Intel warns Q3 will miss expectations on weak PC demand

Intel decreases its estimates for Q3 revenue, which it says is being affected by weaker than expected demand for consumer PCs in mature markets.

By Suzanne Deffree, Managing editor, news -- EDN, August 27, 2010

Intel Corp this morning said its Q3 revenue will be below its previously announced outlook.

The chip leader's revised outlook calls for September quarter revenue to be $11 billion, plus or minus $200 million, and compares to the previous expectation of between $11.2 billion and $12 billion. Even with the reduction, the projected sales would be flat or reflect a modest sequential gain on Intel's Q2 revenue of $10.8 billion.  

Intel said revenue is being affected by weaker than expected demand for consumer PCs in mature markets. Intel further said inventories across the electronics supply chain appear to be in-line with its revised expectations.

Q3 gross margin is now expected to be 66%, plus or minus a point, lower than the previous expectation of 67%, plus or minus a couple of points. The impact of lower volume is being partially offset by slightly higher average selling prices stemming from solid enterprise demand, Intel said.

Intel did not revise any additional earnings expectations, originally projected in its Q2 statement on July 13. In that statement, Intel reported what it called its "best quarter ever" with revenue up 34% year over year. At that time, company CEO Paul Otellini reported healthy demand in the PC segment.

Intel is slated to report on its Q3 earnings on October 12, at which time it is also expected to provide guidance on its Q4 and update its full-year expectations.  

In related news, market researchers at IC Insights this week suggested Intel may lose its place as the No. 1 chip industry player ranked by revenue as Samsung gains ground and could overtake the company mid decade.