Intel has slashed its first-quarter (Q1 2015) revenue outlook to $12.8 billion from the earlier estimate of $13.7 billion due to weaker demand for business desktop PCs.
“The change in revenue outlook is a result of weaker than expected demand for business desktop PCs and lower than expected inventory levels across the PC supply chain,” said Intel in a statement.
IDC cuts PC shipment estimate
IDC today said PC shipments are expected to dip 4.9 percent in 2015 to 293.1 million PCs.
However, the research agency increased its projections for 2016 and 2017 slightly. In 2019, the shipment of PCs will reach 291.4 million units.
PC market reached $201 billion in 2014, a decline of 0.8 percent, and is expected to fall another 6.9 percent in 2015 with smaller declines in subsequent years bringing the total to $175 billion by 2019.
Intel believes the changes to demand and inventory patterns are caused by lower than expected Windows XP refresh in small and medium business and increasingly challenging macroeconomic and currency conditions, particularly in Europe.
The data center business is meeting expectations, said Intel.
The company is forecasting the mid-point of the gross margin range to remain at 60 percent, plus or minus a couple of percentage points, as lower PC unit volume is offset by higher platform average selling prices. Expectations for R&D and MG&A spending and depreciation in the first quarter remain unchanged.
Fitch on Intel estimate
Rating agency Fitch believes expectations for sustained negative PC sales growth could pressure ratings or outlooks for technology companies including Advanced Micro Devices, Dell and Hewlett-Packard Company.
While Intel and Microsoft are negatively affected, both companies have significant financial flexibility at their respective current ratings to weather weaker PC demand as each continues to shift focus toward growth markets.
Fitch now expects negative low-single-digit PC unit growth for 2015, driven by the resumption of an extended PC refresh cycle and consumer substitution of smartphones and tablets for PCs more than offsetting solid demand around the data center.