors for most of the world’s wireless phones to a mostly analog company. A Gartner market ranking of analog chip makers ranked TI number one and National fourth. The combination makes TI an even bigger gorilla yet.

Who’s number 2? Analog Devices, ahead of Maxim and Linear Technology, who are numbers three and five respectively in the Gartner rankings. Further down the list you see names like STMicro, On Semi, Intersil and Fairchild.

So what’s so great about analog chips? They go into everything: From wireless phones to games to medical devices to military and industrial gear. They manage power; help convert light and sound into digital information; and measure temperature or pressure or any other quantity that occurs in the real world. And with all the digital gadgets we rely upon these days, we’re relying increasingly on analog chips of every stripe. Analog sales grew 37 percent last year, which was faster than the chip business as a whole, Gartner analyst Steve Ohr told me.

As is the case with TI and National, there’s bound to be a lot of overlap in products and customers among all these other companies. That suggests that more combinations are likely, though with valuations inflating on the speculation, any company thinking of making an acquisition would probably want to sit tight until the prices come down a little bit before making a move.

That might seem a piddling increase, but it’s actually quite substantial–the difference between $3.4 trillion and $3.6 trillion. Said Gartner’s Richard Gordon, “Absent the addition of media tablets, the forecast would have slightly declined in constant-dollar terms; however, with their addition, there’s virtually no change in the underlying forecast growth at the level of overall IT.”

Gartner also raised its 2011 IT hardware spending estimates, lifting them to 9.5 percent from 7.5 percent. And once again, tablets were largely the reason. Global spending on the devices is expected to reach $29.4 billion this year, up from $9.6 billion last year. And that growth trend is likely to continue for the foreseeable future. Gartner expects the tablet market to have an average growth rate of 52 percent through 2015.

Gartner now says that PC shipments will grow by 10.5 percent, down from a previous forecast of a much more robust 16 percent. It doesn’t get much better in 2012. Gartner now expects growth of 13.6 percent down from 14.8 percent previously.

There are two forces at work. First, demand for PCs is generally weaker in China, but there’s also an overall loss of interest among consumers for mobile PCs, Gartner analyst Ranjit Atwal explained in a statement. Sales of Mobile PCs have been growing like crazy for the last several years, and particularly as Wi-Fi has penetrated the home and office. But now that smart phones and tablets–especially the iPad–have brought the Internet everywhere a notebook can go plus lots of other places too, notebooks just aren’t as cool as they once were.

And there’s more bad news for notebook vendors: Not only are sales of new notebooks slowing, but consumers are expected to keep their existing notebooks for a longer period of time. In mature markets like the U.S. and Europe, notebook sales will be growing at an average of less than 10 percent over the next five years, down from 40 percent during the previous five years.

This isn’t the first time that Gartner has put out data showing how tablets are encroaching on the notebook market. In January, Gartner and its main rival IDC came out with fourth quarter sales data that was weaker than expected, in part because of iPad sales.

Tablets were supposed to be–or so the conventional wisdom went–entertainment and media consumption devices, not something you could do any serious work on. That’s clearly turning out not to be the case.

And while for the most part sales of notebooks into large corporations is secure–Gartner says it still expects double-digit growth in sales of professional notebooks–that segment is not without its own set of iPad-centric worries. As Apple said on its latest earnings conference call, 80 percent of Fortune 100 companies are putting iPads to work in their businesses, and Apple is actively pushing the iPad as a device that’s as useful at the office as at home.

The company asked 500 people at 300 companies, many of them large companies with 10,000 or more employees, about the benefits they were seeing from using social business software, which in this case is Jive, naturally, though an independent firm did the survey itself.

Some of the results were a little vague. For instance, respondents reported a 39 percent increase in “employee connectedness.” Others were more concrete: Jive users generated 32 percent more ideas, sent 27 percent less email and found answers to questions 32 percent faster

And there were benefits for customers. For one thing, employees spent 42 percent more time communicating with them, which in turn led to a better rate of customer retention, 31 percent, while the volume of support calls dropped by 28 percent and sales to new customers jumped by 27 percent.

The survey also found that 83 percent of companies in the survey are preparing to deploy some kind of social enterprise solution across the entire company this year. That finding is at least validated in part by a Gartner study that forecasts spending on enterprise social software will grow a little more than 15 percent this year to reach about $770 million.

Jive, you’ll remember, is the company that landed a $30 million venture capital investment from Kleiner Perkins last summer, and hired former Mercury Interactive head Tony Zingale as its CEO.

BoomTown’s Kara Swisher visited its offices last August, and her video interview with Zingale and Ted Schlein–Kleiner partner and Jive director–is below:

]]> http://allthingsd.com/20110131/in-case-you-needed-reminding-social-enterprise-software-is-going-to-be-big/feed/ 0 http://allthingsd.com/20110126/gartner-sees-mobile-apps-generating-15-billion-in-revenue-in-2011/ http://allthingsd.com/20110126/gartner-sees-mobile-apps-generating-15-billion-in-revenue-in-2011/#comments Wed, 26 Jan 2011 17:26:42 +0000 Ina Fried http://mobilized.allthingsd.com/?p=2972 A billion here, a billion there and pretty soon you are talking serious money.

