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Intel Lowers Q1 Revenue Outlook on Weak PC Sales, Currency Effects

Small and medium businesses aren't upgrading their old Windows XP as fast as Intel would like.

Nick Knupffer / IntelPR

Chip giant Intel warned that weaker-than-expected sales of desktop PCs has hurt its revenue outlook for the first fiscal quarter. Its shares opened lower by more than 4 percent at $30.95 on the Nasdaq.

Intel said it now expects Q1 revenue to come in at $12.8 billion, plus or minus $300 million. It had previously guided to revenue of $13.7 billion, plus or minus $500 million. That guidance was already lower than the consensus view of analysts surveyed by Thomson Reuters.

The company also said that PC makers are holding fewer of its chips in inventory than had been previously expected. In addition, small and medium businesses running PCs with Microsoft’s old operating system Windows XP are taking their time upgrading their machines.

The warning hurt shares of Hewlett-Packard, a significant Intel customer. Its shares fell by more than 3 percent as markets opened for trading.

Intel also cited macroeconomic and currency effects. When the U.S. dollar is strong versus international currencies — as it is now — American companies that do a lot of business overseas lose out on the exchange rate when they’re paid in non-U.S. currencies such as the euro and the Japanese yen. Several large tech companies including Oracle and HP have cited these “currency headwinds” in earnings reports in recent months.

Intel said its data center business, which supplies chips to companies building servers and networking equipment, is meeting expectations. It forecast a gross margin, a closely watched metric indicating profitability, to be 60 percent plus or minus a few percentage points. In Q4 its gross margin was 65.4 percent.

This article originally appeared on Recode.net.