Intel warns, businesses not upgrading PCs

Intel warned Thursday that its first quarter revenue will be lower than expected.

The chipmaker said that it now expects revenue for the quarter to be $12.8 billion, plus or minus $300 million. Its previous expectation had been $13.7 billion, plus or minus $500 million.

That new guidance comes in substantially lower than even Wall Street's most pessimistic outlook: The lowest Street revenue estimate for Intel's first quarter was $13.23 billion.

The company's stock fell about 5 percent as the market opened Thursday morning, and then cut some of those losses.

Brian Krzanich, chief executive officer of Intel.
Patrick T. Fallon | Bloomberg | Getty Images
Brian Krzanich, chief executive officer of Intel.

Intel blamed the new guidance on poor demand for business desktop upgrades.

"The change in revenue outlook is a result of weaker than expected demand for business desktop PCs and lower than expected inventory levels across the PC supply chain," the company said in a release.

Intel cited "increasingly challenging macroeconomic and currency conditions, particularly in Europe," for this trend.

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Microsft stock also traded down about 2 percent, as Intel specifically warned that the Windows upgrade cycle had been weak.

Hewlett-Packard and Advanced Micro Devices both fell more than 3 percent when the market opened.

Although Intel said small and medium-sized businesses were not upgrading as quickly as expected, it said its data center business is "meeting expectations."

Intel said the mid-point of its gross margin range will remain at 60 percent, plus or minus a couple of percentage points, as lower PC unit volume is offset by higher platform average selling prices.

Global PC shipments fell 2.4 percent in the fourth quarter of 2014, according to research firm IDC.

—Reuters contributed to this report.