Cloud provides Intel with one bright spot in Q2

Intel reported a set of rather lacklustre financials for its second quarter, with the only beacon of light being a healthy increase in its data centre business, as more companies look at adopting cloud solutions.

Quarterly revenue was lower than expected at $13.5b, up 5 per cent from Q1 and up 4 per cent from this time last year. Net income was $2.8bn, up 2 per cent from the previous quarter, but down 4 per cent from Q2 last year. Paul Otellini, Intel president and CEO, commented that:

“The second quarter was highlighted by solid execution with continued strength in the data center and multiple product introductions in Ultrabooks and smartphones.”

Intel’s Data Centre business is part of its Architecture Group, which accounts for the vast majority of the company’s revenue ($12.6bn this quarter). The Data Centre Group reported revenues of $2.8bn, which was up 14 per cent on Q1 and 15 per cent year-on-year. In addition, average selling prices for the group were up 12 per cent from this time last year.

In contrast, the PC Client Group – also part of the Architecture Group – reported a modest 3 per cent rise in revenues with average selling prices down 2 per cent. In terms of volumes, only the Notebook platform say growth, with a 10 per cent sequential increase from Q1, although average selling prices were down 3 per cent.

Intel’s Mobile Communications Group (formerly Infineon) was responsible for a 20 per cent revenue decline year-on-year for the rest of its Architecture business, due to a “lower demand for netbooks”.

The Software and Services Group, whilst only being responsible for $586m of revenues in Q2, reported a 15 per cent growth from last year.

As for the next quarter, Otellini alluded to more disappointing numbers:

“As we enter the third quarter, our growth will be slower than we anticipated due to a more challenging macroeconomic environment. With a rich mix of Ultrabook and Intel-based tablet and phone introductions in the second half, combined with the long-term investments we're making in our product and manufacturing areas, we are well positioned for this year and beyond.”

Intel expects Q3 revenue of $14.3bn, plus or minus $500 million. In a CFO Commentary note, Intel explains this figure is “on the lower end of the historical seasonal range for the third quarter” and adds that in addition to macroeconomic issues, it reflects “lower inventory levels… ahead of the Windows 8 operating system release.”

Looking at the full year, the company now thinks revenue growth will be between 3 and 5 per cent year-on-year, which is significantly lower than the prior expectation for “high single-digit growth”.

According to analysis at TechCrunch, Intel has been quietly building up its data centre management business, primarily through its partners that sell server technology, such as HP, Dell and IBM.

Data from the Uptime Institute’s 2012 Data Centre Industry survey’, released last week (you’ll need to complete a web form to get a copy), corporate data centre budgets are on the increase. 55 per cent of organisations that responded to the survey said their budgets increased in the past year, with 32 per cent indicating that their budgets will rise more than 10 per cent in 2012.

Furthermore, 49 per cent of respondents said they are deploying private clouds, which is up from 35 per cent in last year’s survey. This compares with 25 per cent who said they’re adopting public cloud solutions, up from 16 per cent last year.