Intel announced today that outlook for revenue during the first quarter earnings period will likely come below expectations. Originally, Intel was forecasting revenues of $13.7 billion for first quarter, but they now expect revenue around $12.8 billion. Wall Street’s original revenue outlook matched Intel’s first estimate of $13.7 billion. First quarter results are, as of now, scheduled to be released April 14, 2015. Shares of Intel are trading lower by -3% in the first hour of trading on Thursday.
Weak demand for business computers hurting Intel’s bottom line
Intel cited reasoning for the lower revenue outlook due to weaker than expected demand coming from enterprise desktop solutions and weak inventory levels across the PC components industry. Intel management cites the fact that businesses still are clinging to Windows XP systems and an overall reluctance to upgrade operating systems such as the new Windows 10. Additionally, Intel says that the overall weak Eurozone economy has hurt its business operations overseas, adding to the outlook downgrade. Stifel research additionally firm sees the pain expanding to other PC component makers such as hard drive makers Seagate and Western Digital, as US hard drive imports reportedly lower and demand waning.
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Apple has chosen Intel chips for its planned iPhone to be released in 2016
While Intel’s first quarter is set up to be dud due to lagging conditions in PC demand and European headwinds, Intel detailed yesterday at Apple will feature their chips in the 2016 iPhone. It was reported yesterday that Intel’s new LTE chip, XMM 7360, will be Intel’s venture into the iPhone. Intel has long supplied chips and components for other Apple products such as its Mac lineup, but it appears Intel is trying to take advantage of Apple’s appeal to find new chips for its products. Additionally, with rumblings rumored between Qualcomm and Apple, who was a big supplier of wireless chips for Apple products, it appears Apple wants to shop around more to find other sources.
Overall, Intel may face some headwinds in the first half of 2015 with the outlook downgrade. Lagging PC demand is nothing new, as sales in PC industry have struggled for a number of years. However, combine that with struggling European economy and a very strong US Dollar, headwinds are sure to follow. However, with Intel set to provide its LTE chips in the 2016 iPhone, the chip maker stands to reap the benefits from its partnership with Apple.