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Intel shocks Wall Street with revenue warning
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Intel on Wednesday shocked Wall Street with a revenue and margins warning that
indicated a rapid decline in the business of the world’s largest chipmaker over
the past month.
Intel, a bellwether for the technology industry, reported that sales were being
“affected by significantly weaker than expected demand in all geographies and
market segments”.
“In addition, the PC supply chain is aggressively reducing component
inventories,” it said.
The warning came less than a month after Intel issued forecasts for the fourth
quarter on its third-quarter earnings call, and amounted to a 14 per cent cut
in revenue expectations since the time of that call.
Intel said it now expected revenues of $9bn, plus or minus $300m, down from
$10.1bn–$10.9bn. Gross margins were now expected to be about 55 per cent
compared with 59 per cent previously.
In another sign of the rapid deterioration of the business climate, Intel said
its warning replaced a planned mid-quarter update scheduled for December 4.
It announced last month that it was bringing back a mid-quarter update after a
three-year absence, because of the level of economic uncertainty.
Intel’s shares fell 6 per cent in after-hours trading in New York on Wednesday
to $12.71.
Roger Kay, semiconductor analyst with Endpoint Technologies, said PC makers
such as Dell were cutting back on orders from manufacturers in Asia and
reducing their inventories of chips and other components to conserve cash.
“I think frankly the worst is yet to come – despite the throttling back by the
participants in the supply chain, it won’t be enough, and there will be
inventory overhang in Q1 and the first quarter will be worse,” he said.
“We went through this before in 2000 when we mis-predicted the depth of the
recession and 2000 was much milder than this.”
Qualcomm, the biggest supplier of wireless chips for mobile phones, last week
cut its estimates significantly for the remainder of the year as it noted its
customers were tightening their belts. It reported a very sharp decline in
inventories over the previous fortnight as customers tried to preserve their
working capital.
Applied Materials, the biggest supplier of chip-making equipment, said
yesterday it was cutting 1,800 jobs or 12 per cent of its workforce in order to
cut costs in the face of a slump in orders.
