Intel Corp. (Nasdaq: INTC), the world’s largest semiconductor maker, scaled back its annual sales forecast as personal-computer demand fails to rebound among consumers in the U.S. and Europe.
Revenue will rise 3 percent to 5 percent in 2012, the company said in a statement Tuesday. That was lower than an earlier projection for a gain at a percentage in the high single digits. Santa Clara, California-based Intel posted $54 billion in sales last year, and analysts on average estimated growth of 4.8 percent, according to data compiled by Bloomberg.
With demand in developed countries ebbing, Intel is relying on PC purchases in emerging regions such as China and India for growth. Though its third-quarter sales forecast fell short of some analysts’ projections, the company’s data-center group, which makes chips used in the server machines that underpin networks, posted a sales gain of 15 percent in the second quarter, helping keep profitability at record levels.
“They’re definitely recognizing the weakness out there,” said Patrick Wang, a New York-based analyst at Evercore Partners Inc. “Margins were fairly robust. Data center continues to work for them.”
Revenue in the third quarter will be $14.3 billion, plus or minus $500 million, Intel said. Analysts had projected sales of $14.6 billion, the average of estimates compiled by Bloomberg. Gross margin will be about 63 percent this quarter, the company said, compared with 63.4 percent in the second quarter.
AMD’s Forecast
Intel shares slipped 1.1 percent in extended trading after the report. They had climbed 1 percent to $25.38 at the close in New York, leaving the shares up 4.7 percent this year. In German trading today, the stock fell 1.9 percent to the equivalent of $25.11 at 9:37 a.m. in Frankfurt.
Last week, Intel rival Advanced Micro Devices Inc. disclosed that revenue unexpectedly slumped 11 percent in the second quarter. The company blamed weakness in China and Europe for the decline, which contrasted with a previous estimate for growth of as much as 6 percent. Applied Materials Inc., Intel’s biggest supplier, also cited China in lowering its forecasts.
Intel’s better performance allayed some concerns that the company might say that there would be no growth in the computer market this year, said Daniel Amir, an analyst at Lazard Capital Markets.
“It’s better than the worst fears out there,” he said.
Analysts on average had projected third-quarter gross margin, or the percentage of sales remaining after deducting costs of production, of 64 percent. In last year’s third quarter, Intel’s gross margin was 63.4 percent, and sales were $14.2 billion.
Economic Environment
“The macroeconomic environment’s really a little weaker than we saw when we began the year,” Chief Financial Officer Stacy Smith said in Bloomberg Television interview.
Consumers in Europe and the U.S. haven’t started spending again as quickly as Intel had expected, and growth in China has moderated, forcing the company to reduce its sales target for the year, Smith said in a separate phone interview. While inventory has increased because PC makers don’t want to risk having unused stockpiles of parts, Intel is confident that it can sell the chips it has on hand in the current quarter, he said.
The company didn’t lower prices and has taken market share in cheaper laptops and desktop machines from AMD with better products, Chief Executive Officer Paul Otellini said. Intel is sticking to its prediction that Ultrabooks, slim-line notebook PCs that resemble Apple Inc.’s MacBook Air, will reach 40 percent of consumer laptops sold this year, Otellini told analysts on a conference call yesterday. Intel set the specifications for the new devices, made by Dell Inc. and other PC makers, hoping to fire up consumer interest.
Second Quarter
For the second quarter, Intel said net income was $2.83 billion, or 54 cents a share, compared with $2.95 billion, or 54 cents, a year earlier. Sales rose 3.6 percent to $13.5 billion. Analysts had projected profit of 52 cents a share on sales of $13.5 billion. In April, Intel had predicted sales of $13.6 billion, plus or minus $500 million.
Because its chips power more than 80 percent of the world’s PCs, investors view Intel’s earnings as a broad indicator of demand for desktop, server and laptop computers. The company’s announcement kicks off two weeks of earnings reports by the largest U.S. technology companies.
PC shipments totaled 87.5 million units in the second quarter, a decline of 0.1 percent from the same period a year earlier, market researcher Gartner Inc. said last week.
Intel’s biggest customers are PC makers Hewlett-Packard Co. and Dell, according to a Bloomberg supply-chain analysis.