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Why Did Intel Corporation (INTC) Cut Guidance For First Quarter Revenues?

Intel Corporation (NASDAQ:INTC) took a step back on Thursday morning as they revised their outlook for first quarter. They reduced their revenue guidance set earlier and stated multiple reasons for doing the same. Will this have a huge impact on the stock, which has already dropped around 15% Year To Date. The ‘Squawk on the Street’ team Jim Cramer and David Faber discuss about this on CNBC.

Is Intel Corporation (INTC) The World’s Most Vital Company?

Faber said that Intel Corporation (NASDAQ:INTC) has cut its guidance for the first quarter revenue and he mentioned that they have revised the revenue guidance to $12.8 billion +/- $300 million from its original guidance of $13.7 billion +/- $500 million. He also pointed at various reasons that Intel Corporation (NASDAQ:INTC) has quoted during the press conference for this guidance cut.

“The company announces first quarter revenue lower than expected below previous outlook. Now expects first quarter revenue to be $12.8 billion, +/- $300 million. This is what they say compared to previous expectations of $13.7 billion +/- $500 million. Why the change in outlook? A weaker than expected demand for business desktops/PC’s, lower than expected inventory levels across the PC supply chain. Company believes that changes demanded inventory patterns are caused by lower than expected Windows XP. Small and medium business increasingly challenging macroeconomic and  here it is currency conditions particularly in Europe,” Faber said.

Cramer feels that PC business is not good at the moment and he pointed at Hewlett-Packard Company (NYSE:HPQ)’s numbers as an example. He mentioned that Microsoft Corporation (NASDAQ:MSFT) expectations are way too high and optimistic and he feels it will be difficult for the company to meet it.

Cramer thinks that PC business is taking a hit due to growing mobile business. He thinks that Intel Corporation (NASDAQ:INTC)’s dependence on PC’s is the main cause for this guidance cut. Cramer thinks that CEO of Intel Corporation (NASDAQ:INTC), Brian Krzanich is doing a great job but he is facing a huge tide ahead of him with the PC business.

Though, Intel Corporation (NASDAQ:INTC) mentioned that the gross margin guidance still remains at 60%. Faber pointed at companies statement that lower PC sales volume is compensated by higher average prices, which maintains the gross margin at 60%. The company also said that its data center business is meeting expectations. But, Cramer thinks that data center business should exceed expectations as it is the way to go for the future.

Cramer thinks that even if European market grows, PC business cannot gain profits. He said that PC’s are in a secular decline. He feels that Intel Corporation (NASDAQ:INTC) should have moved into the wireless.

Disclosure: None

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