Thomson Reuters
Intel CEO Brian Krzanich
To a company like Intel, whose PC chips drive a big chunk of its sales, that's bad news.
But Intel's CEO Brian Krzanich didn't sound all that worried about the upcoming free Windows 10 upgrades, scheduled for later this month, during his earnings call on Wednesday.
He thinks customers will still have to get a new PC in order to fully enjoy all the best features offered on Windows 10.
"A lot of the really good features of Windows 10, things like Windows 10 Hello where you have facial log in, and you don't have to use all your passwords, the Start screen and your ability to go through that, the touch usages of gaming, as the new games come to this product - those are going to run with PCs that have the latest features," he said.
"That, combined with products like Skylake over the long haul, I think Windows 10 will be a boost to the PC market."
Skylake is Intel's latest chip that will allow new functionalities like streaming your mobile content to your TV, or have longer battery lives. Intel announced Skylake will be available in the second half of this year.
Economic factors
Krzanich blamed the decline in PC sales on factors like macroeconomic conditions and consumer sentiment.
"In general, the PCs always had a fairly decent tie to GDP. The worldwide GDP growth has a bit slowed, especially in areas like China, where a lot of the growth in PCs were occurring," he said.
He continued, "There's always a little bit of a stall right before a new product like Skylake, combined with a new OS like Windows 10, which the majority of these devices will run on. That tends to have people waiting to see what those products are going to be...I think you put all these together, it's made 2015 be weaker in the PC than we had anticipated."
Last week, Gartner estimated worldwide PC shipments will drop 4.4% this year, after seeing a 9.5% decline in the second quarter alone.
Even with the long term growth he sees in the PC market, Krzanich predicted Intel's PC sales will remain "relatively flat" over the long haul - but he's OK with that, as he sees other businesses to offset the losses in the PC market.
"Our growth strategy was to hold the PC as close to flat as we can, and grow in the data center, grow in IoT, grow in NAND memory," he said. "The amount of earnings and income that's coming now from those segments is quite significant, and growing faster and faster as they get bigger."
In fact, more than 70% of Intel's operating profit in the second quarter came from its data center, memory and IoT businesses. That led to a surprise beat in its earnings Wednesday, which drove its shares to spike as much as 8% in after hour trading, while providing positive outlook for next quarter.
"We expect the launches of Skylake, Microsoft's Windows 10 and new OEM systems will bring excitement to client computing in the second half of 2015," Krzanich said.