Intel sales sag under PC slowdown

Businesses bought fewer PCs than expected last quarter, the chip maker said

The PC business enjoyed a bit of a revival last year as companies replaced older systems running Windows XP. Those upgrades are mostly done now, and the slower market has hit Intel's financial results.

The chip maker reported first-quarter revenue of $12.8 billion on Tuesday, flat from the same quarter last year and a bit lower than financial analysts had been expecting, according to a poll by Thomson Reuters.

Intel blamed lower than expected sales of business PCs but said the decline was offset by strong sales of servers and other data center products. The company had already cut its forecast for the quarter last month.

Its profit for the quarter, ended March 28, was $2.0 billion, or $0.41 per share, both up slightly from last year and in line with expectations.

Intel is battling at least two problems at the moment: a gradual decline in the PC business and an inability to make much headway against chip-design company ARM in smartphones.

Intel used to break out the financial results from its division that sells smartphone and tablet chips; last year that group lost $4.2 billion.

It made a change last quarter and no longer breaks out those numbers, so it's hard to see how its low-power Atom chips are selling. Instead, Intel lumps them together with the group that makes laptop and desktop PC chips.

That combined division, called the Client Computing Group, reported revenue of $7.4 billion for the last quarter, down 8 percent year over year, Intel said.

Its Data Center Group, which sells Xeon server processors, did better. Revenue there was $3.7 billion, up 19 percent from last year. Its smaller Internet of Things division also did well.

The PC business hasn't been this bad for a while. Shipments tumbled to a six-year low last quarter, according to research firm IDC. Another research firm, Gartner, predicts a single-digit percentage decline for the full year.

The upgrades from XP, brought on by the end of support for that operating system last year, have slowed, and companies are now waiting for Windows 10 before making purchases, IDC said. The OS is expected toward the end of the year.

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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