Intel gives lukewarm forecast for first-quarter revenue

Chipmaker Intel gave a lukewarm forecast for first-quarter revenue that did little to dispel concerns about a slowing PC industry, and said it overestimated the extent of a recovery in spending among its enterprise customers.

Revenue will be $12.3 billion to $13.3 billion, the company said in a statement. Analysts on average were estimating $12.8 billion, according to data compiled by Bloomberg.

Consumer notebook PC demand is declining in Asia, and business orders for server chips fell short of Intel's projections in the fourth quarter, chief executive Brian Krzanich said on a conference call.

Even as revenue in the period rose amid a pickup in corporate desktop demand, the lacklustre forecast damped optimism for a stronger rebound in the PC market, said Alex Gauna, an analyst at JMP Securities. “The prevailing view coming in was that things are getting better,” said San Francisco-based Gauna, who has the equivalent of a hold rating on the stock. “The quarterly result and forecast says that things are still not very good.”

Intel shares, which gained 26 per cent in 2013, slipped 4.7 per cent in extended trading following the announcement. They fell less than 1 per cent to $26.54 at yesterday’s close in New York.

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

"It was a return to financial growth for the company," chief financial officer Stacy Smith said in an interview. "Specific to the PC market, it is getting better. But, consistent with third-party estimates, we're expecting a small, single-digit decline" in the PC market.

Some investors had expected the company to top average analysts’ estimates, said Stacy Rasgon, an analyst at Sanford C. Bernstein and 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 Mr 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.”

CEO Mr Krzanich, who was promoted to the 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, Mr Krzanich said Intel is aiming to get its chips into 40 million tablets this year.

The company has less than 1 per cent of the market for smartphone microprocessors, according to researcher Forward Concepts.

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 per cent to $3.4 billion. The data-centre business, which makes chips for servers that dish out and store data, reported sales of $3 billion, up 8 per cent from a year earlier. Operating income in that division rose 11 per cent.

Revenue in the unit that makes other chips, such as those that run smartphones, tablets and industrial devices, rose 8.5 per cent to $1.11 billion, while the division’s operating loss widened to $620 million.

Intel expects server-chip sales to rise about 10 per cent this year, at the lower end of an earlier prediction for growth of as much as 15 per cent, Mr Smith. Demand from operators of large data centers remains strong, though companies aren’t ordering as many new machines as the company had projected, he said.

Earlier this week, the company said it’s postponing the opening of a new plant in Arizona, though the delay won’t reduce its total output.

The chipmaker yesterday said it plans to spend $11 billion on new equipment and factories this year. (Bloomberg)