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Intel cuts fourth-quarter sales forecast on hard drive shortage

China Daily | Updated: 2011-12-14 07:55

Intel cuts fourth-quarter sales forecast on hard drive shortage

SAN FRANCISCO - Intel Corp, 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 on Monday. Analysts predicted $14.7 billion, according to Bloomberg estimates.

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, Intel 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. "This is obviously not great news."

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 still recovering from the floods in Thailand, which is home to production for about one-quarter of the world's hard-disk drives. The forecast sent the Philadelphia Semiconductor Index down 3.6 percent.

Nvidia Corp 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 Monday. 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 was 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 analysis. In last year's fourth quarter, Intel had revenue of $11.5 billion. Gross margin 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.

"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 joined Seagate Technology PLC 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.

Bloomberg News

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