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
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