Intel Sales May Miss Some Analysts' Estimates Amid PC Slump (2)

Bloomberg News

, the world's largest chipmaker, forecast first-quarter revenue that may fall short of some analysts' estimates as corporate demand fails to reignite personal-computer sales.

Revenue will be $12.3 billion to $13.3 billion, the Santa Clara, California-based company said today in a statement. Analysts on average were estimating $12.8 billion, according to compiled by Bloomberg.

Amid a persistent slump in PC sales, Intel and other companies that depend on the market had been helped by corporations replacing machines that run Windows XP, a 12-year-old operating system that Microsoft Corp. will stop supporting in April. Those extra orders may start to dry up as companies complete their upgrades, said Tristan Gerra, an analyst at Robert W Baird & Co. in San Francisco.

'Once you're past that XP deadline, you could see a slowdown again,' said Gerra, who has the equivalent of a hold rating on Intel's stock. He predicts the PC market will shrink for a third consecutive year in 2014. 'It's not going to be as bad, but we're going to see declines.'

Intel shares, which gained 26 percent in 2013, slipped as much as 3.7 percent in extended trading following the announcement. They fell less than 1 percent to $26.54 at the close in New York.

Fourth Quarter

In the fourth quarter, net income rose 6.4 percent to $2.63 billion, or 51 cents a share, from $2.47 billion, or 48 cents, a year earlier. Sales climbed 2.6 percent to $13.8 billion. Analysts on average had earnings of 52 cents on sales of $13.7 billion.

Some investors had expected the company to top average analysts' estimates in the fourth quarter, said Stacy Rasgon, an analyst at Sanford C. Bernstein & Co. Some were also optimistic that an improving PC market would cause Intel to be more upbeat in its forecasts, he said.

'People were expecting them to beat and raise, and the guidance was just in line,' said Rasgon, who has the equivalent of a sell rating on the stock. 'PCs are less bad -- that's not a reason to jump up and down.'

Sales at the company's PC-chip division were unchanged in the fourth quarter at $8.56 billion. Operating income at the unit rose 20 percent to $3.4 billion. The data center business, which makes chips for servers that dish out and store data, reported sales of $3 billion, up 8 percent from a year earlier. Operating income in that division rose 11 percent.

First quarter , or the percentage of sales left after deducting the cost of production, will be about 59 percent, Intel predicted, in line with analysts' estimates. That measure, the only profit indicator Intel forecasts, was 62 percent in the fourth quarter.

Mobile Markets

More than 80 percent of all PCs and servers are based on Intel's microprocessors, making the company's earnings an indicator of demand across the industry. Intel kicks off about two weeks of reports from the largest U.S. technology companies.

Chief Executive Officer Brian Krzanich, who was promoted to Intel's top job in May, is trying to reverse his company's fortunes in smartphones and tablets, which have replaced PCs as a means of getting online for many consumers. In November, Krzanich said Intel is aiming to get its chips into 40 million tablets this year. The company has less than 1 percent of the market for smartphone microprocessors, according to researcher Forward Concepts.

Global PC shipments fell 5.6 percent in the fourth quarter -- the seventh straight drop -- bringing the annual decline to 10 percent, according to IDC Corp. The market researcher is predicting a decline of 3.8 percent in 2014.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net

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