Intel faced with a lackluster business PC market, is expected to see a modest sales increase when it reports first-quarter earnings after the market closes Tuesday.

Analysts polled by Thomson Reuters have modeled Q1 earnings per share excluding items of 41 cents, up 8% from the year-earlier quarter. Revenue is expected to increase 1% to $12.9 billion.

Santa Clara, Calif.-based Intel, the longtime leader in chips that power personal computers, on March 16 slashed its revenue estimate for Q1 by nearly $1 billion, citing weaker-than-expected demand for business PCs and lower-than-expected inventory levels across the PC supply chain.

Intel expects Q1 revenue of $12.8 billion, plus or minus $300 million, down from its previous forecast of $13.7 billion, plus or minus $500 million. The company expects its data-center business to meet expectations, but said all other forecasts have been withdrawn and will be updated on Tuesday.

On Thursday, market trackers IDC and Gartner said year-over-year PC shipments in Q1 fell 6.7% and 5.2%, respectively. Last year, global PC shipments fell 2.2% to 308.1 million units, IDC said.

Intel is revising how it presents its operating segments in its financial reports starting with its Q1 numbers. It combined its PC Client Group and Mobile and Communications Group to create the Client Computing Group.

Intel's PC unit has been highly profitable, while its mobile device group continues losing money. In January, Intel reported a 6.5% increase in Q4 revenue to $14.72 billion, with a solid holiday season for PC sales and mobile phone sales helping boost its results above analysts' expectations.

On Tuesday, Intel management plans to discuss how it intends to achieve the goal of improving mobile profitability by $800 million in 2015. One strategy is to more aggressively pursue sales of mobile chips through partnerships in China and other initiatives in the Internet of Things, wearables and other markets.

Earlier this month, Intel said its will combine its technology with Ingenico Group to jointly develop a mobile tablet to enable secure payments and meet new standards required by banks that help prevent credit card fraud.

Last month, Intel and Micron Technology began rolling out 3D storage chips that stack circuitry in layers to boost storage capacity, instead of shrinking it on a flat square of silicon. The two companies are targeting the flash memory market, the mainstay medium for storing data in portable devices such as smartphones, tablets and digital cameras.

Merger Talks Fuel Speculation

The Q1 results come amid reports that Intel has been negotiating to acquire programmable chipmaker Altera.

But a report by CNBC's David Faber Thursday claimed that, after months of negotiations, Intel and Altera had ceased merger talks.

Bloomberg also reported Thursday morning that "Altera Corp. rejected an offer of about $54 a share from Intel Corp., breaking off talks," and citing sources familiar with the negotiations.

But analysts have since speculated talks might be rekindled.

Summit Research Partners analyst Srini Sundararajan said in a research note Thursday that "despite the news that the Intel-Altera deal is a no-go for now, the rationale still exists for a deal, though the price seems to be too high (Intel apparently walked away at $54, per Bloomberg).

"We thought it important to review the rationale for such a deal one more time: The two primary reasons why Intel wanted Altera are enhancing its server capability using FPGAs (field-programmable gate array, or integrated circuits designed to be configured by customers or a designer after manufacturing), and Intel's preference to keep its foundry business looking good (i.e. potentially not losing marquee clients such as Altera)."

Sundararajan said a "partnership may be the best option" for Intel and Altera.

On Thursday, Intel announced it was selected as the prime contractor for a $200 million, U.S. Energy Department supercomputer project for Argonne National Laboratory. The company will hold its annual stockholder meeting on May 21.

Intel stock rose 2.2% Friday to 31.93 but is still down 12% this year.