Intel cuts outlook, cites weak PC sales

Intel said it cut its first quarter outlook because of "weaker than expected demand for business desktop PCs and lower than expected inventory levels across the PC supply chain."

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Intel said Thursday that its first quarter revenue will be about $12.8 billion, give or take $300 million, as the corporate PC upgrade cycle has ran its course. Intel's outlook was well below the $13.7 billion, give or take $500 million it projected.

In a statement, Intel said it cut its first quarter outlook because of "weaker than expected demand for business desktop PCs and lower than expected inventory levels across the PC supply chain."

The outlook also highlights how Intel is still tethered to the PC market and the Windows ecosystem even as it is carried by the data center unit and sees growth ahead for its Internet of things unit. Intel's fourth quarter was mixed, but there were positive signs for the PC market when the company initially gave its outlook.

According to Intel, there are a few moving parts in the first quarter:

  • Small and medium sized businesses aren't upgrading Windows XP the way large companies did.
  • Inventory patterns have changed.
  • And Europe has its economic and currency troubles.

On the bright side, Intel did say the data center business is on track. Intel is expecting gross margins to remain at about 60 percent.

In a research note on Wednesday, Cowen analyst Timothy Arcuri said that the data from contract equipment manufacturers pointed to a rough first quarter. Arcuri said:

February monthly sales and shipment data from Taiwan ODMs (original design manufacturers) underscore February sales data from other Taiwan companies in the supply chain and point to a seasonally soft Q1:15 for both notebook PC and, to a lesser extent, storage and x86 server demand. While the magnitude of ODM's M/M decline (shipments -19% vs. -4% 10-year seasonal) follows a below-seasonal January and an above seasonal December, we think that shipments during the month were negatively impacted by the delayed timing of Chinese New Year (in February vs. January). If March snaps back to normal seasonal (+20% M/M), we think CQ1:15 PC shipments could fall ~20% Q/Q (-11% Y/Y), or slightly below the mid-point of most company's guidance.

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