Weak PC Sales Expected to Hurt Intel's Q1 Results

Chipmaker Intel has already warned the markets that its first quarter results will come in weaker than previously expected. The question that will face its shareholders on Tuesday, when it reports earnings after markets close, is whether or not it sees any brighter days ahead.

Last month, Intel slashed the midpoint of its revenue outlook by $900 million to $12.8 billion. Intel blamed the problem on slower-than-expected demand for PCs, especially among small- and medium-sized businesses that are taking their time upgrading older machines running Microsoft’s Windows XP.

Analysts surveyed by Thomson Reuters now expect Intel to post earnings of 40 cents a share on sales of $12.9 billion and to offer Q2 guidance of 48 cents a share on $13.5 billion in revenue. Last month, Intel said it expected its gross margin, a closely watched metric indicating profitability, to be about 60 percent. In Q4, its gross margin was 65.4 percent.

Like other tech companies, Intel has struggled with the strong U.S. dollar, which can hurt companies that do a lot of international sales after they account for exchange rates. Expect to hear CFO Stacy Smith specify exactly how badly these “currency headwinds” hurt during a conference call.

Sales of chips to PC makers dominate Intel’s business, accounting for 62 percent of sales last year. And while the market showed signs of recovery at the end of 2014 after posting its worst year ever, research firms Gartner and IDC last week reported further year-on-year declines in the first quarter.

Also expect questions from analysts about reports that Intel has been in talks to acquire chipmaker Altera. Such a deal makes a certain amount of sense and would boost revenue by about $2 billion. However, the talks were said to have fizzled out last week. If the talks are really over, Intel executives will likely say so unambiguously. If they decline to answer, that may be a hint that the talks are still ongoing.

This article originally appeared on Recode.net.

Will you support Vox’s explanatory journalism?

Most news outlets make their money through advertising or subscriptions. But when it comes to what we’re trying to do at Vox, there are a couple reasons that we can't rely only on ads and subscriptions to keep the lights on.

First, advertising dollars go up and down with the economy. We often only know a few months out what our advertising revenue will be, which makes it hard to plan ahead.

Second, we’re not in the subscriptions business. Vox is here to help everyone understand the complex issues shaping the world — not just the people who can afford to pay for a subscription. We believe that’s an important part of building a more equal society. We can’t do that if we have a paywall.

That’s why we also turn to you, our readers, to help us keep Vox free. If you also believe that everyone deserves access to trusted high-quality information, will you make a gift to Vox today?

One-Time Monthly Annual

$5/month

$10/month

$25/month

$50/month

Other

$

Yes, I'll give $5/month

Yes, I'll give $5/month

We accept credit card, Apple Pay, and Google Pay. You can also contribute via