Intel Issues Revenue Warning - InformationWeek

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Infrastructure // PC & Servers

Intel Issues Revenue Warning

The chipmaker lowered its fourth-quarter forecast for the second time in two months, blaming a drop in sales to PC makers.

Intel on Wednesday lowered its fourth-quarter revenue forecast for a second time, blaming a drop in sales to PC makers.

The microchip manufacturer, which is considered a bellwether for the tech industry, said revenue for the quarter would be $8.2 billion, down 23% from the same period a year ago. The latest forecast is Intel's second revenue warning in two months. The company in November projected $9 billion, plus or minus $300 million, in sales. Intel originally forecast revenue of between $10.1 billion and $10.9 billion.

In a brief statement, the company blamed the latest reduction on "further weakness in end demand and inventory reductions by its customers in the global PC supply chain."

Intel, along with other tech companies, is bracing for what is likely to be a tough year as companies and consumers cut spending in the global economic downturn. Market researcher IDC last month lowered its 2009 global forecast for PC shipments to just 3.8% more than 2008, with the total value of the units shipped falling by 5.3%. Previous projections were for 13.7% growth in units and a 4.5% increase in shipment value.

Intel also said that its preliminary estimate for gross margin for the quarter would be at the bottom of the previous expectation of 55%, plus or minus a couple of points.

In addition, the year-end market price of Clearwire stock would impair the value of Intel's investment in the wireless broadband provider, resulting in a noncash charge of $950 million to the chipmaker's fourth-quarter earnings. Clearwire's drop in stock price would also contribute to a greater-than-expected loss of between $1.1 billion and $1.2 billion in Intel's equity investments. Intel had originally expected a $50 million loss.

Intel said spending in research and development would be $200 million less than expected, or $2.6 billion.

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