In Wake Of Declining Desktop Sales, Intel Slashes Revenue Forecast

Intel on Thursday warned investors that its first-quarter revenue is likely to be $900 million lower than previously forecast as it weathers weaker than expected sales of business PCs. As a result, Intel now expects to record Q1 revenue of $12.8 billion, plus or minus $300 million, compared to its previous expectations of $13.7 billion, plus or minus $500 million.

The Santa Clara chip maker placed the bulk of the blame on small and medium businesses standing pat with Windows XP. Microsoft finally put the legacy operating system to rest a year ago in April, leaving those who don't upgrade at a severe security risk as newly discovered vulnerabilities go unpatched, though businesses have the option of paying for extended support. By going that route, businesses on a strict budget can delay the costly process of upgrading to a newer operating system and/or new hardware.

Windows XP
CRT monitor? Windows XP? It's time to upgrade! Image Source: Flickr (Daniel Oines)

It can't all be blamed on Windows XP. The number of machines running Windows XP now compared to a year ago has eroded -- StatCounter's data shows that Windows XP is installed on just over 10 percent of the world's PCs, while Net Applications has the OS clinging to a little over 19 percent. In April of last year, those figures stood at 15.83 percent and 26.29 percent, respectively.

Intel also pointed the finger at "increasingly challenging macroeconomic and currency conditions, particularly in Europe." Bottom line either way is that consumers and businesses alike just aren't upgrading their PCs, and that's obviously having an effect on Intel.

Investors still shouldn't hit the panic button. Despite the challenges, Intel is coming off a record fourth-quarter in which it collected $14.7 billion in revenue for a $3.7 billion profit. That bumped the chip maker's full-year totals to $55.9 billion revenue and $11.7 billion in profit.

Intel's shares fell nearly 5 percent to $30.63 following the revised forecast.