Intel earnings rise but PC chip sales disappoint

July 18, 2015 (LBO) – Intel, the world’s leading semiconductor company, reported higher than expected earnings this week even though sales of chips for PCs were predictably lower.

The California-based chipmaker posted second-quarter earnings of 55 cents per share on revenue of $13.2 billion above analyst expectations of 50 cents a share on $13.04 billion revenue.

“Second-quarter results demonstrate the transformation of our business as growth in data center, memory and IoT (Internet of Things) accounted for more than 70 percent of our operating profit and helped offset a challenging PC market,” said Intel CEO Brian Krzanich in a release.

The slower chip sales for PCs is linked to the demise of Moore’s law which predicted that transistor density will double every 18 to 24 months.

Performance improvements now average between seven and fifteen percent, which means PC owners are less likely to buy the new product and more likely to hold on to their old machines. Revenue from chips for PCs fell 14 percent in the second quarter; sales in 2015 could be five percent lower than last year.

Intel has diversified into chips for data centers and the internet of things — internet-connected products for industry. Sales of chips for data centers rose 10 percent from a year earlier. Chips for data centers, Internet of Things and high-level memory accounted for 40 percent of revenue and 70 percent of profits.

The market for IoT is expected to hit 25 billion by 2020, and Gartner estimates that IoT will produce close to $2 trillion of economic production globally.

IoT includes dedicated objects such as vending machines, jet engines and connected soap dispensers rather than general purpose devices such as smartphones and PCs.