Intel, during its earnings conference call, told analysts and investors that demand for data centers will help it post second quarter sales that are in line with the consensus estimate. On Tuesday, the chip maker said it expects revenue for the second quarter to be around $13.2 billion compared to the analysts’ projection of $13.5 billion.
Shift towards mobile devices helping Intel
Consumer demand for PCs is weakening due to the shift of users toward tablets and smartphones, but this is increasing demand for the data centers needed to support those mobile devices and also for higher-end Intel processors. In the first quarter, data center sales for the chip maker rose 19% owing to the demand from big names such as Google and Facebook.
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Pat Becker Jr., a fund manager at Becker Capital Management in Portland, told Bloomberg, “The data-center group is strong, and that’s overcoming what’s happening on the personal-computer side.”
Also the impressive performance of the data center unit helped Intel to post healthy margins. According to the chip maker, the gross margin for the current period will be about 62% compared to the 61% predicted by the analysts.
Is PC demand stabilizing?
For 2015, Intel expects flat revenue and a gross margin of around 61%. Previously, the chip maker indicated revenue growth to be in the “mid-single digits.”
Topeka Capital Markets analyst Suji Desilva said, “I think the full-year guidance being flat year over year (is) supportive of a stable PC environment, despite the first-quarter weakness.”
However, last week, research firm Gartner said PC shipments were down 5.2% globally in the first quarter owing to a decline in corporate spending. The chip maker noted that notebook shipments were up 3% in the first quarter from the last year while the average selling price for laptops chip was down 3%. Also the desktop chip shipment for the company declined 16%, while the ASP was up 2%.
For the quarter, Intel posted revenue of $12.8 billion, which was flat compared to last year but marginally below the analyst estimate of $12.9 billion. Net income for the chip make came in at $1.99 billion or 41 cents per share, up from $1.93 billion, or 38 cents per share a year earlier.