Intel Cuts Sales Forecast as PC Demand Slumps

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intel earnings computer chips pc technology processors servers tablets smartphones
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By PETER SVENSSON

NEW YORK -- Intel, the world's largest maker of chips for PCs, put a brave face on the decline of the global PC sales earlier this year, saying it still expected its own sales to grow. On Wednesday, it backtracked, saying sales will be flat.

Intel (INTC) is hoping that sales of processors for servers, tablets and smartphones will compensate for the drop-off in PC sales. The downward revision of the company's outlook is an admission that Intel chips haven't made it into many mobile devices.

"I've made it Intel's highest priority to create the best products for the fast growing ultra-mobile market segment," said new CEO Brian Krzanich in a statement.

Intel shares fell $1, or 4.2 percent, to $23.15 in extended trading Wednesday, after the release of its quarterly financial results.

Analyst Kevin Cassidy at Stifel Nicolaus said the sell-off was likely overdone, and praised Krzanich's commitment to chips for mobile gadgets.

Krzanich said the company has been slow to respond to the shift in consumer spending from PCs to tablets and smartphones, but intends to make up for lost time. The company will now place as much importance on "Atom" processors for ultra-light laptops, tablets and phones as it does on the much higher-priced "Core" processors that go into PCs. The latter have generated the bulk of the company's revenue for years.


Krzanich vowed to speed up the process of shifting production of Atom processors to Intel's latest fabrication lines. The company's latest production equipment can make processors that are faster, cheaper and consume less power than ones made on older equipment.

Intel is bringing out a major new update of its Atom processors, code named "Bay Trail," later this year.

The Santa Clara, Calif., chipmaker said revenue for the April to June period was $12.8 billion. That was down 5 percent from a year ago and just below the company's projections and analyst expectations of $12.9 billion, as polled by FactSet.

Net income for the quarter was $2 billion, or 39 cents a share. That was down 29 percent from a year ago.

For the third quarter, Intel expects revenue of $13.5 billion, plus or minus $500 million. Analysts were expecting $13.7 billion.

Worldwide shipments of personal computers fell 11 percent in the April-June period, according to data from research firms Gartner and IDC, as people continued to migrate to tablets and other mobile devices. It's the fifth consecutive quarter of decline, making it the longest slump in PC history, according to Gartner. Previous sales declines were related to recessions; this is the first time the PC is yielding to new devices.

Intel revealed a notable win in the quarter, as it got one of its chips into an Android-based Samsung tablet, replacing a chip based on technology from Britain's ARM Holdings PLC.

Intel named Krzanich, formerly the chief operating officer, to the CEO post in May. He replaced Paul Otellini, who surprised observers in November when he announced his intention to retire.


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