Intel’s Client Computing Group Continued to Fall in 2Q15
Intel's Fiscal 2Q15 Results: Plagued by Softness in the PC Space
CCG suffered a fall due to strict inventory control
Previously, we saw that Intel’s fiscal 2Q15 results were better than analysts’ expectations. However, its primary operating segment is the CCG (Client Computing Group). It suffered a significant fall due to softness in the PC market. In 2Q15, Intel’s (INTC) CCG segment reported revenue of $7.53 billion—a fall of ~14% on a YoY (year-over-year) basis.
On July 9, 2015, Gartner reported that global PC shipments fell by 9.50% to 68.4 million units on a YoY basis in 2Q15. It’s the steepest PC shipment fall recorded since 3Q13. Due to weak PC demand, Advanced Micro Devices (AMD) slashed its revenue expectations by about 8% for its fiscal 2Q15 results.
A reduction in the global PC shipments—due to faltering demand and high inventory levels in anticipation of Microsoft (MSFT) Windows 10—impacted this segment’s growth. Macroeconomic and currency fluctuations, especially the US dollar’s (UUP) continued appreciation in 2014 and 2015 to date, also contributed to the fall. All of the major PC vendors—Lenovo, Hewlett-Packard (HPQ), Dell, Asus, and Acer Group—experienced a fall in their PC shipments, as the above chart shows.
How did CCG’s key drivers perform in 2Q15?
Desktop unit volumes and notebook platform volumes registered a 22% and 11% fall, respectively, on a YoY basis. It’s important to note that 1Q15 was the fifth consecutive quarter that the company’s notebook volume registered YoY growth. However, this growth was absent in 2Q15. Tablet unit volumes rose to 10 million units—a rise of 11% on a YoY basis.
The fall in desktop and notebook unit volumes was expected in line with the fall in the PC shipments. Tablet performance in 2Q15 generates optimism, but it isn’t comparable to the PC market. The majority of the tablets still lack the comprehensive functionality that PCs provide. As a result, in between PC and tablet, there’s a wide gap that needs to be bridged.
If you are bullish about Intel, you can invest in the PowerShares QQQ Trust (QQQ). Intel makes up about 3.41% of this ETF.
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