Intel slashes outlook as PC demand weakens

  @DavidGoldmanCNN September 7, 2012: 10:36 AM ET
Intel not feeling chipper

Intel severely cut its third-quarter sales forecasts Friday as demand for personal computers has slowed beyond expectations.

The world's largest chipmaker said it now expects revenue of between $12.9 billion and $13.5 billion in the current quarter, down from its previous forecast of between $13.8 billion and $14.8 billion. Intel said corporations are ordering fewer PCs, consumers in emerging markets are sitting on the sidelines, and PC manufacturers are reducing their inventories to meet sinking demand.

Intel blamed a weakening global economy for slumping chip sales.

As a result, Intel said it would cut spending -- the company had expected to spend $12.1 billion to $12.9 billion in 2012, but Intel said capital expenditures will come in below that level by the end of the year.

Profits will take a hit too -- gross margins are now forecast to be between 61% and 63%, at the low end of the chipmaker's target range of between 61% and 65%.

Shares of Intel (INTC, Fortune 500) fell 3% in morning trading.

Intel had already warned in July that its outlook would be weaker than Wall Street analysts had expected, citing a challenging economic environment.

Yet the company had largely been able to avoid the worst of a slumping PC market. Though worldwide shipments of PCs fell by 0.1% in the second quarter, according to separate surveys by Gartner and IDC, Intel's PC chip sales actually rose by 4% last quarter. The economy now appears to be catching up to Intel.

Still, chief rival AMD (DOX) has fared much worse. Sales have tumbled, and the stock has matched it -- falling by more than 32% this year.

Some investors are holding out hope that the upcoming new Windows 8 operating system from Microsoft (MSFT, Fortune 500) will help rejuvenate the PC market. But shares of the two largest PC companies, Hewlett-Packard (HPQ, Fortune 500) and Dell (DELL, Fortune 500), have been hit hard this year as more consumers flock to tablets, most notablyApple's (AAPL, Fortune 500) iPad. To top of page

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