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Intel warns decline in PC market revenue

Posted: 17 Mar 2015 ?? ?Print Version ?Bookmark and Share

Keywords:Fitch Ratings? IDC? PC market? LTE? 4G?

Intel cut nearly $1 billion in its first-quarter revenue forecast March 12. This revived the age-old discussion of whether or not the PC market is on the decline.

The warnings from Intel also raise the issue of Intel's ability to diversify its businessfast enough to make up for the declining PC revenue. A recent report that Intel's LTE modems "could get into iPhones" in 2016 stirred some noise, but it's still a rumour at this point.

Now back to the PC market news.

Piling onto the bad news for Intel, IDC said Thursday it's revising a PC market outlook. The market research firm is now forecasting the global PC market to shrink nearly 5 per cent this year instead of 3.3 per cent previously forecast.

Chicago-based rating agency Fitch Ratings also reported Thursday, "Intel's negative pre-announcement this morning suggests the end of support for Windows XP was a more significant factor than previously estimated in last year's perceived stabilising personal computer (PC) demand."

The rating agency concluded: "Consequently, extended PC refresh cycles may result in a resumption of negative PC sales growth."

The takeaway here is that the PC market rebound is proving to be short-lived.

Indeed, Intel's newly issued forecast is a shock to some who were led to believe in recent months that the PC business was growing after two years of weakness. Intel CEO Brian Krzanich told analysts last fall that the company's PC business was performing better than expected.

Intel said in its latest statement:

The change in revenue outlook is a result of weaker than expected demand for business desktop PCs and lower than expected inventory levels across the PC supply chain. The company believes the changes to demand and inventory patterns are caused by lower than expected Windows XP refresh in small and medium business and increasingly challenging macroeconomic and currency conditions, particularly in Europe.

Fitch Ratings isn't so worried about Intel and Microsoft, despite current woes. Both companies have "significant financial flexibility at their respective current ratings to weather weaker PC demand as each continues to shift focus towards growth markets."

More worrisome are companies such as Advanced Micro Devices, Dell and Hewlett-Packard Company, it said, as stabilising PC demand is a key base case assumption for those technology companies.

Company needs to diversify

The latest warning from Intel also brings up a much needed diversification issue for the microprocessor giant. Last year, the company's full-year revenue was $55.9 billion, of which PC client group brought in $34.7 billion.

The company depends on roughly 62 per cent of its revenue from PCs, posing the question of how fast it can accelerate its tablet/smartphone business.


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