Intel Corp, the largest computer chip maker, lowered its fourth-quarter sales forecast by about $1 billion amid “significantly weaker'' demand across its entire product line. The shares dropped 6.8 per cent in late trading.
Revenue will be $9 billion, plus or minus $300 million, and profit margins will be short of projections, Intel said today in a statement. The Santa Clara, California-based company originally predicted sales of between $10.1 billion and $10.9 billion.
Intel, whose chips run more than three-quarters of the world's computers, said customers worldwide are “aggressively'' chopping orders as they cope with falling sales. That signals that the US economic slump, which Chief Executive Officer Paul Otellini already expects to be the worst of his lifetime, is spreading overseas.
“I didn't think things were anywhere near this bad,'' said David Wu, an analyst at Global Crown Capital in San Francisco. “There was a lot of noise about things getting worse, but it's still shockingly bad guidance.''
Worldwide technology spending will grow less than predicted next year, research firm IDC said today, as the industry faces its worst slump since the dot-com bust. Spending will rise 2.6 per cent in 2009, down from an earlier estimate of 5.9 per cent, the Framingham, Massachusetts-based research firm said. Growth in the US will probably slow to 0.9 per cent, less than a quarter the pace IDC forecast in August.
Intel's fourth-quarter gross margin, the percentage of sales left after production costs, will total about 55 per cent, “plus or minus a couple of points.'' The chipmaker had earlier anticipated about 59 per cent. The margin is the only measure of profit that Intel forecasts publicly.
Intel fell 92 cents to $12.60 in late trading after the report. The stock, which has lost almost half its value this year, had dropped 41 cents to $13.52 in regular Nasdaq Stock Market trading.
Analysts had anticipated fourth-quarter profit of 37 cents a share on revenue of $10.4 billion, according to a Bloomberg survey. Intel intends to report full results January 15.
The company cut its spending plans by $100 million, to $2.8 billion in the fourth quarter. Intel had previously planned to brief investors on sales trends on December 4. It cancelled that update today.
Intel's report came minutes after National Semiconductor Corp, the maker of chips for the five largest mobile-phone manufacturers, reduced its revenue forecast and announced plans to cut 5 per cent of workers.
Applied Materials Inc, the biggest maker of chip-production machinery, reported a 45 per cent drop in fourth-quarter profit and said it will cut 1,800 jobs.
“This will be an extended downturn, lasting a year or longer,'' Applied CEO Mike Splinter, a former Intel executive, said today.
Both Applied and National are located within three miles of Intel in California's Silicon Valley. Advanced Micro Devices Inc, Intel's only rival in the market for personal-computer processors, will hold a briefing for analysts tomorrow at its headquarters in nearby Sunnyvale.
Last week, Otellini said unemployment will be worse in about a year, since job creation lags behind improvements in gross domestic product. That will weigh on consumer confidence, he said, hurting demand for computers and electronics.
Technology companies typically get a bigger chunk of their annual sales in the fourth quarter, since their products are popular in the holiday shopping season. Intel's sales in the period grow an average of 8 per cent from the third quarter, according to Global Crown Capital's Wu. The lower end of Intel's forecast range would be a 15 per cent quarter-on-quarter decline.
Microsoft Corp, the world's largest software maker, fell 42 cents, or 2.1 per cent, to $19.88 in extending trading. Micron Technology Inc., the largest US producer of computer memory, dropped 20 cents, or 6.5 per cent, to $2.90, while AMD declined 3 cents to $2.54.
