By Ian King - Dec 13, 2011 4:16 AM GMT+0700
Dec. 13 (Bloomberg) -- Ashok Kumar, an analyst at Rodman & Renshaw LLC in New York, talks about the outlook for Intel Corp., the world's largest chipmaker. Intel reduced its fourth-quarter revenue forecast by about $1 billion, saying a shortage of hard-disk drives is cutting customers’ production of personal computers. Kumar speaks with Susan Li on Bloomberg Television's "First Up. (Source: Bloomberg)
Intel Corp. (INTC), the world’s largest chipmaker, reduced its fourth-quarter revenue forecast by about $1 billion, saying a shortage of hard-disk drives is cutting customers’ production of personal computers.
The company said revenue will be $13.7 billion, plus or minus $300 million, compared with a previous estimate of $14.7 billion, give or take $500 million, according to a statement today. Analysts predicted $14.7 billion, the average of estimates compiled by Bloomberg.
While PC sales will rise in the fourth quarter from the prior three months, Intel said customers are stockpiling fewer parts because output has been hurt by a shortage of disk drives, the main data-storage devices in computers. The supply constraints, resulting from the worst flooding in Thailand in 70 years, will continue into the first quarter, the chipmaker said.
“I am a bit surprised -- I had thought that there would still be enough supply that Intel would be able to make its forecast,” said Daniel Berenbaum, an analyst at MKM Partners LP in Stamford, Connecticut, who recommends buying the stock. “This is obviously not great news.”
Shares of the Santa Clara, California-based company fell 4 percent to $24 at the close, leaving the stock up 14 percent this year. Rival Advanced Micro Devices Inc. (AMD) slipped 4.3 percent.
Flooding Recovery?
The reduced outlook from Intel, whose microprocessors power more than 80 percent of all PCs, comes after some drive makers had indicated the industry was recovering from the floods in Thailand, home to production for about a quarter of the world’s hard-disk drives. The forecast sent the Philadelphia Semiconductor Index (SOX) down 2.8 percent.
Nvidia Corp. (NVDA) is now the only PC-related semiconductor maker that hasn’t told investors that the floods will hurt earnings, according to Mark Lipacis, an analyst at Jefferies & Co.
Intel’s customers have cut chip orders in the past two weeks after their hard-disk suppliers updated them on the availability of their products, Intel Chief Financial Officer Stacy Smith said on a conference call today. Sales of computers haven’t dropped and are following the pattern that was the basis of Intel’s original forecast, he said. Sales of servers and demand in emerging markets are providing “pockets of strength,” while demand in some developed markets is weaker, he said.
“We expect supply to catch up with demand sometime in the first half of 2012,” Smith said. He said he is unable to predict a more specific time in the first half.
PC Customers
Intel’s biggest clients are Hewlett-Packard Co., Dell Inc. and Quanta Computer Inc., according to a Bloomberg supply-chain analysis. In last year’s fourth quarter, Intel had revenue of $11.5 billion.
Gross margin, or the percentage of sales remaining after deducting costs of production, will be 64.5 percent in the fourth quarter, plus or minus a couple of points, compared with an earlier target of 65 percent, Intel said today.
“The good news is that the gross margin is only 50 basis points below where they had previously guided to,” Berenbaum said.
On Dec. 1, disk-drive maker Western Digital Corp. (WDC) joined Seagate Technology Plc (STX) in signaling that the industry was rebounding from the disaster in Thailand, raising its quarterly sales forecast and saying it restarted production earlier than expected. Western Digital had cut its sales forecast in October.
To contact the reporter on this story: Ian King in san francisco at ianking@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
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