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With PC sales down, Intel could face tough earnings report

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With PC sales down, Intel could face tough earnings report

With PC sales falling, a strong dollar making its products more expensive and bad times in some of its major markets, chip maker Intel is expected to announce it had a difficult quarter with the release of its earnings report after the markets close today. Intel was trading slightly down, at $31.50, Tuesday morning.AFP 535855560 A CIT USA NV

Last month the Santa Clara, Calif.-based company warned that revenues would be nearly $1 billion short of forecasts, totaling about $12.8 billion. The poor outlook was based on weaker than expected demand for business desktop PCs and lower than expected inventory levels among computer suppliers, the company said. Analysts are predicting Intel to post earnings of 40 cents a share on sales of $12.9 billion, according to a survey by Thomson Reuters. That compares with $12.8 billion in the same quarter last year.

Intel forecasted its gross margin, a measure for profitability, would be around 60%. Last quarter the company’s gross margin was 65.4%. Intel, the world leader in semiconductor chips used in computers as well as network controllers and embedded processors, faces several issues. Gartner reported last week that worldwide PC sales were down 5.2%.

Last year Intel benefited from surge in sales when the one-third or so of PCs out there still running Microsoft’s Windows XP had to upgrade when Redmond stopped supporting the aging software in April. Many companies and users bought new machines that could run more modern versions of Windows, resulting in a brief uptick in sales. However those machines have now been replaced. Another surge is expected later this year when Microsoft releases Windows 10, which should entice many PC users to upgrade their machines. However the timing on the release is uncertain and could miss the back-to-school market and even perhaps part of the Christmas sales market, said Mark Hung, lead Intel analyst with the research firm Gartner, in Santa Clara, Calif.

The final quarter of 2014 closed well for the company. It reported revenue of $55.9 billion, up 6%. Its earnings per share were $2.31, up 22%. This quarter’s earnings are the first under Intel’s new financial reporting structure that combines PCs with mobile into a new Client Computing Group. Intel also says it will use its quarterly call to “provide commentary on the company’s goal to improve mobile profitability by $800 million in 2015.

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