CHICAGO--(BUSINESS WIRE)--Intel's negative pre-announcement this morning suggests the end of support for Windows XP was a more significant factor than previously estimated in last year's perceived stabilizing personal computer (PC) demand, according to Fitch Ratings. Consequently, extended PC refresh cycles may result in a resumption of negative PC sales growth.
Intel Thursday changed its first-quarter revenue outlook as a function of weaker than expected PC demand. Intel now expects $12.8 billion in first-quarter revenue versus its prior $13.7 billion projection.
We believe expectations for sustained negative PC sales growth could pressure ratings or outlooks for technology companies for which stabilizing PC demand is a key base case assumption, including Advanced Micro Devices Inc. (B-/Stable), Dell Corp. (BB/Positive) and Hewlett-Packard Company (A-/Negative Watch).
While Intel and Microsoft are negatively affected, Fitch believes both companies have significant financial flexibility at their respective current ratings to weather weaker PC demand as each continues to shift focus toward growth markets.
Fitch now expects negative low-single-digit PC unit growth for 2015, driven by the resumption of an extended PC refresh cycle and consumer substitution of smartphones and tablets for PCs more than offsetting solid demand around the data center. These secular trends were clouded in 2014 by the end of support for Windows XP, resulting in only slightly lower PC unit growth for the year.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.