Intel's Q4 Revenue Warning Spells Trouble For Tech Industry

Semiconductor giant Intel has announced that it expects revenue to drop by as much as 23 percent for its fourth quarter, causing its stock to drop more than six percent at the time of writing (ed: it is up slightly in after hours trading)

"Weakness in demand and customer inventory reductions in the global PC supply chain" were to blame for the steep fall in earnings, which are down a whopping 20 percent over the third quarter at a not so insignificant $8.2 billion.

Sales of computers have staggered and although netbooks and laptops are still selling well, many companies are putting off upgrading expensive servers. Furthermore, some firms might prefer to switch to Intel's competitor, AMD, in order to increase their slim profit margins. However, the Sunnyvale company hasn't been doing great as well saying that its sales had dropped a whopping 33 percent compared to 2007.

The Santa Clara company had already lowered its revenue projection for the fourth quarter from an upper target of $10.9 billion to $9 billion; it has already taken a non-cash charge of $950 million following the steep fall in Clearwire, a telecom company whose aim was to build a WiMax network across Northern America.

Intel now expects to lose up to $1.2 billion from its equity investments and interest due to assets being written down. The company is expected to unveil its Q4 figures on the 15th of January and should keep its growth margin around 55 percent.

Financial results from Intel normally act as the pulse of the industry given the importance of the company in the semiconductor sector; it ships around 80 percent of the world's microprocessors and employs more than 83000 people worldwide.

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Our Comments

Wednesday 7th will be remembered as a bad day for the tech industry with outsourcing giant Satyam embroiled in an Enron-esque scandal that threatens a whole segment of the industry. However, the silver lining in these dark clouds is that Intel is not giving up on R&D investments, promising to plough in an impressive $2.6 billion.

Related Links

Intel Slips on Another Sales Warning

(The Street)

Intel Sets A Gloomy Tone

(Forbes)

Intel feels pain from dropping revenue, WiMAX investment

(Arstechnica)

Intel lowers revenue estimate again

(International Herald Tribune)

Intel will miss its already-lowered 4Q targets

(AP)

Intel expects Q4 revenue to be off 23 percent

(Mercurynews)

Intel lowers outlook, sales drop 23 percent

(The Business Review)

Intel Writes Almost $1B Off Clearwire Investment

(Gigaom)

Intel warns again on Q4; shares fall

(Guardian)

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