Back-to-School Produces No PC Sales Bounce, Deflating Intel’s Hopes

Perhaps this shouldn’t come as much of a surprise, given that sales of personal computers have in recent quarters collapsed to levels not seen since records have been kept. But the latest look at the state of the personal computer market doesn’t appear to bode well for the industry’s biggest supplier of microprocessors, Intel.

Every September, the PC industry’s eyes turn toward indications that demand has surged during the back-to-school season, which is often an early indicator of the holiday season’s demand. Analyst Vijay Rakesh of Sterne Agee has checked in on the latest word from the companies that manufacturer machines for Hewlett-Packard, Dell and others, and finds that there’s little hope left for a bounce off the bottom in 2013.

Build rates at ODM companies are running flat versus this time last year, he said. Writing in a note to clients this morning, Rakesh said, “We believe back to school PC demand has been virtually absent.”

And don’t expect much help from Intel’s other businesses, like server chips or mobile chips. While Intel is the world’s dominant supplier of chips for servers that go into data centers, that business has its own headwinds, as overall growth in data centers has slowed, and spending on IT by the federal government has slowed in the wake of the sequester.

It’s worse for mobile chips, Rakesh said, especially in the wake of Microsoft’s move to acquire Finland’s Nokia. “We believe with the Microsoft-Nokia acquisition, Intel’s handset segment might be weaker,” he writes. It also doesn’t help that Intel sells a notebook chip for about $150, and decline by about 10 percent a year, while mobile device chips sell for between $20 and $40, and decline by about 10 percent a quarter.

Rakesh lowered his estimates on Intel’s revenue for calendar year 2013 to $52.7 billion from $53.2 billion, and trimmed his earnings estimate to $1.85 a share from $1.88. He also lowered his forecast for 2014, but maintained a “neutral” rating on Intel shares.

(Image from Wikimedia Commons of a U.S. Army civil affairs specialist helping out a boy in Afghanistan in 2007)