Associated Press
Intel Lowers Financial Forecast for 3Q
Thursday September 2, 5:23 pm ET
By Michael Liedtke, AP Business Writer
Intel Lowers Financial Forecast for Third Quarter, Latest Indicator of Sluggish Economy
SAN FRANCISCO (AP) -- High-tech bellwether Intel Corp. lowered its financial outlook Thursday, providing the latest sign of the economy's doldrums.
The Santa Clara-based computer giant said its third-quarter revenue will range from $8.3 billion to $8.6 billion. Management previously forecast revenue ranging from $8.6 billion to $9.2 billion for the three-month period ending Sept. 25.
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Gross profit margins are now expected to be within a couple points of 58 percent, compared with the earlier guidance of 60 percent, plus or minus a couple points.
With recent economic indications pointing to a slowdown, the stock market had been bracing for disappointing news from the world's largest computer chip maker, but Thursday's revised outlook appeared to be gloomier than many investors anticipated.
Intel's shares gained 20 cents to close at $21.63 on the Nasdaq Stock Market before the release of the mid-quarter update, then dropped $1.45 in extended trading.
The sales letdown at Intel doesn't bode well for other tech stocks because the chip maker is frequently used as a financial yardstick for sizing up the industry's prospects. Investors have become increasingly disenchanted with much of the tech sector after a flurry of disappointing second-quarter results.
The tech-laden Nasdaq composite index has declined by more than 6 percent so far this year. Intel has fared much worse, having lost one-third of its market value before Thursday's announcement.
Like many other companies, Intel is being hurt by slackening demand from customers. It's a headache that caused many of the nation's largest retailers to release disheartening monthly sales figures on Thursday.
The summer historically heralds a sluggish sales quarter for Intel, but this season seemed to be even more lethargic than usual, said First Albany Corp. analyst Auguste Richard.
The malaise may reflect one of the problems that plagued retailers -- a lackluster back-to-school shopping season. Intel relies on the beginning of the year to spark sales of computers.
But consumer don't seem as eager to buy computers, particularly the most sophisticated desktop models, said Moors & Cabot Inc. analyst Patrick Ho, who believes higher gas prices are one of the factors hurting Intel.
"When many consumers are paying 20 cents per gallon more for gasoline, it starts to add up and they begin to wonder if they need to spend an extra $800 to $1,000 on a computer," Ho said.
Even though Intel's second-quarter profits nearly doubled, this hasn't been a banner year for the chip maker. Unlike last year, the company hasn't been able to develop a hot new microprocessor that to spur businesses and consumers to upgrade to more sophisticated products -- a predicament that has narrowed Intel's profit margins, analysts said.
The frustrations, which have included product delays and manufacturing missteps, prompted CEO Craig Barrett to send out a July memo urging the company's employees to do a better job.
