Intel Corp. slashed its financial forecast for the current quarter, the latest sign of how rapidly computer sales have turned sour because of the slumping economy.The chip giant set a fourth-quarter revenue range that points to a sales decline of around 12% from the third quarter. In mid-October, Intel had projected sales would rise 3% over the same period.
Intel also said its closely watched gross profit margin would be considerably lower than its prior prediction.
Intel's shares dropped 7% in after-hours action, after ending the regular session at $13.52 on the Nasdaq Stock Market.
The company said "revenue is being affected by significantly weaker than expected demand in all geographies and market segments." The company added that companies that buy and distribute chips are "aggressively reducing component inventories."
An Intel spokesman said the company has experienced "a pretty rapid decline" in its business. He said Intel is ordering a hiring freeze and cutting other discretionary spending, but has no plans to reduce its work force.
Intel's projection portends a grim environment in what is traditionally the biggest quarter for electronic sales. The comments mirror those of players such as Qualcomm Inc., the biggest supplier of chips for cellphones.
Intel, of Santa Clara, Calif., had seen little effect from the slump through the third quarter, when its net income rose 12%. Since then, however, demand for computers has been hit hard -- both among corporate customers and consumers.
Gartner, a market research firm, last week sharply cut its estimate for semiconductor-industry growth in 2009 to 1% from nearly 8%, citing the impact of the economic crisis.
Intel is in better shape than many other chip makers, with bigger profit margins, a strong product line and a network of factories that have adopted advanced manufacturing recipes. But Intel's plants could become a liability if demand falls quickly and its production lines are no longer full, said Roger Kay, a market researcher at Endpoint Technologies Associates.
Intel said it now expects fourth-quarter revenue to be $9 billion, plus or minus $300 million, lower than its previous prediction of between $10.1 billion and $10.9 billion.
The company put its gross profit margin at 55%, plus or minus a couple of points, off from its prior prediction of 59%.
