Intel Corp cut its third-quarter revenue estimate more than expected on Friday due to a decline in demand for its chips as customers reduce inventories and businesses buy fewer personal computers.
Intel also said it was scaling back capital spending as a result of the business slowdown.
A revision of Intel targets had been expected by some analysts after PC makers Hewlett Packard Co and Dell Inc warned of slow demand last month, a development that has been compounded by a shaky global economy and consumers shifting toward tablets and smartphones.
However, the 8 percent reduction in the top chipmaker’s revenue outlook was much more severe than expected. Intel also withdrew its full-year forecast.
The scaled-back outlook comes just days ahead of a major event where Intel will tout a new generation of processors that consume less power, central to its strategy of reinvigorating a stagnant PC industry.
Bernstein analyst Stacy Rasgon said the size of the Intel cut was surprising. Weakness in PC sales to businesses and governments, known as enterprise sales, cited by Intel also raised concerns.
Intel’s warning comes at a time when PC makers should be gearing up to build more computers than usual ahead of the launch of Microsoft Corp’s Windows Phone 8 operating system.
Intel has been banking on the Windows 8 release next month to help slow the trend of consumers buying smartphones and tablets instead of PCs.
Devices running Windows 8 and powered by Intel’s latest components will be a major draw when thousands of technology professionals descend on the annual Intel Developer Forum in San Francisco next week. While a Windows release normally boosts computer sales, analysts believe it might not help as much this time.
At the forum, Intel is expected to show off a range of Ultrabook laptops powered by recently launched Ivy Bridge processors, as well as hybrid devices with screens that detach from keyboards to be used as tablets.
Along with concerns about consumer demand being hurt by the weak economy, manufacturers are reluctant to commit their resources until they have a better idea of which kinds of new devices will become hits with consumers.
“In the absence of knowing what to sell, there’s a clear reluctance to build any sort of further inventory,” MKM Partners analyst Daniel Berenbaum said.
Intel’s next-generation PC processor, codenamed Haswell, is to be front-and-center at the forum, with executives talking up improved power performance that will let future laptops stay on longer without needing a recharge.
Haswell, due to appear in a crop of laptops released for next year’s holiday season, will improve on computing and graphics features and is targeted to reduce electricity consumption from 17 watts to 10 watts, according to Intel.
Intel said it now expects third-quarter revenue of US$13.2 billion, plus or minus US$300 million, down from its previous forecast of US$13.8 billion to US$14.8 billion.
Analysts on average expected US$14.2 billion. The company is due to report third-quarter results next month.