Intel Raises Revenue Outlook, Cites Business PC Demand -- 4th Update

By Dow Jones Business News, 
A A A


By Don Clark and Josh Beckerman

Intel Corp. dispensed a dose of hope for the beleaguered personal computer business, boosting its financial estimates because of stronger-than-expected demand for business PCs.

The Silicon Valley giant, whose chips manage calculating functions in most computers, on Thursday said the pickup should generate $700 million more revenue in the current quarter than previously expected. Intel also said it now expects some revenue growth for the year instead of flat results.

The last time Intel was prompted to raise its financial outlook was in the third quarter of 2009. Its stock jumped in after-hours trading Thursday.

The news counters a long gloomy spell in the PC sector, as consumers shifted their spending to smartphones and tablets. At businesses, meanwhile, many companies saw little reason to upgrade hardware that was performing adequately.

But several factors have changed the dynamics, analysts say. Most recently, Microsoft Corp. ended technical support for its aging Windows XP operating system, spurring many companies to consider buying new machines using more recent software.

More broadly, companies have begun to realize that mobile devices don't meet employee needs for many kinds of tasks.

"PCs are not going away in business," said Bob O'Donnell, president and chief analyst of TECHnalysis Research. " They are not being replaced by tablets and smartphones."

Mr. O'Donnell said that conclusion was bolstered by a survey in April he conducted of employees at companies. Some 78% of respondents said they used a PC when working in their jobs, while 13% said they used smartphones and only 8% used tablets, he said.

He and other market watchers are quick to note that strong demand is limited to businesses, and mainly in the U.S. and other developed countries. "The consumer side is still weak," said Jay Chou, an analyst at IDC.

His firm predicts total PC unit shipments will decline 6% in 2014, with business PCs off 4.3%.

The forecast issued by Intel was more upbeat. For the second quarter, the chip maker said it now expects revenue of $13.7 billion, plus or minus $300 million, an estimate that points to 7% growth over the year-earlier period. Intel had previously predicted revenue of $13 billion, plus or minus $500 million.

Intel didn't quantify its yearly revenue guidance, other than to point to some growth, which it also attributed to business PC demand.

Another factor affecting demand is that new "2-in-1" PCs promoted by Intel and some of its customers--devices that can convert from clamshell to tablet mode--are attracting some interest at companies, Mr. O'Donnell said. For that reason and others, he predicts the business PC pickup may last 12 months to 19 months.

But others wonder what will happen after the short-term pressure to upgrade hardware because of Windows XP fades. " The big question in my mind is sustainability," said Stacy Rasgon, an analyst at Sanford C. Bernstein.

Besides revenue, Intel predicted gains in its closely watched gross profit margin. For the second quarter, Intel forecast that the midpoint of its gross margin range will rise by one point to 64%, with guidance for the full year at 61%, plus or minus a few percentage points.

Write to Don Clark at don.clark@wsj.com and Josh Beckerman at josh.beckerman@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


  (END) Dow Jones Newswires
  06-12-141836ET
  Copyright (c) 2014 Dow Jones & Company, Inc.


This article appears in: Technology

Referenced Stocks: INTC

Dow Jones Business News


More from Dow Jones Business News:

Related Videos

Stocks

Referenced

Most Active by Volume

110,219,031
  • $6.79 ▲ 14.31%
104,982,008
  • $11.83 ▲ 12.35%
95,065,355
  • $3.40 ▲ 0.59%
79,694,763
  • $36.59 ▲ 2.64%
49,037,292
  • $39.90 ▲ 5.81%
47,069,528
  • $15.34 ▼ 1.03%
43,387,835
  • $6.56 ▼ 1.94%
42,066,487
  • $98.38 ▼ 0.65%
As of 7/29/2014, 04:04 PM