Intel dropped its quarterly revenue outlook on Thursday by approximately $1 billion, noting that business customers are not enthusiastic enough about switching from Windows XP, a 13-year old operating system.
A concern for Intel, Microsoft and PC makers
Intel stated that the currrent slow PC sales are primarily due to the weaker than expected demand to upgrade from Windows XP from small and medium size businesses, along with the broader economic issues, such as a weaker euro.
The chipmaker noted on Thursday that it is now expecting to post $12.8 billion in first quarter sales, a drop from its mid-January guidance of $13.7 billion, which was already less than Wall Street expectations.
Intel spokeswoman Cara Walker said on Thursday, “This happens occasionally and we’re transparent about changes to our financial outlook.” Walker said that the company sticks to its strategy and is determined to execute it.
Intel could struggle if users continue to show their disinterest in shifting from Windows XP. Apart from the chip maker, it could create a problem for Microsoft, which is backing the latest operating system, Windows 10, that launches this year, says a report from CNET. Moreover, PC makers such as Lenovo, Acer and HP will also suffer from the slow transition from Windows XP.
Data center business going strong
On a brighter note, Intel said that its data center business, which contributes significantly to profits, would meet expectations. The chip maker concluded 2014 on a strong note as its data center group is driving towards significant growth. Its PC business also surged after previously finding it hard to win back consumers who have shifted to the smartphones and tablets computers in prior years.
Just last year, Microsoft scrapped support for the Windows XP in a move to encourage businesses and consumers to upgrade to newer machines. Market share of Windows XP for desktop and tablet dropped to 11% last month, compared to 17% a year earlier, according to research StatCounter. Windows 7 is still the most popular operating system, holding approximately 50% of the market.
The slow transition away from Windows XP highlights some of the earlier warnings from the analysts that the PC market is just experiencing a short-term bounce instead of a long-term revival.