Intel cuts forecast amid broad spending slowdown

Intel cut its revenue forecast Wednesday, the latest sign that the global financial crisis is leading to a sharp slowdown in IT spending.

Intel on Wednesday cut its revenue forecast for the fourth quarter, the latest sign that the global financial crisis is leading to a sharp slowdown in IT spending.

Intel cited "significantly" weaker-than-expected demand for its products worldwide, and said companies involved in manufacturing PCs are aggressively reducing their component inventories.

Intel now expects its revenue for the quarter ending Nov. 28 to be about US$9 billion, plus or minus $300 million, down from its earlier forecast of $10.1 billion to $10.9 billion, the chip maker said. Analysts had been expecting revenue of $10.3 billion, according to a poll by Thomson Reuters.

Separately Wednesday, IDC said it was lowering its forecast for worldwide IT spending in 2009 as a direct result of the financial crisis. The analyst company expects IT spending to grow by just 2.6 percent next year compared to 2008, down from its earlier forecast of 5.9 percent growth.

Growth in IT spending in the U.S., Western Europe and Japan will hover around 1 percent next year, IDC said. Emerging markets such as Eastern Europe and Latin America will see healthier growth, but not in the double digits IDC had previously expected.

Spending on hardware, with the exception of storage gear, will actually decline next year, IDC said, though software and services will fare better. The industry will lose more than $300 billion in revenue over the next four years as a result of the slowdown, it estimated.

The downturn in spending won't be as grim as it was in the early 2000s, however, according to IDC.

"Companies currently don't have the asset and spending 'overhang' that enabled them to put off purchases after Y2K and the dot-com bubble. As a result, there will be greater pressure for them to continue making IT investments in order to stay competitive," the company said.

Intel had warned in its earnings call last month that it was difficult to figure out how the downturn would affect its business. It joins SAP and Sun Microsystems, among others, that have warned of slowing business.

The news pushed Intel's shares down 7 percent in trading after-hours, to $12.59. Its shares ended the regular trading day down 3 percent at $13.52.

(IDC is owned by International Data Corp., the parent company of IDG News Service).

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Agam Shah

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