July 17 (Bloomberg) -- Intel Corp., the world’s largest semiconductor maker, forecast third-quarter sales that were lower than some analysts had estimated as an economic slowdown in China, the largest computer market, erodes demand.
Revenue in the current period will be $14.3 billion, plus or minus $500 million, Santa Clara, California-based Intel said in a statement today. Analysts had projected sales of $14.6 billion, the average of estimates compiled by Bloomberg. A year earlier, sales were $14.2 billion.
Intel’s forecast adds to concern that expansion in China is no longer enough to counter an economic slump in Europe and sluggish growth in the U.S. The company, whose chips are in eight out of 10 of the world’s personal computers, had maintained that demand outside the U.S. and Europe would drive sales of PCs as more consumers in developing nations become able to buy their first machines.
“It will be difficult for Intel to achieve the type of growth that they were looking for the rest of the year,” said Tristan Gerra, an analyst at Robert W. Baird & Co. “This year it’s looking more like flat” growth for the PC market, he said.
Gerra, who is based in San Francisco, has an outperform rating on the company’s stock, because it gets a higher proportion of sales from the business-PC market than rival Advanced Micro Devices Inc., he said.
Last week, AMD disclosed that revenue unexpectedly slumped 11 percent in the second quarter. The company blamed weakness in China and Europe for the decline, which contrasted with a previous estimate for growth of as much as 6 percent.
Intel shares climbed 1 percent to $25.38 at the close in New York. That left the shares up 4.7 percent this year.
Gross margin, or the percentage of sales remaining after deducting costs of production, will be about 63 percent in the current period, Intel said. Analysts on average had projected gross margin of 64 percent. In last year’s third quarter, Intel’s gross margin was 63.4 percent.
Because its chips power more than 80 percent of the world’s PCs, investors view Intel’s earnings as a broad indicator of demand for desktop, server and laptop computers. The company’s announcement kicks off two weeks of earnings reports by the largest U.S. technology companies.
For the second quarter, Intel said net income was $2.83 billion, or 54 cents a share, compared with $2.95 billion, or 54 cents, a year earlier. Sales rose 3.6 percent to $13.5 billion. Analysts had projected profit of 52 cents a share on sales of $13.5 billion. In April, Intel had predicted sales of $13.6 billion, plus or minus $500 million.
PC shipments totaled 87.5 million units in the second quarter, a decline of 0.1 percent from the same period a year earlier, market researcher Gartner said last week.
Intel’s biggest customers are PC makers Hewlett-Packard Co. and Dell Inc., according to a Bloomberg supply-chain analysis.
To contact the reporter on this story: Ian King in San Francisco at email@example.com
To contact the editor responsible for this story: Tom Giles at firstname.lastname@example.org