Intel cuts its Q3 revenue forecast by about $1 billion

Poor sales of PCs to enterprises and emerging markets are forcing Intel to cut its forecast for the third quarter

Intel shaved about a billion dollars off its third-quarter revenue forecast on Friday, blaming the global economy for slowing sales. It will announce full results for the quarter on Oct. 16.

The company had previously predicted third-quarter revenue of between US$13.8 billion and $14.8 billion, but on Friday lowered its forecast to between $12.9 billion and $13.5 billion.

In last year's third quarter, Intel reported record revenue of $14.2 billion, but by the second quarter this year revenue had slipped to $13.5 billion.

Intel said it would usually expect its customers to be increasing inventory in the supply chain at this time of year, but instead they are cutting back. Enterprise PC sales are soft, and demand for products based on Intel chips is slowing in emerging markets, the company said.

Market watcher IHS iSuppli also pointed to reduced demand for PCs and related electronic components last month, when it said it now expected global semiconductor sales to shrink by 0.1 percent this year, rather than grow by up to 3 percent as it had previously forecast. This year will be the first year of decline in semiconductor sales since 2009, the company warned.

The economic situation has hit semiconductor manufacturers in Europe and Japan harder than it has hit Intel, iSuppli said earlier this week in a round-up of second-quarter semiconductor sales figures.

European chip makers saw their second-quarter revenue fall by an average of 8.3 percent year on year, compared to a 3.1 percent rise at Intel for that quarter. STMicroelectronics' revenue fell 16.4 percent, while at Infineon Technologies second-quarter revenue was 12.9 percent down on a year earlier, iSuppli said. Japanese semiconductor suppliers, meanwhile, saw revenue drop 7.5 percent for the same period.

A continued decline in revenue could also hit profitability, Intel said. It narrowed its forecast for third-quarter gross margin to between 61 percent and 63 percent, from a previous forecast of 61 percent to 65 percent.

One bright spot for Intel is the company's data center business, which is meeting revenue expectations, the company said.

Intel said spending on research and on mergers and acquisitions will remain unchanged from the previous forecast, while capital spending for the full year will fall below previous forecasts as the company finds ways to reuse existing equipment in more advanced manufacturing processes.

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