Intel Cuts Forecast

Digital technology platform designer and manufacturer Intel INTC cut its annual forecast Wednesday, as demand for PCs in the U.S. and Europe failed to ramp up. Benzinga reported Monday that Intel may be revising its 2012 PC forecast, saying that, "Analysts are expecting about a 4% drop in earnings from a year earlier when Intel INTC reports earnings on Tuesday afternoon, while many will be watching to see if the chipmaker will be forced to revise its PC growth forecast. The world's largest chipmaker is still expecting PC growth in the high-single digits for fiscal 2012, yet the global PC market appeared to stall in Q2. Shipments fell slightly in the second quarter, according to the market research firm International Data Corporation. Also, IDC added that the U.S. market shrunk 10.6%, worse than expected." On Tuesday, Benzinga reported that in the company's second-quarter earnings released after Tuesday's closing bell, Intel reported, "non-GAAP net income of $2.97 billion or $0.57 per share, down from $3.13 billion or $0.57 per share in the year ago period. This came in ahead of Wall Street analysts' consensus EPS estimates of $0.52." However, Intel cut its forecast from high single-digit growth to 3-5 percent. Demand for PCs in developed countries continues to decline, and companies like Intel are relying on emerging regions for purchases. According to Bloomberg, "Though its third-quarter sales forecast fell short of some analysts' projections, the company's data-center group, which makes chips used in the server machines that underpin networks, posted a sales gain of 15 percent in the second quarter, helping keep profitability at record levels." In addition, Chief Financial Officer Stacy Smith recently said in a Bloomberg interview, "The macroeconomic environment's really a little weaker than we saw when we began the year." Intel's reaction from here is vital. The forecast for the year might have dropped slightly but it is still far from terrible. However, the decline in PC sales in the U.S. and Europe, and Intel's reliance on those sales, is something that will need to be addressed. On Wednesday Intel traded at about $25.40, up roughly one percent. Follow me @BCallwood.