Intel raises its forecast for third-quarter sales

New York: Intel raised its forecast for third-quarter sales, bolstered by growing optimism for the personal computer market. Shares climbed to their highest closing price in more than 18 months.
The world’s largest maker of semiconductors has been suffering from a global slide in demand for PCs because people increasingly prefer their tablets or mobile phones. Now, Intel is seeing signs of "replenishment of PC supply chain inventory,” indicating that PC makers are stocking up on key components for computers after years of sliding sales that left hardware gathering dust on shelves.
It’s also "seeing some signs of improving PC demand,” the company said in a statement on Friday.
Chief Executive Officer Brian Krzanich is looking for new ways to fuel growth in areas such as drones, robots and everyday items like connected air conditioners, while still depending on its traditional businesses, including products that power PCs and mobile phones. In addition to the PC gains, the company’s forecast indicates Intel may be benefiting from chips that are now being placed in some of Apple’s iPhones, according to Timothy Arcuri, an analyst with Cowen & Co.
"They also had this iPhone stuff in their back pocket, which is now coming through,” Arcuri said. "I do think PCs are better — there’s enough data points to suggest that — but it’s not just PCs.”
The shares rose 3 per cent to $37.67 at the close in New York, the biggest single-day jump in about nine months and the highest value since December 2014. The stock has gained 9.3 per cent this year.
Intel’s new forecast is for revenue of $15.6 billion, plus or minus $300 million. The previous projection from the Santa Clara, California-based company was $14.9 billion, plus or minus $500 million. Analysts on average had estimates in line with the company’s original outlook.
Intel also boosted its forecast for adjusted gross margin by 1 point, now expecting the midpoint at 63 per cent, plus or minus a couple of percentage points.
Shipments of PCs, a market that provides Intel with more than half of its sales, fell to their lowest level in a decade in the first three months of 2016. The depth and duration of the slump means Intel can no longer fall back on booming demand for server chips or market-share gains against weaker rival Advanced Micro Devices.
By the second quarter, the rate of decline in PC shipments had slowed, as demand in North America helped blunt weakness across the rest of the industry.
Some analysts were hesitant to call this a turnaround yet.
"PCs are doing better, no doubt about it,” said C.J. Muse, an analyst at Evercore ISI. "I wouldn’t call it rapid change. I think when you look at depleted inventory in the channel plus the pessimistic attitude coming in, we were set up for things to come in a little better than expectations.”