Intel cuts outlook on weak PC demand

Reuters: Intel Corp cut its third-quarter revenue estimate more than expected on Friday due to a decline in demand for its chips as customers reduce inventories and businesses buy fewer personal computers.

Intel also said it was scaling back capital spending as a result of the business slowdown.

A revision of Intel targets had been expected by some analysts after PC makers Hewlett Packard Co and Dell Inc warned of slow demand last month, a development that has been compounded by a shaky global economy and consumers shifting toward tablets and smartphones.

But the 8% reduction in the top chipmaker’s revenue outlook was much more severe than expected. Intel also withdrew its full-year forecast.

The scaled-back outlook comes just days ahead of a major event where Intel will tout a new generation of processors that consume less power, central to its strategy of reinvigorating a stagnant PC industry.

Intel’s warning comes at a time when PC makers should be gearing up to build more computers than usual ahead of the launch of Microsoft Corp’s Windows Phone 8 operating system.

Intel has been banking on the Windows 8 release in October to help slow the trend of consumers buying smartphones and tablets instead of PCs.

Devices running Windows 8 and powered by Intel’s latest components will be a major draw when thousands of technology professionals descend on the annual Intel Developer Forum in San Francisco next week.

While a Windows release normally boosts computer sales, analysts believe it might not help as much this time.

At the forum, Intel is expected to show off a range of Ultrabook laptops powered by recently launched Ivy Bridge processors, as well as hybrid devices with screens that detach from keyboards to be used as tablets.

Along with concerns about consumer demand being hurt by the weak economy, manufacturers are reluctant to commit their resources until they have a better idea of which kinds of new devices will become hits with consumers.

Intel’s next-generation PC processor, code-named Haswell, will also be front-and-center at the forum, with executives talking up improved power performance that will let future laptops stay on longer without needing a recharge.

Haswell, due to appear in a crop of laptops released for next year’s holiday season, will improve on computing and graphics features and is targeted to reduce electricity consumption from 17 watts to 10 watts, according to Intel.

Intel processors are used in 80 percent of the world’s PCs, but the Santa Clara, California, company has been slow to adapt chips for smartphones and tablets and now trails Qualcomm Inc and Samsung Electronics Co Ltd (005930.KS), which design their chips using power-efficient technology licensed from ARM Holdings Plc.

Intel’s new Medfield processor, showcased in phones launched this year in Russia, India and the United Kingdom, surprised some critics who believed the chips would consume too much power.