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Notebooks, Servers Boost Processor Sales

Worldwide PC processor sales were higher than usual in the second quarter, but signs of a weakening market could lead to a slower second half of the year, a market research firm said Friday.

When compared to the first quarter, unit shipments of microprocessors rose 3.6%, while revenues were up 6.2%, IDC said. The increases were much higher than the average sequential change in a calendar year between the first and second quarters. The average is a 1.6% rise in shipments and a 2.8% decrease in revenue.

The modest rise in revenue pointed to an increase in average selling prices, as computer makers bought more and higher-priced PC processors, IDC said. Specifically, system makers bought more mobile processors and more server processors, while sales of desktop chips remained flat.

In looking at the market by PC form factor, unit shipments of mobile and server processors rose 6.5% and 6.1%, respectively, quarter over quarter, IDC said. Unit sales of desktop PC processors fell 0.1%.

IDC predicts worldwide processor shipments to increase 19.8% this year from 2009. However, the analyst firm saw a weakness in demand during the second quarter and said it expected that softness to continue in August.

"Major OEMs (original equipment manufacturers) cut PC build orders with their contract manufacturers who, in turn, have cut orders for commodity components," IDC analyst Shane Rau said in a statement. "While the PC processor vendors re-iterated their solid outlook during their most recent earnings calls, the softness we've seen ultimately makes us concerned for end demand's pull on processors."

Indeed, for the current calendar quarter, Intel has forecast revenue of $11.6 billion, plus or minus $400 million. In the second quarter, Intel's best quarter ever, the chipmaker reported a 34% increase in revenue year over year to $10.8 billion, with profit soaring 175% to $2.9 billion.

But IDC said that while the second half of the year is likely to follow seasonal patterns of higher PC sales due to back-to-school and the holiday shopping seasons, the analyst firm said it expected year-over-year growth in the second half of the year to be less than the first half.

"2011 remains a wildcard in terms of sustainable unit growth," Rau said.

In looking at the major vendors in the second quarter, IDC found only small changes in market share in terms of shipments. Intel ended the quarter with an 80.7% share, a loss of 0.3%; AMD earned 19%, a gain of 0.2%; and VIA Technologies had 0.3% of the market.