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What just went down on Intel for three months? Er, PC and mobile chips

'Lower than expected' sales kept Chipzilla's revenue flat

Intel announced its earnings based on its new financial reporting structure for the first time on Tuesday, but despite having lumped its ailing Mobile & Communications unit in with its PC Client business, there was no hiding that the three months ended on March 28 were a tough quarter for Chipzilla.

Total revenue for the first quarter of Intel's fiscal 2015 was flat at $12.78bn, and the chipmaker's net income barely grew to $1.99bn, a 3.2 per cent increase from the year-ago period.

Still, the firm reported earnings of $0.41 per diluted share, which met the Wall Street prognosticators' average estimate.

Poor old Intel, though. Revenue from its newly consolidated Client Computing unit – which remains its largest single reporting segment, despite being forced to swallow the former Mobile & Communications group's losses – were down 8.4 per cent versus last year's Q1, to $7.42bn. And the group's operating income for the period was just $1.41bn, a 23.7 per cent year-on-year decline.

In a canned statement, CEO Brian Krzanich said that demand for business desktop PCs was even lower than expected in the quarter, adding, "These results reinforce the importance of continuing to execute our growth strategy."

But the PC sales slump was partially offset by strong growth in Intel's Data Center segment. The group saw its revenue climb 19.2 per cent from the year-ago quarter, to $3.68bn. And because margins for server chips aren't quite as razor-thin as they are in the PC market, operating income for the Data Center unit was actually higher than the Client Computing group's, at $1.70bn, up 27.3 per cent from last year's quarter.

The plucky Internet of Things group grew again, too, with sales up 10.6 per cent from the year-ago quarter. But it's still but a small part of Intel's overall business, with total revenue for the period of $533m. And its operating income was down 24.4 per cent, to just $87m.

Chipzilla's Software and Services group also failed to impress. Its sales for the quarter were $534m, a 3.4 per cent dip from last year. Worse, its operating income was a paltry $3m, which was down a worrying 62.5 per cent, year-on-year.

Revenue for the All Other group was up 12.8 per cent, which Krzanich attributed to a strong quarter for the company's non-volatile memory business. But given that Intel lumps this business in with various odds and ends and corporate accounting items, it's hard to see how well it's really performing. The group posted an operating loss of $586m on revenue of $615m.

Still, Intel's results were more or less in line with guidance it gave in March, and investors seemed unfazed. The firm's share price dipped slightly on the news but rebounded in after-hours trading. ®

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