SAN FRANCISCO (AP) -- Even after sharply reducing its outlook for the fourth quarter, Intel Corp. said Wednesday that it would miss its revenue projection by about $500 million, a sign that PC makers and buyers are being more tightfisted than it seemed only two months ago.
Intel shares closed down 6 percent.
Santa Clara, Calif.-based Intel, the world's largest chip maker, now says revenue was $8.2 billion for the last three months of 2008, a 23 percent decline from the year-ago period. Analysts surveyed by Thomson Reuters were expecting $8.7 billion, which was at the low end of the range Intel provided in November of $8.7 billion to $9.3 billion.
Intel's profits also are being hit. It expects its gross profit margin to be at the bottom of its previous guidance, which was for 53 to 57 percent of revenue. Gross profit is the amount of money a company earns after manufacturing costs are stripped out. It's a valuable gauge of how well companies are controlling their costs, and is particularly useful in looking at chip makers since their manufacturing expenses are huge.
Intel is scheduled to provide more detail when it releases full fourth-quarter earnings on Jan. 15.
The fact that Intel has had to revise its fourth-quarter guidance twice indicates how deeply the economic meltdown has damaged the semiconductor industry. It also reveals how hard it is for even conservative companies - Intel formally stopped doing mid-quarter updates in 2006 - to figure out how badly they're being hurt.
Intel blamed the latest revision on weaker-than-expected demand, piling up in a chain reaction. Businesses are putting off upgrading to new computers until the economy and their finances improve. And consumers, singed by layoffs and falling home prices and stock portfolios, have scaled back their spending as well. In turn that has prompted PC makers to try to save money by burning through their existing inventories of chips instead of buying lots of new ones.
These trends have slammed chip makers since the downturn intensified in September, and now appears to be worsening.
The news came as little surprise to industry analysts, who have been warning for months that PC suppliers like Intel might miss even their lowered forecasts.
"It's not something that indicates any kind of share loss or structural change in the company or the markets," said Cody Acree, senior semiconductor analyst with Stifel, Nicolaus & Co. "Right now the economy is causing everybody up and down the manufacturing channel to live hand to mouth."
More details will emerge when Intel reports its full quarterly results Jan. 15.
Intel's primary competitor in the market for microprocessors, which are the brains of personal computers, has also slashed its forecasts. Sunnyvale, Calif.-based Advanced Micro Devices Inc. warned last month that its fourth-quarter sales would drop 25 percent from the previous quarter. That implies a drop of 33 percent from the previous year.
Intel shares fell 93 cents, or 6.1 percent, to close at $14.44. AMD shares fell 12 cents, or 4.3 percent, to $2.66.
Intel also needs to absorb a charge for the deterioration of the value of its investment in Clearwire Corp., an Internet provider specializing in a new type of wireless broadband technology called WiMax. Intel, which invested $1.6 billion in Clearwire, plans to take a $950 million non-cash charge in the fourth quarter because of Clearwire's falling market value. Clearwire's stock price has fallen from around $12.50 in October to around $5 today, leaving it with a market capitalization of $833 million. Questions have circled about Clearwire's aggressive network buildout plans in the souring economy.
Time Warner Cable Inc., another Clearwire investor, said Wednesday it would take a similar charge, for approximately $350 million. Google Inc. put $500 million into Clearwire, but spokeswoman Jane Penner declined to comment Wednesday on whether the Internet search leader intended to recognize a loss on its investment.
Representatives for Comcast Corp., which invested $1.05 billion in Clearwire, declined to comment.