Woes Worsen For PC-Based IBM And Intel

IBM (NYSE: IBM - news) and Intel have reported large declines in profit, as consumers continue to shift from traditional PC-based systems towards mobile computing.

Intel, the world's largest maker of chips for PCs, reported a 29% drop in second quarter profit at $2bn (£1.3bn), while earnings for IBM in the same period were down 17%, at $3.23bn (£2.1bn)

Revenue for Intel in the period was down 5% to $12.8bn (£8.4bn) and down 3% to $24.92bn (£16.4bn) for IBM.

Earlier this year Intel put a brave face on the decline of global PC sales saying it expected its own sales to grow, but on Wednesday night it backtracked and said sales would be flat.

Intel is hoping that sales of processors for servers, tablets and smartphones will compensate for the drop-off in PC sales.

The downward revision of the company's outlook is an admission that Intel chips haven't made it into many mobile devices.

Britain's ARM Holdings (LSE: ARM.L - news) has been one of the great success stories in snaring a large stake in mobile device chip design and licensing.

However Intel revealed a notable win in the quarter, as it got one of its chips into an Android-based Samsung tablet - replacing a chip based on technology from ARM.

"I've made it Intel's highest priority to create the best products for the fast growing ultra-mobile market segment," Intel's new CEO, Brian Krzanich, said in a statement.

Meanwhile, IBM said that its Q2 income fall of 17% was partially due to the absorbed cost of staff layoffs.

Revenue for IBM was down some $500m on the figure expected by analysts.

Services sales dipped 5%, while hardware sales were off 12%. Software (Berlin: SOW.BE - news) revenue, however, grew 4%.

"Their strategic focus on software is paying off - because that software growth has the best profit margins," Forrester research (NasdaqGS: FORR - news) analyst Andrew Bartels said.

The sale of an IBM hardware business - reportedly its small server business based on Intel chips - was meant to offset the layoff charge this year.

But IBM said the sale had been delayed until at least next year.

Chief financial officer Mark Loughridge said the workforce restructuring would begin to show benefits in the third quarter and more fully in the fourth quarter.

:: An AGM of shareholders in Texas-based Dell Computers has been adjourned until July 24 over founder Michael Dell's $24.4bn (£21bn) plan to take the struggling firm private.