Intel’s Client Computing Group Declined in 1Q15
Key Takeaways from Intel's 1Q15 Earnings (Part 2 of 5)
CCG suffered a declined due to inventory reduction
In 1Q15, Intel’s (INTC) CCG (Client Computing Group) segment reported revenue of $7.42 billion—a decline of 8% on a YoY (year-over-year) basis. Reduction in the global PC shipments—partially due to slow refreshment of Microsoft (MSFT) Windows XP, especially in the SME segment—impacted this segment’s growth. Macroeconomic and currency fluctuations, especially in Europe (EZU), contributed to the decline.
Performance of CCG’s key drivers
Desktop unit volumes, especially in SME (small and medium enterprises) registered a 16% decline. Notebook platform volumes saw a modest 3% increase in 1Q15. It’s important to note that 1Q15 is the fifth consecutive quarter that the company’s notebook volume registered YoY growth. Tablet unit volumes stood at 7 million units—an increase of 45% on a YoY basis.
The CCG segment’s contribution towards operating profit was $1.4 billion—a decline of 24% on a YoY basis. Low desktop revenue and high unit cost contributed to the decline in margins.
On April 9, 2015, as the above chart shows, Gartner stated that global PC shipments declined 5.2% in 1Q15—compared to 1Q14. To gain diversified exposure to Intel, you can invest in the iShares US Technology ETF (IYW). It invests about 4.56% of its holdings in Intel.
Intel altered its revenue guidance
On March 12, 2015, Intel lowered its 1Q15 revenue forecast due to “softer-than-expected demand for business desktop PCs.” Lower-than-estimated inventory levels across the PC supply chain also contributed to the lower revenue outlook. As a result of lower revenue expectations, Intel’s share declined by 4% on March 12.
Slow refreshment of Microsoft Windows XP by some SMEs likely caused the change in demand and inventory orders. Before the lowered revenue guidance, Intel’s prior revenue guidance was $13.7 billion—plus or minus $500 million. Microsoft (MSFT) and Seagate (STX) also previously stated that they have lower expectations from the March quarter revenue due to softer-than-expected PC demand
Browse this series on Market Realist:
