Intel Corp. today announced that the third-quarter revenue is expected to be below the company's previous outlook as a result of weaker than expected demand in a challenging macroeconomic environment. Intel's customers among PC makers, distributors and others are reducing inventory they carry due to weak outlook for demand in the coming months. Some observers believe that the demand may get higher once Windows 8 is released.
The company now expects third-quarter revenue to be $13.2 billion, plus or minus $300 million, compared to the previous expectation of $13.8 billion to $14.8 billion. Relative to the prior forecast, the company is seeing customers reducing inventory in the supply chain versus the normal growth in third-quarter inventory; softness in the enterprise PC market segment; and slowing emerging market demand. The data center business is meeting expectations.
Many analysts this week warned about Intel's inability to meet its own earnings forecasts this quarter. Apart from macroeconomic reasons behind Intel's upcoming financial results, many analysts pointed out that the demand towards PCs in the Q3 was supposed to be lower than traditionally due to Windows 8 launch in late October. In addition, Intel's main initiative these days - ultrabooks - has not really taken off, which means that sales of Intel's high-end microprocessors are lower than it originally anticipated.
The company's expectation for third-quarter gross margin is now 62%, plus or minus one percentage point; lower than the previous expectation of 63%, plus or minus a couple of percentage points. Expectations for R&D and MG&A spending and depreciation in the third quarter remain unchanged.
Full-year capital spending is expected to be below the low-end of the company's previous outlook of $12.1 billion to 12.9 billion, as the company accelerates the re-use of existing equipment to the 14nm node.