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Analysts are projecting Intel (NASDAQ:INTC) and Microsoft (NASDAQ:MSFT) to report unremarkable sales growth figures for the quarter as China’s slowing economy puts pressure on already-low PC demand. Both Intel and Microsoft are scheduled to announce quarterly earnings this week, and according to estimates, will report sales growths of barely 5 percent or less from a year earlier.
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Economic growth has slowed in China, which is now the world’s largest PC market and was, until now, counterbalancing the dropped demand from Europe and the U.S. “The current picture is lousy,” Pat Becker Jr., a fund manager at Becker Capital Management, told Bloomberg. “It’s Europe, it’s the chain reaction into the emerging markets.”
Last week, Intel competitor Advanced Micro Devices (NYSE:AMD) blamed the weakness in China and Europe for its unexpected 11 percent revenue decline in the second quarter. It had previously estimated a growth of 6 percent. Intel supplier Applied Materials (NASDAQ:AMAT) also cut its annual targets last week.
Another contributing factor is that more and more consumers are beginning to choose tablets such as Apple’s (NASDAQ:AAPL) iPad and smartphones over PCs. Global PC shipments stalled in the second quarter, declining 0.1 percent to 87.5 million units, according to a Gartner report. The research firm predicts the PC market will grow just 2.7 percent this year.
Intel (NASDAQ:INTC) had predicted sales of $13.6 billion, plus or minus $500 million, for the second quarter. Analysts on average project sales will rise about 4 percent to match the midpoint of the company’s forecast, with per-share profit estimated to be 52 cents a share.
Microsoft’s (NASDAQ:MSFT) quarterly net income fell to 62 cents a share, according to average analysts estimate. The company has already announced a $6.2 billion writedown in its online division, which means it will post a net loss for the quarter. Sales will rise 4.7 percent to $18.2 billion in the period, analysts estimate.
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