Intel Slashes Revenue Forecast (Update)

SAN FRANCISCO -- Intel (INTC) sharply reduced its fourth-quarter sales expectations Wednesday, citing "significantly" weaker-than-expected demand in all regions and across all product types.

Shares of Intel were down 7%, or $1, at $12.51 in extended trading Wednesday.

The world's No. 1 maker of PC microprocessors said revenue in final three months of the year is now expected to be $9 billion, plus or minus $300 million, instead of its previously forecasted range of $10.1 billion to $10.9 billion.

Intel also said its gross profit margin in the quarter will be 55%, plus or minus a couple of points, instead of the 59% level previously expected.

The news comes a week after CEO Paul Otellini described the current economic slowdown as the worst he'd seen in his lifetime.

And it comes a day before rival Advanced Micro Devices ( AMD) is slated to host an annual briefing with financial analysts.

The new forecast means Intel's sales will decline between 9% and 15% sequentially in the fourth quarter, a major slowdown for Intel, which typically counts the last three months of the year as one of its strongest periods. The last time Intel's sales actually decreased sequentially in the fourth quarter was 1984 (In 2000, Intel's fourth-quarter sales were essentially flat sequentially).

With unemployment rising in the U.S. and the economy headed for a recession, consumers are holding off on buying everything from new cars to PCs. And spending by corporations looks equally bleak.

In recent weeks, various companies involved in the PC industry have reported weak results.

Dell ( DELL), the world's second-largest PC maker, has cited sluggish spending on technology by its customers since late August. Many of the Taiwanese companies that assemble notebook PCs began warning of problems in September.

Intel said Wednesday that the PC supply chain is aggressively reducing component inventories, suggesting that PC makers have low expectations for sales in the months ahead and are taking steps to avoid getting caught with excess stockpiles of chips and other parts.

The only type of computer product that appears to be exceeding expectations is the new breed of netbooks -- low-priced, miniature laptops designed primarily for surfing the Web and sending email. While those devices appear to be selling briskly, they carry much thinner profit margins for the companies involved.

Intel created a special microprocessor, dubbed Atom, to ride the netbook wave. While the Atom has a slimmer profit margin than some of Intel's other products, the company claims the net impact of the Atom on Intel's margins is healthy.

Intel was slated to give Wall Street a midquarter update on Dec. 4, but said that Wednesday's warning replaces that event.

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