IBM and Intel put analysts to shame

Payday is here

IBM (IBM) and Intel (INTC) both beat analyst’s estimates yesterday when they published their quarterly results, but the real question is if the results can sustained over the long term.

The revenue of IBM rose 8 percent to $24.6 billion, while net income rose 10 percent to $2.86 billion. Some of the rise in the net income can be attributed to the weak dollar.

Intel posted revenue of $12.8 billion for the quarter, up 12 percent from the previous quarter and up 25 percent compared to the year-ago quarter. The profit was $3.3 billion. Both numbers significantly shattered expectations from the analyst community that had come up with all sorts of excuses for why Intel would fall short of their estimates. Excuses included problems with the Cougar Point chipsets and the earthquake in Japan that was supposed to have hit Intel’s supply chain.

Even though IBM and Intel both are in the core IT-business they are two vastly different beasts.

Whereas IBM used to be primarily a hardware company it has been transformed over the past years and now mainly relies on development of software and the sale of services. This puts it in a very enviable position since margins in the hardware business are slimming down.

Intel, on the other side, relies heavily on the sale of hardware – and almost entirely in the server and PC segments, where growth is relatively modest.  Intel still has ways to go before it can compete effectively with ARM in the mobile space. We have now for several years heard the same Atom-story repeated over and over again: when the next generation of Atom-processors arrive then we will be in the mobile space.

We are now eagerly awaiting Ivy Bridge later this year. Hopefully this processor design will put Intel closer to competing with ARM.

Also, Intel may be forced to change its business model for Atom. ARM only sells IP. In order to compete it may be necessary for Intel to start selling Atom as pure IP as well – and then offer to fab it for its customers. This would also give customers much greater flexibility when designing SoC’s that do not necessarily match what is available from Intel as standard offerings.. S|A

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