Intel cuts revenue forecast by $1bn

Intel has warned its fourth-quarter revenues would miss forecasts because of a shortage of hard disk drives created by Thailand’s devastating recent floods.

The world’s largest chipmaker by sales said flooding around Thai hard disk drive factories had hit the supply of the components. This meant computer makers were reining in orders of other parts - anticipating cuts in production as they are unable to complete PCs.

Intel said in a statement that sales of PCs were expected to be up in the fourth quarter, compared with the third, but “the worldwide PC supply chain is reducing inventories and microprocessor purchases”.

The company expects hard disk shortages to continue into the first quarter, followed by a rebuilding of microprocessor inventories as supplies recover later in the first half.

About one-third of the world’s hard-disk drive production is located in Thailand. In November, many computer makers said they expected fourth-quarter sales would be affected by the disruption to their supply chains.

Intel executives told an analyst conference call it was later than other companies in reporting the effects of the Thai floods because of its efficient supply chain, with orders only dropping off in the past two weeks.

“The big hard-disk drive manufacturers had given their statement of supply on a customer-by-customer basis and then we saw a quick dropping off of backlog as customers aligned the purchase of microprocessors with future shipments of HDDs,” said Stacy Smith, chief financial officer.

Intel, which makes microprocessors for four out of every five PCs sold, cut its forecast for revenues in the October through December period to $13.7bn, plus or minus $300m, from an earlier estimate of $14.7bn, plus or minus $500m. Analysts surveyed by Bloomberg had also predicted revenues of $14.7bn.

Intel’s shares were down 5 per cent at $23.72 in midday trading in New York on the news. Intel’s stock had risen 30 per cent over the past three months, helped by strong growth in chips. Rising demand for PCs in emerging markets has contributed significantly to that growth.

Mr Smith said he did expect to see an uptick in demand for solid-state drives (SSDs) - storage with no moving parts that uses Nand Flash memory, made by Intel and others.

Tablets such as the iPad and a new category of laptops promoted by Intel known as Ultrabooks use this type of storage.

“We will be certainly using this as an opportunity to drive [the SSD] trend,” he said.

Worldwide PC shipments are expected to fall by 3.8m units to 84.2m in the first quarter due to the flooding, according to a forecast by the IHS research firm last week.

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