Intel Cuts 4Q Revenue Estimates By $1 Billion
As primary culprit for sales miss, chip giant cites PC customers scaling back on inventory due to hard drive shortages.
This is the second time that Intel has revised down its fourth quarter numbers. However, this revision comes close to the end of the company's fourth quarter and resulted in a 4% drop in chipmakers share price on Monday. At around noon on Tuesday, the stock is down another 1.5%.
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While a $1 billion shortfall is not trivial, Intel continues to have a good year. Its stock is up 12.7% year to date, and even with the shortfall, the company's sales will be up sequentially. The company slightly increased guidance for its gross margins, saying they'd be approximately 65%--up from the previous estimate of 64.5%. Intel's margins overall remain extremely strong, ranging from a recent high of 67% Q2 2010 to a low of 61% in Q1 2011. It's not unusual for chipmakers to see some variance in margins as they bring on new processes as a normal part of their operations.
[ Learn more about AMD's new chip. Read AMD Designed Bulldozer For Large Virtual Machine Loads. ]
Drive shortages are likely to persist into the first quarter, after which, PC makers will have to rebuild their inventories. In the long run, a bigger threat to Intel's revenue stream could be a more pronounced move to the use of ARM processors in everything from handhelds, laptops, and servers. While dominant in handhelds such as smartphones and tablets, the ARM processor is just beginning to make its way to laptops and servers. The next generation of the chip will sport a 64-bit architecture as well as key architectural features required for virtualization. The ARM chip's primary advantage over Intel's are a lower gate count and low power consumption. Intel's own low-power processor, the Atom, is seen as a few generations behind this ARM in terms of its low power design.
ARM's threat to Intel's server chip business is years off, if indeed it ever materializes as a significant threat. Meanwhile, the company's chief rival there, AMD, seems to have stumbled with its most recent chip. Performance of AMD's "Bulldozer" has been disappointing.
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