Wednesday, November 12, 2008

Intel (INTC) Warns After Hours

Should not be a surprise considering what we are seeing everywhere but can't be great for sentiment. As we said multiple times all year, fourth quarter 2008 estimates by analysts were a complete smoke and mirrors operation - anticipating 60% year over year growth over 2007. Throw the credit crisis on top of it, and for many companies these estimates look even more foolish. Sadly, even companies beating estimates despite a difficult environment react no differently than the ones missing and guiding down. The width ("everywhere") and magnitude of the Intel (INTC) warning is really the only thing that sets it apart - it is a good global bellweather.
  • Microchip maker Intel Corp (NasdaqGS:INTC - News) on Wednesday warned that its revenue would be about 14 percent below its previous forecast due to weak demand around the globe and in all market segments, and its shares fell 7 percent. Intel forecast fourth-quarter revenue of $9 billion, plus or minus $300 million. That compares with its previous forecast of $10.1 billion to $10.9 billion, or 14 percent below the $10.5 billion midpoint.
  • "It means consumer's have basically shut down for the holidays," said Charter Equity Research analyst John Dryden. "It's so far below what they had expected .... The company had outlined weakness in enterprise but not the consumer yet."
  • The company also sharply dropped its gross profit margin outlook to 55 percent, plus or minus a couple of percentage points, from 59 percent, plus or minus a couple of percentage points and said it would cut spending.
  • The company warned two weeks ago that the credit crisis could hurt demand for its chips, and lead to the insolvency of key suppliers that could result in product delays.
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