Blue screen for IBM and Intel profits

Two of tech's largest firms have reported a fall in profits after they failed to cash in on the mobile device market.

by Emma Haslett

Tough times for two once-mighty giants of tech: Intel and IBM have both reported hefty falls in profits.

Profits at Intel, which primarily makes chips for PCs (last week we reported PC sales are plummeting – we can’t help but see a pattern here…) dropped by 29% on a year ago to $2bn (£1.32bn), while revenues fell by 5%.

It was a similar story at IBM, where profits fell by 16.9% to $3.23bn and revenues dropped by 3.3% to 24.9bn: the second quarter in a row profits have missed analyst expectations.

What’s going on? In short: mobile technology. In the nineties and early noughties, Intel ruled the roost when it came to computer processors – but it missed the mobile technology boat and now a British company, ARM, designs 98% of the processors used in mobile phones.

At IBM (which, despite its struggles, is still the world’s largest technology company by revenue), it’s a similar story. Although it pointed to weakness in China, its fastest growing market, where GDP growth dropped to 7.5% earlier this week, there are wider problems.

The company once focused on hardware but has increasingly turned to software as its main source of revenue. When its income fell short of analysts’ forecasts earlier this year, it was the first time in eight years that had happened. Not surprisingly, then, it decided to cut 3,300 jobs.

But both firms assured investors they can change. IBM has shifted its focus to cloud computing and data analysis, and says the restructuring (read: job cuts) will begin to show benefits in the third and fourth quarters. Unfortunately, the sale of one of its hardware businesses (it wouldn’t say which – although it is reported to be a small server manufacturer) has been put off until next year.

And despite Intel’s troubles, it did have one big win to report: Samsung has replaced an ARM chip in one of its tablets with one from Intel. That’s one device down – only another couple of hundred-odd to go…

- Image credit: Flickr/mark.sze

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