Intel Corp., the worlds largest semiconductor manufacturer, raised its second-quarter revenue forecast and projected 2014 sales will jump for the first time since 2011 as businesses replace ageing machines.
Intels shares marked a minor advance in New York on Thursday but surged 6.6% to $29.80 in extended trading after the announcement. The chip maker increased the lower end of its guidance by 7% and projected second-quarter sales at between $13.4 and $14.0 billion, compared to an earlier forecast of $12.5-$13.5 billion. The company also raised its gross margin projection, or the percentage of sales left after the deduction of production costs, by 1% to 64%. Revenue is expected to increase in the full year as well, but an exact number was not provided. The last annual sales growth was a 24% jump posted in 2011 when revenue reached $54 billion.
“Intel now expects some revenue growth for the year as compared to the previous outlook of approximately flat,” the company said in its statement. “The change in outlook is driven mostly by strong demand for business PCs.”
The improved forecast fanned optimism for the personal computer industry, which accounts for most of Intels revenue. Despite the global tendency for customers to switch to tablets and other mobile devices, businesses replacing their ageing computers will be a source of growth in the short to medium term.
According to market-research company IDC, this years corporate demand will be driven mainly by replacements of computers running Microsofts Windows XP operating system, whose support the software maker recently discontinued. According to IDC, worldwide PC sales shrank less than expected in the three months through March as developed markets began to stabilize. However, global shipments will drop by 6% this year and the decline may continue through 2018 as people continuously switch from desktop PCs and laptops to mobile devices.
In order to offset the softening demand at its main revenue driver, Intel has made mobile chips its priority but posted disappointing first-quarter results in its mobile division.
Renée James, president of Intel, said earlier this month that the personal computer is yet to evolve and will not die to competition from new generation devices.
“In five years time I don’t think we’ll be talking about PCs versus tablets, what we’re going to see is a blending between them,” said Ms James, cited by the Financial Times. “In the end that will look like significant growth, if not a doubling, of what was just known as the PC business.”
Intel Corp. rose by 0.11% on Thursday to close the session at $27.96 per share, marking a one-year change of +14.31%. The semiconductor maker is valued at $139.04 billion. According to CNN Money, the 38 analysts offering 12-month price forecasts for Intel Corp. have a median target of $28.00, with a high estimate of $35.00 and a low estimate of $17.00. The median estimate represents a +0.14% increase from the last price of $27.96.
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