Here’s what’s most important to save Intel’s shrinking $35 billion PC business

The PC market is shrinking and that’s not a good sign for Intel, a company that’s historically relied on selling chips to personal computers to grow its business.

To reinvigorate its PC business, Intel is counting on the release of its new Skylake chips and Microsoft’s new Windows 10 operating system. But that alone may not be enough, according to Gartner analyst Mark Hung.

“Windows 10 and Skylake by themselves will not generate additional sales,” Hung told Business Insider. “It’s really the technologies that sit on top of that.”

Hung pointed out that there needs to be a new platform or products built on top of those two things to really drive additional PC sales, like Microsoft’s new Surface Book laptop or Intel’s Real Sense camera.

“Those are more important things to help generate growth in their core market, and that’s what’s really going to propel the company going forward,” Hung added. “It’s really about getting people excited about buying PCs again.”

Intel seems to be aware of this. During earnings call on Tuesday, Intel CEO Brian Krzanich said, “I do believe we’re in a unique situation, where we have a new operating system with Windows 10, our 6th generation core Skylake in place, there’s a lot of innovations from the OEMs, and we have some additional products, or innovations, like Real Sense… so I do think there could be points for optimism.”

Sexy systems

Krzanich pointed out more than a hundred new devices built on top of both the Windows 10 and Skylake chips are coming out later this year, adding it’ll take some time until we see real results in terms of PC sales growth.

Patrick Moorhead, principal analyst at Moor Insights and Strategy, was upbeat about the new product lineup and its potential to drive higher PC sales. “I’m actually bullish on Q4 consumer PC sales-out given new slim and sexy systems based on Skylake and Windows 10, plus the fact that there are over 400 million PCs around four years old,” he said.

Intel has been able to offset the loss in its PC sales with growth in other areas, such as its data center and IoT businesses. But considering PC sales generated $35 billion last year for Intel, or roughly 62% of its total revenue, there’s no question the PC market needs to get back on track for Intel.

“For the company to grow again, the PC group has to do better,” Hung added. “I do think Intel is more innovative than probably what we’ve seen in the past, but it remains to be seen.”