Intel warns of Q3 sales shortfall

Blaming weak demand in Europe, the chipmaker says revenues will fall short. Still, Intel is optimistic about a robust second half
Written by Larry Barrett, Contributor

Intel became the latest big name technology firm to warn of disappointing sales in its third quarter Thursday. Company officials said weak demand in Europe was mainly to blame.

Intel said late Thursday that its third-quarter sales would come in around $8.5bn (£5.2bn), up only three percent to five percent from the $8.3bn it recorded in the second quarter.

Intel shares closed off $1.56 to $61.50 ahead of the warning. The company also said gross profit margins will be right around 62 percent, give or take a point, slightly below the 63 percent to 64 percent it had previously anticipated.

First Call consensus expects Intel to earn 41 cents a share in the third quarter. Company officials didn't say whether the sales shortfall would impact its bottom line.

In its second quarter, Intel topped analysts' estimates, earning $3.5bn, or 50 cents a share, on sales of $8.3bn. At the time, Intel officials said they were bullish on the second half. Chief financial officer Andy Bryant in July said strong PC and server demand as well as networking growth would bolster its third and fourth-quarter sales and earnings. "We expect demand to remain strong," Bryant said at the time. "Product supply is improving, but is still tight."

Following the second quarter results, several analysts issued research reports with various outlooks. Wit SoundView's Scott Randall was especially optimistic, reiterating his "strong buy" rating on the stock and predicting that Intel would "likely outperform in the second half".

Even though Intel did beat the Street estimate last quarter, its gross profit margins slipped to 60.4 percent from 62.6 percent in the first quarter. Intel shares moved up to a 52-week high of $75.81 in August after splitting its stock 2-for-1 in July. The stock fell to a low of $32.50 in October. Twenty-eight of the 31 analysts following the stock rate it either a "buy" or a "strong buy".

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