Intel's Q1 profit drops 25 per cent amid PC slump

Chip maker claims it has made 'significant progress' in tablet space, and predicts it will continue in Q2

The shrinking PC market has thumped a 25 per cent dent in chip-maker Intel's first-quarter net profit, but its outgoing chief executive Paul Otellini insisted his firm did well considering the conditions.

For the three months to 31 March, Intel's net profit dropped annually by a quarter to $2bn (£1.31bn) on sales which slumped by three per cent to $12.6bn over the same period, in line with Wall Street and its own expectations.

The firm's PC Client Group's revenue slumped two per cent annually to $3.5bn in its first quarter, while sales for its Datacentre Group dropped 6.5 per cent to $1.1bn over the same period.

On his final conference call before departing the firm at which he has worked at since it was founded in 1974, Otellini said despite the "market softness", Intel's innovation has meant the business has performed well.

Last week, IDC claimed the PC market had suffered its worst quarter to date, dropping 13.9 per cent to 76.3 shipments worldwide.

Intel's chief financial officer Stacy Smith said Intel was making "significant progress" in the tablet segment, shipping its chips on both Windows 8 and Android operating systems. She claimed its Q1 tablet volume more than doubled compared to Q4 and that she expects the figure to double again in its Q2.

Otellini conceded that Windows 8 has not enjoyed a huge adoption rate so far, but said he expects it to grow in popularity in the longer term as prices fall.

Speaking on a conference call transcribed by Seeking Alpha, he said: "There is an adoption curve, and once you get over that adoption curve, I don't think you go back... I think people are attracted to touch, and the touch price points today are still fairly high, and they are coming down very rapidly over the next couple of quarters."

Otellini added that the conference call would be his last as Intel's boss, and that he believes the firm will continue to innovate after his departure.

He said: "Naturally, constant change and reinvention creates plenty of room for both opportunity and skepticism. The company's inventiveness, architectural innovation, manufacturing expertise and intense drive allowed it to create and capitalise on the opportunity over the long haul.

"But even as I prepare to pass the baton to a new generation of leadership, I know Intel's story is nowhere near completely written. I am excited about what lies ahead for Intel. The company has a historically broad portfolio of products, spanning the spectrum of computing."

Intel predicts its Q2 revenue will reach $12.9bn, which it claims is slightly higher than the seasonal average.