Intel Corp (NASDAQ: INTC) slashed its revenue forecast for the first quarter by nearly $1 billion U.S, citing lower-than-expected demand for business PCs and lower inventory levels across the PC supply chain.

The chip maker's shares fell $1.02, or 3.2%, in mid-morning trading Thursday to $31.31 U.S., within a 52-week trading range of $24.40 U.S. to $37.90 U.S.

Intel said it expects first-quarter revenue of $12.8 billion U.S., plus or minus $300 million. It had earlier forecast $13.7 billion, plus or minus $500 million U.S.

Analysts on average were expecting revenue of $13.70 billion U.S., according to Thomson Reuters I/B/E/S.

Intel said it cut its forecast as small and medium business owners did not upgrade their Windows XP operating systems as often as Intel had expected. The company also cited "challenging" macroeconomic and currency conditions, particularly in Europe.

Intel said the mid-point of its gross margin range will remain at 60%, plus or minus a couple of percentage points, as lower PC unit volume is offset by higher platform average selling prices.