Intel Slashes Revenue Outlook Again

Suffering from what it called the spreading ills of the economic slowdown, Intel (INTC Quote - Cramer on INTC - Stock Picks) Thursday slashed its already reduced first-quarter earnings and revenue forecasts and said it would trim 5,000 jobs, mostly through attrition, to cut costs.

The giant chip maker said first-quarter revenue would fall 25% short of fourth-quarter levels, while gross margins will slide to 51% from the previously forecast 58%. But Intel said it was making progress in cutting costs, adding that first-quarter expenses would drop about 15% from fourth-quarter levels. Intel had earlier forecast that first-quarter costs would be roughly flat with the fourth quarter.

Nonetheless, the squeeze on Intel's profit margins appears considerable, as the company has said it would seek to hit 58% for the year. The new first-quarter forecast represents a sharp pullback from that target and an even steeper decline from the fourth quarter's 63%.

Meanwhile, owing to the profit and revenue squeeze, Intel trimmed its research-and-development spending forecast by $100 million, to $4.2 billion. The company said capital spending for the year should be around $7.5 billion.

After rising fractionally during regular trading to close at $33.25, Intel shares dropped $2.50, or 7.6%, to $30.44 in after-hours action on Island.