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Intel's Q3 sales unlikely to beat Q2 – Wall Street

Chipzilla to revise guidance downward

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Intel forecast its Q3 sales will come in somewhere between $6.2 billion and $6.8 billion when it posted its Q2 fiscals on 17 July, but CFO Andy Bryant is expected by Wall Street to narrow it down to the bottom end of that range when he issues a revised sales guidance statement this evening.

On the basis of the Intel internal projections we reported yesterday, analysts expectations are likely to be met. The numbers show a shallow decline in processor shipments through the July-August-September quarter. That, compounded with Intel's aggressive price cutting programme, will have a negative impact on the quarter's revenues.

Last quarter, Intel posted revenues of $6.3 billion, and that's pretty much what analysts are expecting this time round.

"We expect Intel to lower guidance to the lower end of the range of below the midpoint or some other way of saying 'flat','' Lehman Brothers analyst Dan Niles has told his clients.

US Bancorp Piper Jaffray analyst Ashok Kumar told his clients to expect Q3 sales around Q2's $6.3 billion. However, he bases his figure on estimates that processor shipments will rise five per cent during the current quarter, to counter the revenue lost through all those price cuts.

If shipments don't grow, Intel will have to revise its guidance downward. That's certainly what Martin Capital Advisors senior equity strategist Louis Kokernak believes. "It will be at the low end of guidance or a small downward revision," he told Bloomberg. "It's a solid bet to assume it's going to be negative."

With Dell, for one, forecasting a weak quarter - in particular, September, traditionally the time of big, back-to-school sales - Intel may well have a job getting the five per cent unit growth Kumar mentioned.

If there is a significant reduction in Intel's guidance, the company will undoubtedly be looking to Q4 to win back both sales and the support of investors. Certainly, it has high expectations of October, when its i845-led move to get the P4 into low-end boxes comes to fruition alongside the launch of Windows XP. Further price cuts on 28 October will stimulate demand further, it hopes, and everyone who didn't upgrade last Christmas will do so this time round. ®

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