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Bad News from Intel Worse than Expected

Overstocked OEMs aren’t buying as many PC chips, a phenomenon that is anti-historical

A billion dollars more or less - poof - disappeared off of Intel's books Friday morning when it lowered its Q3 revenue guidance to $13.2 billion plus or minus $300 million, down about 7.3% from a range of $13.8 billion-$14.8 billion or a mid-point of $14.3 billion.

It also withdrew its full-year forecast and anything else it might have said.

Wall Street, having read the entrails when HP and Dell confessed that PCs weren't selling, was expecting Intel to pre-announce it just didn't think the news would be quite so dramatic.

It was expecting something like $14.2 billion.

Overstocked OEMs aren't buying as many PC chips, a phenomenon that is anti-historical considering they usually stock up ahead of Christmas and ahead of a major Microsoft operating system. But not this time.

Intel Ultrabooks haven't been selling, the Haswell chip has been delayed, and the market isn't sure if people will rush to buy Windows 8 machines, be confused by the new OS or distracted by the shiny gismos coming out of Apple et al.

And try as it might Intel doesn't have a position to speak of in the mobile business. On top of which - what with the crummy macroeconomy and all - Intel's two diehard fallback positions - the enterprise and emerging markets - are now failing it too.

It said in its announcement that it's "seeing customers reducing inventory in the supply chain versus the normal growth in third-quarter inventory; softness in the enterprise PC market segment; and slowing emerging market demand."

It quickly added that the "data center business is meeting expectations."

Citigroup is anticipating "the worst 2H for PC sales since inception." Others figure the weakness will last longer than the half if for no other reason than businesses tend to be conservative about going to a new operating system.

Intel said its full-year capital spending would fall below its forecast of $12.1 billion to $12.9 billion. Instead it's going to "accelerate the re-use of existing equipment to the 14nm node," a statement to be conjure with, and it also cut its gross margin forecast from 63% to about 62%.

Intel's gonna take another crack at this forecasting business come October 16 when it releases its Q3 results.

Intel closed Friday down 3.65% to $24.18.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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