Intel Falls on Revised Guidance
Shares of Intel (NASDAQ: INTC), a computer chip producer, took a hit Friday when the company announced it would be slashing its third-quarter revenue outlook due to a dismal PC market.
Intel said it now expected third-quarter revenue of $13.2 billion (plus or minus $300 million). This is a significant decrease from the original projection of between $13.8 billion and $14.8 billion, and below analyst estimates of $14.22 billion. Following the announcement, Intel shares fell roughly 2.2% amid lackluster investor confidence.
In response to the reduced revenue guidance, Intel stated it would be cutting costs, saying its capital spending would be below the previous low-end of the company's projections, which ranged from $12.1 billion to $12.9 billion.
The company also reduced its third-quarter gross margin projections to 62 percent, plus or minus one percent, lower than the originally projected 63 percent.
Intel's revision was explained by a weakening PC market, which has been reflected recently by AMD (NYSE: AMD) and NVIDIA (NASDAQ: NVDA) who have taken a beating in recent weeks. Another indicator of a poor PC market are the share prices of HP (NYSE: HPQ) and Dell (NASDAQ: DELL), which have been on a steady decline since February of this year.
Sterne Agee analyst Vijay Rakesh commented that Intel's reduced projections came as little surprise. He said that many analysts, including himself, are pessimistic about the effect Microsoft's (NYSE: MSFT) Windows 8 operating system release will have on PC sales. Rakesh thought it would be just as likely that consumers will be scared away by the new operating system as they will be sold by it.
Rakesh went on to say that poor back to school performance, and increasing demand for tablets -- namely Apple's (NASDAQ: AAPL) iPad -- continue to hurt Intel's bottom line. He said weak expectations for December PC sales also hinder the chip maker's revenue outlook, so an uptick may not be in the near future.
Intel stock has exhibited a roller-coaster of a price chart this summer, jumping up and down as investors struggle to decide what they believe more: the chip maker, or the negative forecasts for the PC market.
Shares of Intel traded down Friday about 3.29% near $24.28.
© 2016 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.