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Intel jolts sector with lowered outlook

08 september 2012, 16:28
Intel Corp. stunned the tech sector Friday by sharply cutting its revenue outlook for the current quarter, citing weak demand for personal computers and slower growth from emerging economies, AFP reports.

The world's largest chipmaker is being hit by a shift away from traditional PCs to mobile devices, and by a sluggish global economy. Consumers are also holding back on purchases ahead of the release in late October of the Windows 8 operating system.

Intel said third-quarter revenue would stand around $13.2 billion, down from an earlier expectation of $13.8 billion to $14.8 billion, "as a result of weaker than expected demand in a challenging macroeconomic environment."

The company also lowered its profit margin forecast and withdrew its guidance for full-year results.

Shares of the California tech giant fell 3.6 percent to close at $24.18.

Analyst Vijay Rakesh at Sterne Agee said Intel is seeing "multiple challenges in the PC space," with slower-than-expected sales of the so-called ultrabooks and tougher pricing for other computers.

Rakesh said this environment also suggests "headwinds for the rest of the PC peers," including chipmaker Advanced Micro Devices, down 5.7 percent Friday, and graphics firm Nvidia, down 2.4 percent

"Intel is in a bind," said Paul Ausick at 24/7 Wall Street. "The company's chip customers are not selling as many PCs or servers as they had expected, and Intel's lack of a real competitive product in the fast-growing mobile market is continuing to take its toll."

Mark Lipacis of Jefferies said Intel may recoup some of the revenue after the new version of Windows is released.

"We believe there is a stronger than normal inventory purge in front of the Windows 8 OS launch due to macro concerns," he said.

"However, we resist the urge to get too negative because Intel's shift in product introductions likely means a stronger than normal first quarter," he said.

Intel is due to release its third-quarter earnings October 16.

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