That’s the conclusion from a new Gartner forecast that predicts mobile apps will produce $15 billion in revenue from sales and advertising this year–nearly triple last year’s still-not-shabby $5.2 billion.

“Many are wondering if the app frenzy we have been witnessing is just a fashion, and, like many others, it shall pass. We do not think so,” Gartner research director Stephanie Baghdassarian said in a statement. “We strongly believe there is a sizable opportunity for application stores in the future.”

The company sees that revenue reaching a whopping $58 billion by 2014. (The forecast covers apps that are directly sold and not other kinds of media content such as ringtones and wallpapers.)

However, Baghdassarian noted that the challenge from Web-based apps will intensify as mobile browsers improve and the Web adapts to the growing base of Web-savvy phones.

“Applications will have to grow up and deliver a superior experience to the one that a Web-based app will be able to deliver,” Baghdassarian said. “Native apps will survive the Web enhancements only when they will provide a more-personal and richer experience to the ‘vanilla’ experience that a Web-based app will deliver.”

Advertising is poised to become a bigger piece of the revenue, Gartner said, climbing to nearly a third of revenue from apps by 2014, roughly double last year’s 16 percent.

Apple announced this week that 10 billion iPhone apps had been downloaded from its store. Apple’s lead in the store arena is poised to continue, but narrow in the coming years, Gartner said.

“We estimate that Apple’s App Store drove close to nine application downloads out of 10 in 2010 and will remain the single best-selling store across our forecast period (through 2014), although to a lesser extent, as other stores manage to gain momentum,” said Gartner Vice President Carolina Milanesi.

]]> http://allthingsd.com/20110126/gartner-sees-mobile-apps-generating-15-billion-in-revenue-in-2011/feed/ 0 http://allthingsd.com/20110113/intel-beats-earnings-expectations-despite-slower-pc-market/ http://allthingsd.com/20110113/intel-beats-earnings-expectations-despite-slower-pc-market/#comments Thu, 13 Jan 2011 21:29:41 +0000 Arik Hesseldahl http://newenterprise.allthingsd.com/?p=1753 Chipmaker Intel just reported quarterly earnings of 59 cents a share, beating the expectations of analysts who had expected earnings of 53 cents. Revenues were $11.5 billion, ahead of the forecast of $11.37 billion. Sales were up 8 percent versus the year-ago quarter, while profits surged 48 percent. Gross margins, a key measure of profitability, was 67.5 percent, slightly above the company’s prior guidance. Intel shares are trading up by 1.7 percent after hours.

Intel said in its statement that PC Client Group revenue was flat. Other groups were stronger: Data Center Group revenue was up 35 percent, and Intel’s architecture group saw sales surge by 27 percent. Intel Atom microprocessor group, its low-power chip aimed at tablets and smartphones, saw revenue grow 8 percent. This despite word from Microsoft last week at the Consumer Electronics Show that it will develop a version of Windows for ARM-based chips from Texas Instruments, Qualcomm and Nvidia aimed at tablets and smartphones. Microsoft’s move calls into question Intel’s hopes to land design wins for the Atom low-power chip that it hopes to sell to manufacturers of smartphones and tablets, but which has yet to show any significant results.

This report of flat revenues for PCs comes a day after Gartner and IDC both said they saw weaker-than-expected sales of PCs in the fourth quarter of 2010.

For its 2011 first-quarter outlook, Intel said it expects revenue of $11.5 billion, plus or minus $400 million, and a gross margin of 64 percent, plus or minus a couple of points. For the full year, it expects gross margins to be 65 percent, plus or minus a few points. More after I go through the numbers and attend the conference call, which starts in about an hour.

]]> http://allthingsd.com/20110113/intel-beats-earnings-expectations-despite-slower-pc-market/feed/ 1 http://allthingsd.com/20110113/memory-chips-are-about-to-get-cheaper/ http://allthingsd.com/20110113/memory-chips-are-about-to-get-cheaper/#comments Thu, 13 Jan 2011 16:28:00 +0000 Arik Hesseldahl http://newenterprise.allthingsd.com/?p=1718
Market research firm iSuppli says it expects a “huge drop” in the selling price of computer memory chips this year. After a run-up of more than 77 percent in price for DRAM chips during 2010, it expects a drop of nearly 12 percent this year.

DRAM is the ultimate commodity chip market, and its boom-or-bust cycles are legendary. When demand picks up, manufacturers like Samsung, Hynix and Micron always rush to add manufacturing capacity–prices pick up; chips become scarce.

Everything seemed to be going well for the chip companies until the third quarter of 2010. After five straight quarters where the average price for a DRAM chip increased, it suddenly turned south as demand for notebook PCs slacked. That’s in line with what Gartner and IDC reported yesterday about the PC market.

There’s good news for consumers, however. All that stacked-up inventory has to go somewhere. If you’re planning to buy a notebook this year, the base models will now start shipping with four gigabytes of memory instead of two. And for those who bought a machine with only two in the last year or so, upgrades will be more affordable.

The one bright spot for the memory companies? You got it: Smartphones and tablets. Memory content in phones is expected to increase by nearly two-thirds. And the 57 million tablets that iSuppli expects will ship this year will also need some DRAM. More details here from iSuppli.

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