SAN FRANCISCO — Intel Corp. Friday (Aug. 27) lowered its sales target for the third quarter, saying the company now expects revenue to be between $10.8 billion and $11.2 billion, down from a previous estimate of $11.2 billion and $12 billion.
Intel (Santa Clara, Calif.) said revenue is being affected by weaker than expected demand for consumer PCs in mature markets. Inventories across the supply chain appear to be in-line with the company's revised expectations, Intel said.
Earlier this month, J.P. Morgan analyst Christopher Danely lowered his firm's estimates for Intel's sales and earnings, saying checks in the Taiwan PC supply chain indicated that order rates from the PC end market deteriorated sharply during the last part of July.
On Friday, Danely said in a report that Intel's guidance adjustment was just the first stage in a three-stage downturn for Intel.
"A typical inventory correction occurs in roughly three stages," Danely said. "The first stage is when a semiconductor company lowers revenue estimates but doesn’t lower utilization rates or spending and does not acknowledge the downturn. The second stage is when the semiconductor company admits the downturn, cuts utilization rates and spending, and begins the bottoming process."
Danely said he expects Intel to reach the second stage of downturn sometime during the fourth quarter. He lowered J.P. Morgan's estimate for Intel's 2010 sales to $43.6 billion from $44.1 billion and its estimate for Intel's 2010 earnings to $1.89 per share from $1.95 per share. He lowered J.P. Morgan's December price target for Intel shares to $17 from $19 and reiterated a "neutral" rating on the stock.
"Essentially, back-to-school appears weak as the global macroeconomic environment softens, and that caused some finished system PCs to accumulate at retailers and elsewhere," said Craig Berger, an analyst with FBR Capital Markets, in a report. " So as HP, Dell, and Acer align production rates with sell-through rates, INTC is seeing consumer order cancellations."
Berger, who also reduced his estimates for Intel, said he believes corporate PC refresh volumes and global server strength are helping to mitigate the third quarter downside. So far, chip prices remain firm, he said.
Intel traded at $18.38 in afternoon trading following the guidance cut Friday. The No. 1 chip vendor is scheduled to report third quarter earnings Oct. 12.
With the variety of other personal electronic devices, I am not surprised that the PC is not seeing the growth with this upturn. Many people are turning their attention to other devices to get their work and play done. With ebook devices and cell phones that can surf the web, a laptop may not be a necessity any more. My daughter wants an ipad because she says she can write her school papers on it.
There doesn't appear to be any no slowdown in the non-PC markets. iSuppli expects semi revenue to grow - see this earlier article in EETimes (http://www.eetimes.com/electronics-news/4205805/ISuppli-raises-semiconductor-forecast?pageNumber=0)
Well, I hope Rich is right on this one. I agree that it is probably a short term weakness, and I think we are already seeing some improvement in other areas. We really need a couple of months more of data to see where the trend is going.
TJ Rodgers CEO of Cypress semi was on FBN last week. He sees good sales, but when pressed admitted there might be a little weakness in the PC area. So, no industry wide downturn - at least in TJ's estimation.
This should not be surprising. Intel, as a general case, should expect the demands to go down from its traditional markets. If it is not able to scale up its mobile business to a good share of the market, investors can very well expect a lot more down revisions to the revenue targets by the chip giant!
Wow, these recoveries are getting shorter and shorter. This one lasted, what, maybe two months? I guess the true test will be how the non-PC related chip manufacturers do in the next quarter. When we see a broad-based downturn, then I'll believe we are seeing a widespread economic weakening. A slowdown in one product area, even if it is a large sector, does not guarantee we are seeing an industry-wide downturn.
This is something many of us feared even when there were good numbers announced by majority of the semiconductor companies, specially the chip manufacturers in the last quarter. Any views on whether this is a short term weakness in the economy? Or are these the symptoms indicating we are going into another slowdown?
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