Intel Corp shares tumbled 19 percent after the world's biggest computer-chipmaker lowered its second-quarter sales forecast, signaling a slower recovery for electronics demand worldwide.
Intel dropped US$5 to US$22, its lowest price since October. The drop erased US$33.4 billion in market value. The shares of rivals Advanced Micro Devices Inc. and Texas Instruments Inc and chip-equipment maker Applied Materials Inc also fell.
Weakness in Europe and a customer shift toward cheaper chips led to the shortfall, surprising investors who expected some improvement in corporate demand. Sputtering sales at Intel, whose chips power 80 percent of new personal computers, may mean that the global PC and software industries still are mired in a slump that started more than 18 months ago, shareholders said.
"A lot of people felt like they had a strong handle on their business, and these guys are missing by a country mile," said Alex Vallecillo, who helps manage US$30 billion at Intel shareholder Armada Funds. "This adds a boatload of confusion to an environment that's already very confused."
Second-quarter sales will be US$6.2 billion to US$6.5 billion, Chief Financial Officer Andy Bryant said on a conference call late yesterday. That compares with the company's April estimate of US$6.4 billion to US$7 billion.
"When Intel makes a statement like this, the hope for a recovery is dissipated," said Simon Kirton, who helps manage US$3.6 billion of European equities at Aberdeen Asset Management in London.
Intel's forecast calls into question the state of the market for everything from chips to PCs to semiconductor equipment, investors said. The second quarter typically is the weakest of the year for PC sales, and in recent weeks some Intel customers have predicted that sales this period will decline.
Hewlett-Packard Co, the world's largest PC maker, expects sales to drop 5 percent to 7 percent this quarter from the previous period, Chief Financial Officer Robert Wayman said this week.
A rebound may not take hold until next year because corporations already have budgets in place and are unlikely to spend more on PCs this year, Michael Dell, chief executive of No. 2 PC maker Dell Computer Corp, said last month. Dell shares fell US$0.19 to US$26.28.
"Tech budgets are under a lot of scrutiny," said DeAnne Steele, who helps manage the US$400 million BNY Hamilton Large Cap Growth Fund at Bank of New York, which owns 360,000 Intel shares.
"Some chief information officers are trying to come in under budget."
If consumers and businesses shun PCs, there's no demand for processors from Intel and Advanced Micro or memory from chipmakers such as Micron Technology Inc. Semiconductor-equipment makers such as Applied and KLA-Tencor Corp don't get as many orders for their tools if chipmakers don't have profits to support spending.
Advanced Micro fell US$0.80, or 7.5 percent, to US$9.81.
Applied fell US$0.30 to US$20.62, while Texas Instruments declined US$1.29 to US$26.40. The Philadelphia Semiconductor Index fell 2.8 percent to 440.96.
"Intel confirms we're still some time away from a chip-market recovery," said Corne van Zeijl at Zurich Leven, in the Hague, who invests 2.4 billion euros and owns Royal Philips Electronics NV shares.
The global chip market is forecast to grow 3.1 percent in 2002, compared with an earlier estimate of 6 percent, the Semiconductor Industry Association said this week. Chip sales fell 33 percent last year to US$152 billion, their worst decline, after a 31 percent rise in 2000, according to researcher Gartner Inc.
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