Intel Cuts Q4 Processor Sales, Revenue Forecasts

Intel is cutting back its fourth-quarter sales and revenue forecasts, saying there has been less demand for its desktop and notebook processors in the United States and throughout the rest of the globe.

In a statement released Nov. 12, Intel said its revenue for the fourth quarter of 2008 is expected to be below what the company announced Oct. 12 during its third-quarter earnings report. Now, Intel expects fourth-quarter revenue of $9 billion, "plus or minus $300 million," rather than the previous expectations of $10.1 billion to $10.9 billion.

Intel originally promised to offer further financial guidance on Dec. 4, but the company pushed its revised forecast update to Nov. 12. In a statement, Intel said the new revenue forecast reflects weaker worldwide demand for its processors in all the company's market segments, including desktops, notebooks and servers.

Intel also found that its partners in the PC industry are tightening their supply chains and reducing component inventories.

The latest report from Intel is another blow to the IT industry and a sign that the financial crisis, which started on Wall Street in September, is beginning to have an impact on the overall economy.

Earlier in November, Advanced Micro Devices, Intel's main rival in the x86 chip market, reported that it would cut another 500 employees from its work force. Dell is also looking to save costs by asking employees to take voluntary, unpaid time off and saying Dell will reduce the number of outside companies it uses for various projects.

On the same day that Intel cut its revenue forecast, research firm IDC issued a report that found IT spending in the United States would grow less than 1 percent in 2009. The rest of the world can expect IT spending to increase less than 3 percent next year.

In addition to lowering its revenue forecast for the fourth quarter, Intel reported that its gross margins—an important indicator of profitability in the chip business—are expected to be about 55 percent, lower than the original forecast of 59 percent. Finally, Intel said it will reduce its overall spending in the quarter, including R&D, from $2.9 billion to $2.8 billion.