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Intel sees first-quarter revenue below target

Intel Corp., the world’s largest semiconductor maker, lowered its first-quarter revenue forecast Friday, citing weaker-than-expected demand and a “slight” market share loss to rivals such as Advanced Micro Devices Inc. Its shares dropped 2 percent.
/ Source: The Associated Press

In a troubling sign for a tech industry dominated by Intel Corp. chips, the world’s No. 1 semiconductor company sharply cut its first-quarter revenue forecast Friday after seeing weaker-than-expected demand and a “slight” share loss to rivals.

The company said it expects to post sales of $8.7 billion to $9.1 billion, down from its previous — and scaled back — estimate of $9.1 billion to $9.7 billion. Analysts had expected sales of $9.42 billion, according to a Thomson Financial survey.

The $400 million reduction at the lower end of its forecast was one of the sharpest warnings from the company since 2001, when the whole tech industry was sinking into recession. This time, Intel’s troubles have so far not been shared by other chip or computer makers.

Analysts said that’s likely to change, given that Intel’s microprocessors are used in roughly 80 percent of the world’s personal computers and servers.

“If Intel is seeing some problems, and it’s not all market-share problems, that’s got to affect the rest of the semiconductor industry,” said Eric Ross, an analyst at ThinkEquity Partners. “We heard there are inventories of PCs out there as well.”

Merrill Lynch analyst Joe Osha, in a Thursday research report, noted that “warning lights continue to blink” for the chip industry. Decreases in selling prices have been offset by unit growth that Osha believes is “unsustainable.”

“We continue to believe that we are within a few months of a peak in unit growth,” he said.

Apjit Walia, an analyst at RBC Capital Markets, said he expects the trouble to spread to computer and other chip makers.

“Intel usually had a quarter or two lead over the rest of the sector, so i think it might take a quarter or so before the rest of the guys see weakness,” he said. “I do expect that — probably by the June quarter.”

Intel also is facing steep competition from its smaller rival Advanced Micro Devices Inc., which has made inroads with processors for servers as well as PC chips that outperform Intel’s offerings. In previous reports, Intel also has cited a shortage of chipsets, which serve as the central nervous system for computers, as a reason for its customers turning to AMD.

In its warning, Intel did not specify how much of its shortfall was attributed to weak demand versus market share loss. The company, following its usual practice, also did not provide a forecast for earnings, which analysts had expected to be 27 cents per share.

It did say it expects gross margins to be squeezed by the lower revenue. However, expenses also will be lower than forecast due to lower revenue and profit-related spending.

Intel will report its full first-quarter results on April 19.