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Intel Cuts Q3 Forecasts, Blames Tough Economy

Weakness in the global economy will hurt third quarter sales at {complink 2657|Intel Corp.}, and the company is now projecting revenue for the period will be up about $300 million below the midpoint of its previous forecast.

Intel, the world's biggest semiconductor company and a bellwether for the industry, said the lower forecast was due to problems in the general economy. The company has been making up for weakness in the developed countries by tapping growth markets in Asia and emerging regions, but as demand softens in these areas too, sales of personal computers, which account for a bulk of Intel's revenue, have also declined.

“As we enter the third quarter, our growth will be slower than we anticipated due to a more challenging macroeconomic environment,” Paul Otellini, president and CEO at Intel, said in a statement.

The company projects third quarter revenue will be approximately $14.3 billion, “plus or minus $500 million” compared with its previous estimate for a midrange of $14.6 billion. It expects gross profit margin will be about 63 percent for the quarter. Full year revenue will be “up between 3 percent and 5 percent year over year, down from the prior expectation for high single-digit growth,” the company said in the statement.

For the second quarter, Intel reported net income of $2.83 billion, or 54 cents per share, down from $2.95 billion, in the comparable quarter of 2011. Revenue rose slightly to $13.5 billion from $13 billion. Analysts had expected the company to report earnings per share of 52 cents for the second quarter. Sales were in line with analysts' consensus estimate.

Intel said it will maintain its previous capital spending estimate of $12.5 billion, “plus or minus $400 million,” for the full year.

14 comments on “Intel Cuts Q3 Forecasts, Blames Tough Economy

  1. _hm
    July 17, 2012

    Will Intel have new product for Tablet and Mobile and acqusition for growth?

  2. mfbertozzi
    July 18, 2012

    @_hm: haven't that insight or something similar, but speaking for myself it could be a good, potentially, a good strategy; some doubts or timeplan for its “go live” and for absorbing the step from the market; other poit is about sales regression, in general, the indicator acts as ringing bell for business, it appears economy's positive trend is still away.

  3. Houngbo_Hospice
    July 18, 2012

    Intel Cuts Q3 Forecasts, Blames Tough Economy? 

    If Intel's revenue is $300 million below the midpoint of its previous forecast, it is likely that the company's analysts failed to understand the right economy context in which they are doing business and they should rather blame themselves. But the good news is that the company is still expecting a 63 percent profit margin for the quarter, supposing they get it right this time.

  4. Houngbo_Hospice
    July 18, 2012

    @mfbertozzi

    it appears economy's positive trend is still away.”

    Most analysts know that the economic recovery is still slow and companies should take that into account in their revenue earning forecasts. It is predicatable that the global tough economy will affect companies' revenues.

  5. mfbertozzi
    July 18, 2012

    @H_H: well, yes, you are absolutely right; I am wondering if, for similar condition, companies need to hire very talented people very experienced in predicting and then delivering the expected forecast, avoiding any negative trend in reviewing it. It could be a key factor also for jobs market.

  6. _hm
    July 18, 2012

    As mentioned earlier, is Intel's progress related to that of relaese of Miscorsoft Windows 8?

     

  7. Eldredge
    July 18, 2012

    I heard art of this report on the radio on the way to wotk this morning. If I heard correctly, part of last years growth was due to acquisition. It would be interesting to see if the growth is more constant year over year if that was taken out of the comparison.

  8. ahdand
    July 20, 2012

    Well everyone is blaming the economy and its fair enough upto some extent since its really tough for small and medium scaled companies to get their selves in the act on time but we should be much more proactive and shoyuld learn how to deal with situations like this and should have back up plans to overcome atleast some percentage

  9. mfbertozzi
    July 20, 2012

    @_hm: as per what major newspapers are reporting, Microsoft8 is bringing high expectations for both endusers and market, then yes, finally, it could represent a key event also for Intel for starting again a positive ramp on forecast and financial results by the end of the year.

  10. stochastic excursion
    July 20, 2012

    The forecasts from companies like Intel are largely about managing expectations.  It's probably best to regard them with some skepticism.  Maybe they are revising downward only to revise upward later, e.g. to coincide with a stock offering from a competitor.

  11. _hm
    July 20, 2012

    @mfbertozzi: Yes, This will be key event for Intel and other major PC manufacturers like Dell and others.

     

  12. bolaji ojo
    July 20, 2012

    I can name a few companies that downplay their expected performance to get a boost when the numbers are finally released. Intel isn't one of them.

  13. stochastic excursion
    July 21, 2012

    We probably are looking at a global slump that's worse than Intel's previous prediction.  Part of this though could be that there is more of a move to mobile devices, where ARM is putting a dent in Intel's market share.

  14. Mr. Roques
    July 23, 2012

    I love those “plus or minus” comments… they can basically change the story from a negative to a positive one.

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