Intel Issues Q3 Earnings Warning

Intel now claims that third-quarter revenue will come in around 3 per cent to 5 per cent higher than second-quarter figures of $US8.3 billion. Intel also said the gross margin percentage for the third-quarter should be close to 62 per cent -- slightly lower than the previous 63 per cent or 64 per cent expectation. Interest along with other earnings should be close to $US900 million for the period.

Shares of Intel plummeted in Thursday's after-hours trading. The company's stock fell over 23 per cent to $48.50 at the time of this report following the release of the profit warning.

Linley Gwennap, principal analyst at The Linley Group, said lower than expected Intel earnings had been on the cards for some time. While analysts once thought the third quarter might be a breakthrough financial period for the chip giant, European currency issues coupled with lower product demand on the continent led to growing suspicions of poor results, Gwennap said.

The analyst added that other areas around the globe have posed a challenge for Intel this quarter. "Motherboard shipments out of Taiwan have also been lower than expected," he said.

Gwennap did, however, say that Intel's warning might not be as bad as it seems. "This is not terrible news," he said. "The third quarter is still looking good."

He added that the drastic drop in Intel's stock in after-hours trading Thursday appears to be an overreaction. "People who have been paying attention have heard some bad news about the third quarter already," Gwennap said.

Intel's third-quarter results are due to appear October 17.

The chip giant also said Thursday third-quarter expenses should rise 7 to 9 per cent from last quarter with most of that cost coming from higher spending on marketing programs and research and development programs.

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Ashlee Vance

PC World
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