(Updates with details of job cuts in fifth paragraph.)
Jan. 17 (Bloomberg) -- Intel Corp., the world’s largest chipmaker, forecast first-quarter revenue that may fall short of some analysts’ estimates as corporate demand fails to reignite personal-computer sales.
Revenue will be $12.3 billion to $13.3 billion, the Santa Clara, California-based company said yesterday in a statement. Analysts on average were estimating $12.8 billion, according to data compiled by Bloomberg.
Consumer notebook PC demand is declining in Asia, and business orders for server chips fell short of Intel’s projections in the fourth quarter, Chief Executive Officer Brian Krzanich said on a conference call. Even as revenue in the period rose amid a pickup in corporate desktop demand, the lackluster forecast damped optimism for a stronger rebound in the PC market, said Alex Gauna, an analyst at JMP Securities.
“The prevailing view coming in was that things are getting better,” said San Francisco-based Gauna, who has the equivalent of a hold rating on the stock. “The quarterly result and forecast says that things are still not very good.”
Intel also plans to shed 5 percent of its 107,600-person workforce by the end of the year to “realign resources to the needs of its business,” the company said.
Intel shares, which gained 26 percent in 2013, fell 2.6 percent to $25.85 at the close in New York.
In the fourth quarter, net income rose 6.4 percent to $2.63 billion, or 51 cents a share, from $2.47 billion, or 48 cents, a year earlier. Sales climbed 2.6 percent to $13.8 billion. Analysts on average had estimated earnings of 52 cents on sales of $13.7 billion.
“It was a return to financial growth for the company,” Chief Financial Officer Stacy Smith said in an interview. “Specific to the PC market, it is getting better. But, consistent with third-party estimates, we’re expecting a small, single-digit decline” in the PC market.
Some investors had expected the company to top average analysts’ estimates, said Stacy Rasgon, an analyst at Sanford C. Bernstein & Co. Some were also optimistic that an improving PC market would cause Intel to be more upbeat in its forecasts, he said.
“People were expecting them to beat and raise, and the guidance was just in line,” said Rasgon, who has the equivalent of a sell rating on the stock. “PCs are less bad -- that’s not a reason to jump up and down.”
CEO Krzanich, who was promoted to the top job in May, is trying to reverse his company’s fortunes in smartphones and tablets, which have replaced PCs as a means of getting online for many consumers. In November, Krzanich said Intel is aiming to get its chips into 40 million tablets this year. The company has less than 1 percent of the market for smartphone microprocessors, according to researcher Forward Concepts.
Sales at the company’s PC-chip division were unchanged in the fourth quarter at $8.56 billion. Operating income at the unit rose 20 percent to $3.4 billion. The data-center business, which makes chips for servers that dish out and store data, reported sales of $3 billion, up 8 percent from a year earlier. Operating income in that division rose 11 percent.
Revenue in the unit that makes other chips, such as those that run smartphones, tablets and industrial devices, rose 8.5 percent to $1.11 billion, while the division’s operating loss widened to $620 million.
Intel expects server-chip sales to rise about 10 percent this year, at the lower end of an earlier prediction for growth of as much as 15 percent, Smith said. Demand from operators of large data centers remains strong, though companies aren’t ordering as many new machines as the company had projected, he said.
Earlier this week, the company said it’s postponing the opening of a new plant in Arizona, though the delay won’t reduce its total output. The chipmaker yesterday said it plans to spend $11 billion on new equipment and factories this year.
First quarter gross margin, or the percentage of sales left after deducting the cost of production, will be about 59 percent, Intel predicted, in line with analysts’ estimates. That measure, the only profit indicator Intel forecasts, was 62 percent in the fourth quarter.
More than 80 percent of all PCs and servers are based on Intel’s microprocessors, making the company’s earnings an indicator of demand across the industry. Intel kicks off about two weeks of reports from the largest U.S. technology companies.
Global PC shipments fell 5.6 percent in the fourth quarter -- the seventh straight drop -- bringing the annual decline to 10 percent, according to IDC Corp. The market researcher is predicting a drop of 3.8 percent in 2014.
Intel’s revenue for 2014 will be little changed from last year, when sales slipped 1.2 percent to $52.7 billion, the company said yesterday.
--Editors: Jillian Ward, Reed Stevenson