(Reuters) - Chipmaker Intel Corp (INTC.O) forecast current-quarter revenue and gross margins that disappointed investors, sending its shares down more than 2 percent in extended trading.
Revenue from its mainstay PC business fell about 3 percent to $8.9 billion in the fourth quarter from the third, raising doubts about the expected recovery of the personal computer business.
Global personal computer shipments fell 2.4 percent in the fourth quarter of 2014, according to research firm IDC, capping three years of declines.
That was not as bad as expected, raising hopes among some investors that the PC market is starting to stabilize.
That optimism has helped drive Intel's stock up 16 percent in the past three months, compared with a 7 percent gain for the S&P 500, to levels not seen since 2001.
In the light of that, Wall Street was hoping for more encouraging figures.
"The top line looked a little bit light of the Street and gross margin looked a little bit light," Christopher Rolland, an analyst at FBR Capital Markets, said.
"PC was weaker in the fourth quarter than we were expecting," Rolland added.
The chipmaker forecast first-quarter revenue of $13.76 billion, plus or minus $500 million, and gross margins of about 60 percent, far below the 65.4 percent it reported in the fourth quarter.
Analysts on average were expecting revenue of $13.77 billion, according to Thomson Reuters I/B/E/S.
Despite exceeding the goal of seeing its chips used in 40 million tablets this year, the heavy subsidies that Intel offered added to its operating loss in its mobile business.
Net income for the fourth quarter rose to $3.66 billion, or 74 cents per share, for the quarter ended Dec. 27, from $2.6 billion, or 51 cents per share, a year earlier.
Revenue rose to $14.7 billion from $13.8 billion.
Analysts on average had expected a profit of 66 cents per share on revenue of $14.71 billion, according to Thomson Reuters I/B/E/S.
Intel shares were down 2.8 percent in after-hours trading at $35.16, after closing on Nasdaq at $36.19.
Reporting by Anya George Tharakan in Bengaluru and Bill Rigby in Seattle; Editing by Don Sebastian, Sriraj Kalluvila and Lisa Shumaker