Intel Cuts Sales View Again; Margins to Lag

The lowered guidance from Intel, the world's largest maker of semiconductors, comes as computer makers and other customers continue to cut back on inventories and demand slides for personal computers and other tech products.

"There was going to be a miss, the issue was whether it was going to be enough for a pre-announcement," said Raymond James analyst Hans Mosesmann. "There was a sense that they were not immune."

Intel shares were recently down 4.9% to $14.61. The stock has risen more than 11% since its first pre-announcement on Nov. 12, though it is still down more than 36% over the past year.

A warning by Intel in November was at the front of an ever-extending line of companies in all facets of the chip industry saying demand had slumped as the global economic slowdown's pace quickened.

As most of the large semiconductor companies cut earnings, shares in the sector began showing signs of recovery as investors hoped most of the bad news had been priced into the stocks. The Philadelphia Semiconductor Index, or SOX, which tracks the chip industry, is up more than 20% over the past month.

Many were expecting Intel's fourth-quarter report would come in below its previous guidance, but the pre-announcement demonstrates that the outlook for chips remains murky.

"If Intel is hurting, the average semiconductor company is certainly worse off in terms of visibility and what is going on," Mosesmann said.

Intel's warning sent shares down across the semiconductor sector. The SOX fell 4.9% to 223.18. Intel rival Advanced Micro Devices Inc. (AMD) dropped 4% to $2.67.

Intel said Wednesday it now expects fourth-quarter revenue of $8.2 billion, down from November's reduced view of $8.7 billion to $9.3 billion. Intel added gross margins will be at the bottom of its lowered estimate of 55%, plus or minus several percentage points.

"Once we had a better understanding of where the numbers were, we felt it was important to put those numbers out," said Intel spokesman Tom Beermann.

Beermann said more information would be provided when Intel reports fourth-quarter earnings Jan. 15.

The chip-sales slide has been highlighted with a 9.9% drop globally in November. Those woes are expected to continue into this year.

As revenue has slumped, Intel has also been trimming costs. It said Wednesday that spending on acquisitions and research and development in the fourth quarter was about $2.6 billion, below its earlier estimate of $2.8 billion.

Intel also plans a nearly $950 million write-down on the value of its stake in WiMax provider Clearwire Corp. (CLWR), shares of which are down 61% in the last year.

The chipmaker added that it will also record $250 million in restructuring charges and write-downs for the period.

-- Jerry A. DiColo, Dow Jones Newswires

(Kerry E. Grace contributed to this report.)