Intel cuts Q3 revenue outlook, cites weak demand

Intel cuts Q3 revenue outlook, cites weak demand

Summary: Intel cites weak economic demand, falling enterprise PC sales and sluggish growth in emerging markets.

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Intel said Friday that its third quarter revenue will be lower than expected.

The company in a statement projected revenue to be $13.2 billion, give or take $300 million. Intel had projected $13.8 billion to $14.8 billion.

Intel noted that it was seeing "weaker than expected demand in a challenging macroeconomic environment." Meanwhile, Intel noted that customers were cutting inventory. Specifically, Intel said:

Relative to the prior forecast, the company is seeing customers reducing inventory in the supply chain versus the normal growth in third-quarter inventory; softness in the enterprise PC market segment; and slowing emerging market demand. The data center business is meeting expectations.

Intel expects gross margins for the third quarter to be 62 percent, down from the 63 percent projected. Intel added that its capital spending would be lower than expected.

Wall Street was expecting Intel to report third quarter earnings of 60 cents a share on revenue of $14.2 billion.

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Intel's sales warning comes after both Dell and HP said PC sales on the consumer front were weak. More worrisome for Intel is that emerging market demand was weak. HP, Dell and Intel noted that sales in emerging markets have tailed off. China in particular has been reporting lower-than-expected economic growth. 

What's unclear is whether Intel's revenue warning is the result of a pause ahead of the Windows 8 launch or the post-PC era. In a research note, Piper Jaffray analyst Auguste Gus Richard said:

We believe the sale of tablets will exceed the sale of notebooks in 2H:CY13 as notebook demand weakens and tablet demand remains robust. We believe popular holiday gifts this year will include the Nexus 7, Kindle Fire, Microsoft Surface and iPad Mini. These ARM-based products are likely to be priced between $199-$299. This is less than half the price of a low-end Ultrabook at $600. Moreover, given the Surface will run Office, it eliminates the last major hurdle, in our view, in adopting a tablet. Our contacts now believe PC demand in 2H:12 could be below 1H:12. This does not bode well for the semiconductor industry or Intel as PCs are roughly one-third of overall chip demand.

Intel's third quarter revenue will put the pressure on the company to become more of a player in the smartphone and tablet markets as it preserves its data center and server dominance. 

Topics: Processors, Hardware, Intel, PCs

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6 comments
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  • Could it be that they are over priced?

    I look at the newer Intel CPUs once in a while and then choose not to buy. They are pricing themselves out of the market.
    happyharry_z
  • I am not buying a new PC until late 2013

    And I think others are waiting too, if they are still interested. The hot thing right now is a Tablet and Intel is not mentioned in any of the desired Tablets I have had discussions with persons about. Its either Kindle Fire, Nexus 7 or iPad or even Windows RT based device or Surface. That's not good for Intel. The fact that the company is still synonymous with big, beige box sitting under a desk is no good and is 1998.
    adacosta38
  • Most people

    Most people know Windows 8 is right around the corner and are holding off new hardware until then. Umm, this isn't the first time it's happened.
    NoAxToGrind
  • Mobile, Not PCs, Is Where The Growth Is

    And mobile devices run ARM chips, not Intel chips.
    ldo17
    • I think that may change slowly!

      When we start see fast performing tablets in the wild.
      Just imagine sitting next to someone while your on you iPad or nexus tablet with it's limits and you see the other tablet singing and dancing cycles around yours.
      At the moment the bulk of tablet buyers are buying their tablets a multimedia device's, wait until they see what real power can do for a tablet, Intel will be back.
      martin_js
      • Re: I think that may change slowly!

        No, it’s already changed. We already have fast-performing tablets, and they’re running ARM, not Intel.

        Windows-based tablets have had their day.
        ldo17