Intel Ups PC Processor Revenue Estimates: Partners Cheer

Who said the PC is dead? Don't tell that to Intel, who just upped its revenue estimates this quarter from $12.5 billion to $13.5 billion. Thanks to corporations upgrading their office machinery, it raised its second-quarter revenue forecast, the chip maker said.

It's a trend Intel partners know firsthand.

"We have been seeing a strong demand for desktop replacements as customers are finally coming around and upgrading their Windows XP machines," said Michael Goldstein, president and CEO of LAN Infotech, a Dell partner based in Fort Lauderdale, Fla. "We accepted the upgrades, but just couldn't tell when we’d see sales take off.’

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Goldstein and other channel partners said security issues, such as the serious security flaw found last month in Internet Explorer 8 that allowed attackers to remotely take control of a user's computer, have been big drivers for companies to finally upgrade their machines. IDC estimates that 20 percent of commercial PCs still run the now-expired Windows XP operating system.

"Since XP users can't upgrade to a more modern version of XP and can't get any more security updates, when big security flaws make news our customers are quickly realizing they have to upgrade," Goldstein said.

Intel’s revised forecast gives hope to a beleaguered PC market that has experienced two straight years of declining global shipments, according to IDC tracking numbers.

"Most of the growth we are seeing in the PC market is going to a mix of commercial desktop and laptop replacement of XP systems,’ said Rajani Singh, senior research analyst at IDC. "Growth is concentrated here in the United States and in parts of Europe."

Singh said it’s not just XP that is driving sales. New PC sales for alternative form factors, such as Chromebooks, small-form-factor PCs known as NUCs (Next Unit of Computing) and ultrathin laptops, are new growth markets for Intel.

IDC is forecasting 8 percent commercial growth in PC shipments in the second quarter of 2014 buoyed by a 9 percent decline in consumer shipments.

For Wally Lang, general manager of Hipskind Technology Solutions Group, a Hinsdale, Ill.-based Intel partner, it's his company’s purchasing of x86 servers for his growing data center business that is driving new Intel purchases. ’We are making significant investments into our cloud and data center business. We just opened up a data center in Chicago and next month opening one in Atlanta.’

Intel, whose chips power more than 80 percent of the world's PCs, reports its next quarterly results on July 15.

IDC and partners said they expect commercial PC sales to remain strong for the rest of 2014. ’We see slow and steady growth in our PC business through the end of the year. Next year, when extended life support for Microsoft’s Windows Server 2003 ends, we expect even more new opportunity for our Intel business,’ Goldstein said.

IDC's Singh said Intel gains also can be attributed to a smaller-than-expected mobile revolution, whose negative impact on desktop and laptop sales have been underestimated by many. She said tablets and 2-and-1 device sales have failed to make a dent in commercial PC sales because of pricing and productivity hurdles.

"Business users are coming to the realization that tablets can’t replace laptops when it comes to productivity," Singh said.Two-and-one form factors are having trouble, she said, because the devices are expensive, costing considerably more than a notebook, and neither excel as a laptop or at being a tablet.

"When it comes down to productivity, as much as people want to rely on a tablet or their phone, in the workplace there is nothing better than a PC to replace a dying, old XP PC," Singh said.