- Associated Press - Friday, August 27, 2010

NEW YORK (AP) - Chip-maker Intel Corp. is cutting its sales forecast for the quarter, adding fresh evidence that a rickety economy is putting a damper on the back-to-school shopping season.

Intel is the world’s biggest provider of microprocessors for PCs and a bellwether for the broader technology industry.

In a statement Friday, the company said it is seeing “weaker than expected demand for consumer PCs in mature markets,” including the U.S. and Europe.

The warning comes a little more than a month after Intel reported its biggest quarterly profit in a decade. But those results were fueled by a rebound in technology spending at corporations, many of which held off replacing older computers during the recession.

Home computer purchases are another matter. Uncertainty about jobs is still keeping people’s spending in check.

Intel said it now expects revenue of $10.8 billion to $11.2 billion for the fiscal third quarter, which ends in September. That compares with a previous forecast of $11.2 billion to $12 billion.

On average, analysts surveyed by Thomson Reuters expected $11.5 billion.

Intel is scheduled to report results on Oct. 12 and plans to update its fourth-quarter and full-year outlook then.

Intel’s downgrade to its guidance wasn’t entirely a surprise. Many investors simply didn’t believe that Intel would be able to hit the higher numbers because of signals from other PC-industry suppliers that PC sales were collapsing.

Those fears were the main reason why Intel’s stock has fallen about 13 percent since Intel issued its original guidance on July 13. The fall erased about $16 billion in shareholder wealth through Thursday’s close.

After the company released its revised outlook, the company’s shares rose 31 cents, or 1.7 percent, to $18.49 in midday trading Friday, amid a general lift on Wall Street.

Last week, PC makers Dell Inc. and Hewlett-Packard Co. also raised red flags about what is normally a robust season for sales. Dell Chief Financial Officer Brian Gladden said in a conference call that the back-to-school shopping season has been “a little weaker than we would have expected.”

Todd Bradley, head of HP’s PC division, told investors that the company saw some “softness” in the consumer laptop market and that back-to-school shopping started “somewhat late for us.”

Intel sees trends in the PC market early because its orders are based on the number of computers that PC makers are anticipating building.

The company has benefited from a recovering PC market for about a year and half. In April 2009, Intel CEO Paul Otellini proclaimed that PC sales “bottomed out” and had started recovering _ a forecast that even the major PC makers wouldn’t immediately get behind, but proved to be true.

Now, it appears the market is starting to dip again.


AP Technology Writer Jordan Robertson contributed to this story from San Francisco.



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