Intel's sales are falling at a rate that blindsided the chip-maker's
management, amplifying Wall Street's worries about the slumping personal
computer market and the frail economy.
The foreboding news came out Friday in revisions to Intel Corp.'s financial guidance for its current quarter.
world's largest maker of computer chips now expects to post
third-quarter revenue of $13.2 billion. That would represent a 7 percent
decline from the same time last year when Intel's revenue totaled $14.2
The projection also is well below a management forecast
in July that envisioned third-quarter revenue ranging from $13.8 billion
to $14.8 billion.
Investors punished Intel for the
miscalculation, driving down the company's shares by 90 cents, or 3.6
percent, to close at $24.19.
Intel blamed its sliding sales on lackluster demand for new PCs among businesses and a "challenging" economic environment.
ailments are probably plaguing other companies whose fortunes are tied
to PC manufacturing and sales. Intel chips are used in about 80 percent
of PCs and a vast number of servers as well, making it a bellwether for
spending on computers.
Taking their cue from Intel, investors
bailed out a wide range of PC-related stocks. Companies whose shares
fell Friday included Microsoft Corp., Hewlett-Packard Co., and other
chip-makers, such as Advanced Micro Devices Inc. and Nvidia Corp.
slowdown in PC sales will be the worst for the second half of a year in
the industry's history, said Citigroup analyst Glen Yeung.
weakening PC sales in the corporate market are the latest sign of a
technological shift driven by the growing popularity of smartphones and
Consumers already have been buying fewer desktop
and laptop computers as they embrace sleeker, more convenient mobile
devices to surf the Web. That shift hasn't been good for Intel because
its chips aren't used in a lot of cellphones and tablets.
typically are slower to adopt the latest trends, but more companies are
allowing their employees to rely on their own personal devices to get
work done as the lines blur between the office and home. That movement
also could reduce the need for companies to buy more PCs.
also suspect that the business executives overseeing technology budgets
are becoming more reluctant to buy new PCs because of concerns that the
wobbly economy might topple into another recession.
have been adjusting to the uncertainty by ramping down their production
and reducing their orders for more chips, according to Intel.
in the year, PC makers were hoping for a sales life from the
long-awaited release of Windows 8, a dramatic overhaul of the
Microsoft-made operating system that has powered most PCs for decades.
But it's now looking like the Oct. 26 release of Windows 8 won't cure the ailing PC market.
business trends won't likely recover in the short term given the weak
PC market, said BMO Capital Markets analyst Ambrish Srivastava wrote in a
Most corporate buyers are expected to stick with the
current versions of Windows until they get a better handle on how the
new version works. Meanwhile, some analysts believe it's going to be
tough to sell PCs running on Windows 8 amid an onslaught of recent
tablet releases from Google Inc., Amazon.com Inc. and Samsung
Electronics. Even Microsoft will be selling a tablet called Surface that
will be powered on a scaled-down version of Windows 8. Apple Inc., the
dominant force in the tablet market, also is widely expected to put out a
smaller version of its pace-setting iPad in time for the holiday
Most of those tablets are expected to be less expensive than Windows 8 PCs, another important factor in a tough economy.
Intel, based in Santa Clara, Calif., is scheduled to report its third-quarter results on Oct. 16.