BUSINESS

Intel lowers revenue guidance, after previously calling for a return to growth

03/12/2015 09:30 EDT | Updated 05/12/2015 05:59 EDT
SAN FRANCISCO - Intel's stock fell Thursday after the giant chipmaker lowered its first-quarter revenue forecast, citing weak demand for business desktop PCs and a strong dollar that affects revenue from overseas sales.

The new forecast calls for little or no revenue growth, in contrast with company statements in recent months that its PC business was returning to growth after two years of weakness.

Intel is the world's leading maker of microprocessor chips that serve as the brains for most personal computers, but its business has suffered as more consumers have turned to smartphones and tablets that use chips made by other companies. Although it has launched its own line of chips for handheld devices, Intel has been struggling to catch up in that market.

Intel CEO Brian Krzanich had been projecting growth since last fall, when he told analysts that the company's personal computer business was performing better than expected after the company had two years of overall sales declines. The company reported in January that revenue for the fourth quarter and the 2014 fiscal year had increased by 6 per cent over the previous periods.

But on Thursday, Intel said small and medium-sized businesses are not buying as many new PCs as expected to replace older machines that run on the now-outdated Windows XP operating software from Microsoft. Analysts say Microsoft's decision to end support for Windows XP helped boost PC sales last year, but that boost has largely subsided.

Santa Clara, California-based Intel is now projecting first-quarter revenue of $12.5 billion to $13.1 billion. The midpoint of that range is the same as the $12.8 billion in revenue that Intel saw in the first quarter of 2014. But Intel previously had forecast revenue in the range of $13.2 billion to $14.2 billion and analysts surveyed by FactSet were predicting $13.71 billion.

Shares in Intel were down 4 per cent in midday trading Thursday to $31.15. Intel is set to report first-quarter financial results on April 14.