When the undisputed kingpin of the semiconductor industry, Intel
Join the club, Intel
Intel's warning focuses on consumer weakness, which isn't exactly new information. It can join NVIDIA
Buy this smartphone, not that PC
Beyond the general economic woes that are causing consumers to spend less, the PC industry faces an alarming shift in consumer spending habits. The explosion of smartphones and tablets isn't causing consumers to spend more on electronics; the Consumer Electronics Association expects consumer electronics sales to be flat in 2010.
Instead, consumers are shifting their electronics dollars away from expensive PCs, where Intel gets higher sales and better margins, and toward tablets and smartphones, where Intel's processor offerings either aren't as competitive or don't exist. The average age of PCs has risen to its highest level in a decade, 4.4 years. Consumers are sticking with old PCs while buying the newest iPhone or Blackberry.
That should spell some future problems for AMD
More winners and losers
However, while Intel's results should have a general downward pull on the IT industry, it'd be wrong to apply that weakness to a wide swath of companies.
For one, Intel affirmed that demand from large companies remains strong. That's good news for companies targeting sales to large businesses. Outside of semiconductors, the announcement shouldn't reflect any weakness in companies such as EMC in the booming storage industry or enterprise-focused sellers like STEC
However, the warning is a bad omen for hard-drive makers Western Digital and Seagate
Intel's announcement once again demonstrates the significant shift going on in consumer spending. That shift puts all the more pressure on Intel's new Moorestown processor to enter the market and be a smashing success. The winners of a previous technological generation are rarely the winners of the next. Unless Intel wants to be another example of that axiom, it'd be better off spending less money buying software companies and more money winning the war to power mobile phones and tablets.
Fool.com analyst Eric Bleeker owns shares of NVIDIA. Intel and Microsoft are Motley Fool Inside Value choices. NVIDIA is a Motley Fool Stock Advisor recommendation. The Fool owns shares of and has written puts on Intel. Motley Fool Options has recommended buying calls on Intel. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Qualcomm. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.