Intel Says Business PC Demand Stronger Than Expected

The chip maker is boosting its financial forecast for the quarter and the year as the migration away from Windows XP and other factors kick in.


Intel officials are seeing strong demand for business PCs, a trend that is driving their financial forecast for the quarter and the year higher.

The company late June 12 reported that second-quarter revenues now will come in at about $13.7 billion, up from the $13 billion executives forecast in April. In addition, the officials said the world's largest chip maker should see revenue growth for all of 2014, a year in which they initially expected sales to be flat.

Most of the improved financial forecast is tied to the stronger-than-expected demand for business PCs, according to officials. They said more information will be released when the company reports its second-quarter earnings July 15.

The announcement comes amid an ongoing transition in the computer industry away from traditional PCs to such mobile devices as tablets and smartphones. Analysts from such firms as IDC and Gartner have been tracking declining PC sales over the past three years, a trend that has corresponded with continued rapid growth in smartphone and tablet shipments.

Millions of PCs continue to ship every year, but the decline has had an impact on vendors in the industry. Established players such as Intel, Advanced Micro Devices, Hewlett-Packard and Dell, with historically close ties to the PC market, have seen their financial numbers take a hit and are aggressively broadening their product portfolios into growth areas like enterprise IT solutions and mobile systems in hopes of lessening their dependence on the PC market.

For example, Intel still gets the bulk of its revenues—$7.9 billion in the first quarter—from PC chip sales, although it is pushing out in multiple directions, from enterprise data center systems to the cloud to the Internet of things.

At the same time, the shift has given rise to other vendors, such as ARM, whose low-power chip architecture is used in most mobile devices.

However, this year, executives from Intel, AMD and elsewhere said they have seen their PC businesses begin to stabilize, due in large part to demand on the commercial side. Analysts attributed much of that to Microsoft's decision to end support of the aged Windows XP operating system in April, which had been running on a large percentage of business PCs despite the subsequent releases of Windows 7 and 8 (Vista was not a popular version of the OS).

"The end of XP support by Microsoft on April 8 has played a role in the easing decline of PC shipments," Gartner Principal Analyst Mikako Kitagawa said in April. "All regions indicated a positive effect since the end of XP support stimulated the PC refresh of XP systems. Professional desktops, in particular, showed strength in the [first] quarter."

In announced first-quarter financial numbers in April, Intel CEO Brian Krzanich agreed that the XP migration played a role by forcing businesses in particular to refresh their system. However, Krzanich said there were also other reasons, such as new form factors being pushed by Intel and OEMs—including 2-in-1 convertible systems—falling prices of new systems and an aging PC installed base.

"So it's a combination of factors that's really driving the stabilization" of the PC market, Krzanich said.

Despite the apparent stabilization, IDC analysts earlier this month said the future for PCs is still challenging.

"The transition toward mobile and cloud-based computing is unstoppable," Loren Loverde, vice president of IDC's Worldwide PC Trackers, said in a statement. "PCs continue a slow transition toward touch and slim designs, even as tablet volume is expected to pass total PC volume in the fourth quarter of 2014 and on an annual basis in 2016. To return to growth, the PC industry is going to need to accelerate the shift to lower-cost, thin, and touch-based designs, despite the challenges it has faced with these designs in the past."