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Warning of weaker than expected demand in Europe, Intel Corp. on Thursday lowered its revenue projections for the quarter, rekindling concerns that the high-tech industry has yet to recover its footing after a more than year-long slump.
The worlds largest chipmaker said it now expects its second quarter sales to range from $6.2 billion to $6.5 billion, from previous projections of $6.4 billion to $7 billion.
Wall Street analysts and investors reacted strongly to the negative news, sending Intels stock price down more than 14 percent Thursday, with Intel shares falling from about $28 to $24 in after-hours trading.
Prior to Intel giving its scheduled mid-quarter update, financial analysts had been projecting the chipmaker would post a profit of 15 cents a share on $6.67 billion in revenue, according to Thomson Financial/First Call.
Shortly before Intel, of Santa Clara, Calif., announced its lowered projections, Merrill Lynch analyst and longtime Intel supporter Joe Osha slashed his rating on the chipmaker from “strong buy” to “neutral.”
“The real issue and the reason the stock is trading off is not the revenue, its the gross margin,” Osha said in research note. “The gross margin target is well below where people thought it was going to be.”
Intel is now projecting its gross profit margins—the income it makes on each product sold—to total about 49 percent, well below its previous projection of 53 percent, a figure the chipmaker always projects could be plus or minus a couple percentage points.
The dour news from what many analysts consider a bellwether company for the computer industry spurred a sell-off in high-tech companies, including Oracle Corp., Microsoft Corp., Sun Microsystems Inc. and Cisco Systems Inc., with those industry leaders experiencing stock drops of 3 percent or more in after-hours trading.