Intel lowers outlook as quarterly profits slide

The chip maker now expects no sales growth for the year, as the PC market continues to suffer

Intel reported another drop in profits for the second quarter and narrowed its sales outlook for the full year, as the declining PC market continues to eat away at its business.

Intel's profit for the quarter, ended June 29, was down 29 percent from last year to US$2 billion, the chip maker said Wednesday. Revenue fell 5 percent to $12.8 billion.

Sales from Intel's PC Client Group, which makes chips for desktops and laptops, were down 7.5 percent, and its Data Center group, which makes server chips, reported sales that were flat.

It's been a tough couple of years for Intel, which has been fighting a weak economy and declines in the global PC market. Sales of tablet computers have been expanding rapidly, but that's a market dominated by ARM-based chips and where Intel barely plays.

"Looking ahead, the market will continue buying a wide range of computing products," Intel CEO Brian Krzanich said in a statement.

Perhaps with that in mind, Intel lowered its financial forecast for the year. It now expects full year sales to be level with those of last year, down from its earlier forecast of single-digit percentage growth.

"Intel Atom and Core processors and increased SOC integration will be Intel's future," Krzanich continued. "We will leave no computing opportunity untapped."

Intel is still the world's biggest semiconductor vendor, with 16.4 percent of the global market last year, according to Gartner. But its dominance stems mostly from the PC market, which has also been hurt by a weak economy and the lackluster response to Windows 8.

PC shipments were down 11.4 percent in the second quarter and down 13.9 percent the quarter before that, according to research firm IDC. By contrast, tablet shipments in the first quarter more than doubled, IDC said, albeit from a lower base.

Krzanich became Intel's CEO in May, taking over from Paul Otellini. His role is to expand Intel's business in smartphones and tablets, and to make sure the company doesn't get sidelined in emerging areas like wearable computers.

Advanced Micro Devices, Intel's main rival in PC chips, reports its earnings Thursday. Analysts expect a loss of $0.12 per share on revenue that will decline 22 percent to $1.1 billion, according to Thomson Reuters.

James Niccolai covers data centers and general technology news for IDG News Service. Follow James on Twitter at @jniccolai. James's e-mail address is james_niccolai@idg.com

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