With personal computer shipments falling for eight straight quarters
through March, some analysts believe the industry's decline is close
to hitting bottom, potentially giving Intel breathing room as it
struggles to develop better processors for mobile and wearable
Following its first-quarter report on Tuesday, Intel Chief Financial
Officer Stacy Smith said the chipmaker continues to expects PC
shipments to decline slightly in 2014.
"But there are pretty clear signs of stabilization," Smith told
Reuters. "You have an ageing install base of PCs and we're bringing
exciting products to the market place and that's leading to the
pockets of strength we're seeing in the PC market."
In its report, Intel said revenue from its PC client group in the
first quarter was $7.9 billion, down 1 percent from the year before.
The company also expects a full-year gross margin of 61 percent,
plus or minus a few percentage points. That is 1 percentage point
higher than Intel's previous forecast.
Intel shares rose 1.6 percent in extended trading after closing up
0.80 percent at $26.77 on Nasdaq.
"The margin guidance is what's pushing the stock up. The PC client
group was roughly in line with seasonal," said Bernstein analyst
Tuesday's results included a new financial reporting structure to
better reflect its focus on two small key areas: mobile and the
growing field of linking up electronic devices, known as Internet of
Intel in recent years has been slow to adapt its chips for
smartphones and tablets and is rushing to catch up with mobile
Intel said its mobile and communications group had revenue of $156
million in the first quarter, down 61 percent from the year-ago
Chief Executive Officer Brian Krzanich told analysts on a conference
call that Intel shipped 5 million tablet chips in the first quarter
and is on track to reach a goal of shipping 40 million tablet chips
Last year, Intel shipped 10 million tablet chips and to reach its
target for 2014, the company is offering to heavily subsidize
manufacturers' costs to include its components in their future
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Asked whether Intel expected that some of those mobile chips might
be used in low-end laptops instead of tablets, CFO Smith said: "We
mean 40 million tablets with Intel chips in them by the end of this
year, with the majority of those being Android-based tablets."
After underestimating the impact of smartphones and tablets, Intel
is keen to make sure it is part of an emerging trend toward wearable
computing devices such as smart watches. In March, it bought Basis
Science, the maker of a wearable health tracker, as part of that
But industry watchers believe smart clothing is not ready to make a
major splash with consumers any time soon. Analysts are skeptical
that chips for wearables will be able to make up for much of the
business that Intel has lost because of the shrinking PC industry.
Intel's data center group, a big contributor to the company's
overall profits, had revenue of $3.1 billion in the first quarter,
up 11 percent year over year.
The chipmaker reported first-quarter net earnings of $1.947 billion,
or 38 cents a share, compared with $2.045 billion, or 40 cents a
share, in the year-ago quarter. Analysts on average expected 37
cents a share, according to Thomson Reuters I/B/E/S.
First-quarter revenue was $12.76 billion, compared with $12.58
billion in the year-ago quarter, Intel said in a statement on
Tuesday. Analysts had expected $12.814 billion.
Intel forecast revenue of $13 billion, plus or minus $500 million,
for the second quarter, which ends in June. Analysts had expected
$12.957 billion on average.
(Reporting by Noel Randewich; editing by Andre Grenon and Lisa
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