Intel warns sales will fall short of forecasts

chart_ws_stock_intelcorp.top.png By David Goldman, staff writer


NEW YORK (CNNMoney.com) -- Intel Corp. on Friday warned investors that its third-quarter revenue will fall below its forecasts as consumer demand for personal computers slipped.

The world's largest chipmaker said that it now expects sales in the current quarter will be in a range of $10.8 billion to $11.2 billion. That falls short of the company's previous revenue guidance of $11.2 to $12 billion.

Analysts polled by Thomson Reuters had expected sales of $11.5, with the most bearish analyst forecasting revenue of $11 billion.

Shares of Intel (INTC, Fortune 500), which were halted for 15 minutes on Friday following the warning, gained more than 1% once they resumed trading. Rival AMD (AMD, Fortune 500) also rose slightly.

The likely reason that Intel and AMD's shares didn't fall Friday is because investors may have already priced in a less optimistic outlook for sales. Intel's shares had already fallen 17%, and AMD's had dropped 29% since the last week of July.

Chip sales have dipped below expectations due to a sudden shift in demand for personal computers. In July, Intel and AMD reported strong second quarters on the back of booming PC sales, with Intel reporting its "best quarter ever."

That tide shifted late last month, and analysts noted that PC manufacturers have begun to scale back their orders from suppliers. Several analysts downgraded shares of Intel and AMD two weeks ago, with analysts at JPMorgan saying that PC order rates in Taiwan were "falling off a cliff."

That shift was rather quick and unexpected, given bullish forecasts from Intel and tech consulting firms like Gartner, which predicted PC shipments would rise more than 20% this year. Analysts said the fact that the economic recovery seems to have tapered off a bit caused manufacturers to grow a bit more cautious.

"The tone in the first half of the year was that the economy looked like it was getting better and the PC business would continue on with strength. But then more uncertain data came in and changed that tone,"said Cody Acree, analyst at Williams Financial Group.

Graphics chipmaker Nvidia (NVDA) also revised its sales forecast down late last month, citing a shift toward lower-priced processors.

The good news for Intel is that corporate PC customers continue to replace their old hardware, as predicted. Chips for servers and computers sold to businesses tend to have higher selling prices than those for consumer PCs.

Still, that was more than offset by the lower than expected consumer PC demand. That led Intel to lower its gross margin expectations from previous forecasts. Intel said its current-quarter gross margin will be in a range of 65% to 67%, compared to a previous range of 65% to 69%.

Intel will report its third-quarter earnings on Oct. 12. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,812.89 -2.05 -0.01%
Nasdaq 4,780.45 22.20 0.47%
S&P 500 2,070.75 3.72 0.18%
Treasuries 2.24 -0.02 -0.84%
Data as of 1:45pm ET
Company Price Change % Change
Apple Inc 118.62 1.02 0.86%
Kinder Morgan Inc 41.12 0.37 0.90%
Facebook Inc 77.40 1.77 2.34%
Hewlett-Packard Co 39.16 1.53 4.07%
Transocean Ltd 23.28 -2.03 -8.02%
Data as of 1:30pm ET

Sections

Several makers of police body cameras say orders have grown in recent months, particularly in the time since a police officer in Ferguson shot 18-year-old Michael Brown. More

More retailers start their deals on Thanksgiving, but it's merely shifted some customers from Black Friday to Thursday. More

Natalie's Cakes and More has raised $84,000 through GoFundMe after protests trash store. More

Retail and restaurant workers in San Francisco may soon benefit from an expansive, first-of-its-kind bill of rights for retail workers, which the city's Board of Supervisors passed unanimously this week. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.