Intel says Q4 sales will be down 23%, decreases spending

Intel has lowered its estimates for the December 2008 quarter again, now projecting sales will be $8.2 billion, down 20% sequentially and down 23% year over year. The MPU bellwether also trims its spending estimate to $2.6 billion and says it expects a $950M write-down on its Clearwire investment.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 1/7/2009

Intel Corp has lowered its Q4 2008 estimates for a second time, now projecting the December quarter's sales will be approximately $8.2 billion, down 20% sequentially and down 23% year over year.

Intel's original estimate for Q4 called for possible 7% sequntial growth with revenue ranging between $10.1 billion to $10.9 billion on Q3's $10.2 billion. That estimate, made in mid-October before the semiconductor industry felt the full weight of the financial crisis, was lowered in mid-November when Intel estimated Q4 sales would fall 9% to15% sequentially to $9 billion, plus or minus $300 million.

Financial analysts have been watching the MPU bellwether closely in recent weeks and have gone so far as to ask why Intel has not begun cutting jobs to reduce costs and to say the Street's estimates for the company are too high.

Today's revised revenue outlook is lower than FBR Capital Markets estimates made yesterday, which forecasted Intel Q4 sales would come in at $8.69 billion, slightly worse than the Street's estimate of $8.74 billion.  

Intel said in its statement that it downgraded the revenue estimate on further weakness in end demand and inventory reductions by its customers in the global PC supply chain.

Analysts at Barclays Capital this morning said they believe desktops and servers are especially weak for Intel. "We believe weak demand is being compounded by inventory reduction across the channel," Tim Luke, a semiconductor market analyst at the firm, said in a report.

"While some revision had been expected this cut comes sharply below cautious expectations and our recently revised revenue estimate of down 14%," he continued. "Our estimates move sharply lower again and we maintain 2EW [equal weight] rating with shares likely to remain range bound through seasonally slower 1H09 [first half of 2009] given low visibility and potential for gross margin to move lower in 1H09 and on going challenges with mix, ASPs [average selling prices],and margins."

Intel's stock, INTC, tumbled to $14.67 in trading this morning by more than 4.5% as of 10:42am eastern on the revised guidance. The stock continued its fall in the afternoon, dipping more than 5% to $14.61 as of 2:16pm. INTC closed at $15.37 on Tuesday.*

Intel further decreased spending (R&D plus MG&A) expectations to approximately $2.6 billion, lower than its November expectation of approximately $2.8 billion.

Intel's preliminary estimate of gross margin for Q4 is at the bottom of the previous expectation of 55%, plus or minus a couple of points.

Intel also said that it expects a $950 million write-down on its investment in Clearwire Corp as a result of the WiMax player's year-end stock price.

On that, Intel said it now expects a loss from equity investments and interest of between $1.1 billion and $1.2 billion, versus a previous expectation of a loss of approximately $50 million, for the December quarter.

Intel is scheduled to announce its full Q4 results on January 15.

*Editor's note: This story was updated at 2:30pm eastern to include afternoon stock information.