Business
Intel cut its first quarter revenue forecast by nearly $1 billion on Thursday. CNET reports that the drop came as business customers are proving reluctant to upgrade from Windows XP -- a popular but now 13-year-old operating system. The company said Thursday it now expects to post $12.8 billion in first-quarter sales, down from its mid-January expectation of $13.7 billion, which was already slightly below Wall Street expectations. "This happens occasionally and we're transparent about changes to our financial outlook," Intel spokeswoman Cara Walker said Thursday. "What hasn't changed is Intel's strategy and our focus on executing to it."
Intel has been playing catch-up after falling behind in high-growth areas such as mobile chips as customer spending increasingly moved towards low-cost handsets, tablets and laptops, notes Reuters. Intel, which benefited after Microsoft Corp wound down support for Windows XP operating system in last April, has been trying to offset the impact of the slowing upgrade by providing chips for new gadgets such as "2-in-1s", a hybrid that can function both as a laptop and a tablet. PC component suppliers are cutting their inventories below typical levels as they become increasingly conservative about the PC market, Topeka Capital Markets analyst Suji De Silva told Reuters. Sales numbers for original design and equipment manufacturers, especially out of Taiwan, have been declining month-to-month, Wedbush Securities analyst Betsy Van Hees said.
The primary supplier of processor chips for PCs said Thursday it has seen weaker-than-expected demand for business desktop computers and lower inventory levels across the industry’s component supply chain, according to the Wall Street Journal. Intel traced the problems to two issues: that small and medium-size businesses have held off PC purchases in anticipation of upgrading from Microsoft Corp.’s outdated Windows XP operating system, plus “increasingly challenging” economic and currency conditions, particularly in Europe.
Analysts said they believed the second set of factors is more important. Intel sells its chips to customers in dollars, but many PC makers that buy those chips sell their products in local currencies. They may also have to convert local currencies to buy components, a process that has grown more costly as the dollar’s value has risen. PC makers have boosted their prices in Europe sharply to respond to the rapid downward move of the euro relative to the dollar, noted Chris Caso, an analyst at Susquehanna Financial Group. Intel said Thursday that its data-center business is meeting expectations. The company, whose Xeon chips are used in servers and other data center hardware, has benefited from strong demand by companies offering Web-based services.
