Intel ( INTC), the world's No. 1 chipmaker and a Dow component, said it expects modest sequential earnings growth in the third quarter, citing a slowdown in computer equipment spending. Excluding certain items, the company posted second-quarter net income of 11 cents a share. Currently, analysts are projecting a third-quarter profit of 13 cents.

Chief Executive Officer Craig Barrett told reporters at a news conference that he has not seen much improvement in the computer environment because companies are reluctant to invest. Barrett also said that he was not confident that conditions would pick up during the holiday season.

The company's shares, which have lost more than half their value since the start of the year, responded negatively to the news, falling 4.5% to $17.31. The Philadelphia Semiconductor Index was losing 3.7%.