Intel Corp. slashed its previous first-quarter revenue target by around $1 billion on Thursday citing lower demand for corporate personal computers.
The Santa Clara, California-based chipmaker said that more businesses held back from upgrading Microsofts Windows XP operating system and thus put off purchasing new and more powerful machines. Intel said the tendency was notably large in small and medium business.
In April Microsoft dropped the support of Windows XP after twelve years of service and warned that clients should take action and replace the operating system with a newer version.
The move was expected to boost personal computer sales as the operating system no longer receives any security updates and potentially exposes sensitive information to hacker attacks. However, a transition from Windows XP to a newer version would add additional costs to businesses and with the cloud computing technology on the rise, many cost-cautious enterprises prefer to stick with the older system.
According to market researcher Netmarketshare, Windows XP still powers more than 19% of all desktop computers, while Windows 7 has a market share of 56%. The latest operating system from Microsoft accounts for around 10% while his older brother, Windows 8, has 3.55%.
The desktop industry has been suffering for a few years now, as smartphones and tablets have overtaken the better half of the personal computers functions. Consumers have proven to prefer mobile devices when it comes to simple tasks like checking an e-mail, internet shopping or a quick online search. However, desktops are still holding the top spot when additional hardware power is needed.
Additionally, Intel cited “challenging macroeconomic and currency conditions”, particularly in Europe as another decision driver. Over the past year the dollar has significantly boosted its strength against the euro. Last March one euro could buy $1.3869 dollars, while today one euro is equal to $1.0605. Additionally, the dollar has risen against a number of other currencies as well.
This shift has affected many of Intels clients as the chipmaker sells its products in U.S. dollars, while the personal computer manufacturers receive customer payments in their local currencies, which has dented overall profits. PC makers have been forced to increase product prices to make up for the stronger dollar, however, the move has additionally reduced sales.
The company said it now expect to generate first-quarter revenue of between $12.5 billion to $13.1 billion, down from its previous guidance of $13.2 billion to $14.2 billion.
Intel dropped 4.73% on Thursday and closed at $30.80 on the NASDAQ, marking a one-year increase of 24.39%. The company is valued at $150.13 billion.
According to the Financial Times, the 39 analysts offering 12-month price targets for Intel have a median target of $36.00, with a high estimate of $48.00 and a low estimate of $23.00. The median estimate represents a 16.88% increase from the last closing price.
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