Intel slashes its revenue outlook
Citing a 'challenging macroeconomic environment,' the chip-maker sees lower demand from business customers.
Shares of Intel (INTC) fell 2.5% Friday after the company cut its third-quarter sales forecast, citing what it called a "weaker than expected demand in a challenging macroeconomic environment." The world's largest chip-maker is seen as a barometer of the broader economy.
The company expects third-quarter revenue of $13.2 billion, plus or minus $300 million, versus an earlier forecast of $13.8 billion to $14.8 billion. Analysts had expected Intel, whose shares have gained about 4% this year, to earn $14.2 billion.
Intel also slashed its forecast for gross margins to 62% from 63% "plus or minus one percentage point." The company added that capital spending will be "below the low-end of the company's previous outlook of $12.1 billion to 12.9 billion. It is due to report its full earnings on Oct. 16.
Not much is going Intel's way. Customers are reducing inventory to cut costs, and demand for PCs by large businesses continues to soften as interest in newer technologies such as tablets continues to rise. Demand in emerging markets is slowing as well. Intel's data center business is meeting expectations, making it a bright spot of sorts.
Sadly, Intel's announcement has a familiar ring to it. Intel cut its 2012 annual sales forecast in July, citing lackluster demand in the U.S. and Europe. Intel's issues, though, may be more company-specific than an indication of the health of the tech industry.
IBM (IBM) is also facing lackluster demand from business customers. Big Blue, however, recently gave a bullish earnings outlook. Apple (AAPL) disappointed investors last quarter, but Wall Street has high hopes for the company's new products, such as the iPhone 5. Sales may hit 10 million units in one week.
Wall Street has not thrown in the towel on Intel, at least not yet. The average 52-week price target is $28.66, about 14% higher than where it currently trades. Given the challenges Intel faces, that forecast seems overly optimistic.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter@jdberr.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
The apparel chain takes a hard hit after blaming the weather for its quarterly sales decline. But cold temperatures don't explain the drop in full-year sales as well.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.