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Intel to get whacked in Q3 by PC slowdown

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Wall Street got a shock this morning as chip maker Intel cut its guidance for the third quarter ending in September.

In a statement, Intel said that it was now expecting revenues to be somewhere between $10.8bn and $11.2bn, significantly lower than the $11.2bn to $12bn guidance that the company gave Wall Street back on July 13 when it reported its financial results for the second quarter. Ironically, Paul Otellini referred to that as "the best quarter in the company's 42-year history," and Intel beat Wall Street expectations for revenues and profits. It now seems pretty clear that PC and server makers might have been a little too exuberant in the chip and chipset buying in Q2 as they thought the IT market had recovered a bit more than it actually has.

"Revenue is being affected by weaker than expected demand for consumer PCs in mature markets," Intel said in its statement. "Inventories across the supply chain appear to be in-line with the company's revised expectations."

"The impact of lower volume is being partially offset by slightly higher average selling prices stemming from solid enterprise demand," it added.

As El Reg has previously reported, market watcher IDC calculated that PC shipments rose by 22.4 per cent in the second quarter, to 81.5 million units. IDC had been projecting that consumer PC spending will "remain healthy" but slow as 2010 progresses, and businesses will grow their PCs budgets as they do their cyclical replacements over the next couple of years.

Gartner said that the PC market jumped in the second quarter, too, with shipments up 20.9 per cent, with 82.9 million machines out the door. Microsoft, which is very keen on a Windows 7 upgrade cycle, was this month poo-pooing the idea that the PC market would slowdown in the second half of this year.

iSuppli, which tracks semiconductor sales, has been expecting worldwide chip sales to grow significantly this year - up 35.1 per cent, to $310.3bn. But that is because so many devices use chips these days and there are product shortages for them in many cases, which drives up revenues. Demand for PCs and servers were cooked into those iSuppli numbers, of course.

Intel also lowered its gross margin guidance by a couple of points, to between 65 and 67 per cent. Perhaps the Opteron 6100 processors for servers are getting a bit of traction in the market, after all.

As El Reg goes to press, Intel's shares are off a few pennies to $18.15 a pop. Wall Street either doesn't care or hasn't heard the news yet. ®

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