Top chipmaker Intel Corp posted earnings confirming the PC industry is alive - but not kicking - and said sales would accelerate in the second half of the year with a powerful new PC processor.
In a first-quarter earnings report that did not inspire investors to push Intel's recently high-flying stock further, the company also said costs associated with ramping up new production lines would hurt gross margins more than expected.
"It's not that they disappointed, they just didn't give us the bull case. In previous quarters they blew the numbers out of the water," said Patrick Wang, an analyst at Evercore Partners.
The long-time technology bellwether is ramping up production of its newest PC processor, codenamed Ivy Bridge, which is expected to drive sales later this year and power a new crop of super-thin laptops dubbed "ultrabooks."
But the costs of upgrading the factories where the chips are being made is temporarily hurting margins, Chief Financial Officer Stacy Smith told a conference call.
Intel said non-GAAP gross margins in the second quarter would be 62 percent, plus or minus 2 percentage points, down from 64 percent in the first quarter. Intel's full-year gross margin forecast of 64 percent was unchanged.
Shaky economies in Europe and the United States, a growing consumer preference for tablets, and a recent shortage of hard drives due to flooding in Thailand last year have taken a toll on the PC industry. Demand in China and other emerging economies has helped sustain growth.
Despite weakness in the United States, global PC shipments in the first quarter grew 1.9 percent from the year-ago period, research firm Gartner said last week. That was better than the firm's previous forecast of a 1.2 percent decline.
Intel said revenue in the current quarter would be $13.6 billion, plus or minus $500 million. Analysts on average had expected $13.45 billion, according to Thomson Reuters I/B/E/S.
The world's leading chipmaker said revenue in the first quarter was $12.9 billion, up from $12.85 billion in the year-ago period and a bit higher than the $12.85 billion expected. GAAP net income in the first quarter was $2.74 billion, down from $3.16 billion in the year-ago period. Shares of Intel fell 2.81 percent in extended trade after closing up 0.23 percent at $28.47 on Nasdaq.