Intel's 'shock warning' shakes market
Posted
Nov 13 2008, 02:37 PM
by
Kim Peterson
Rating:
It's amazing to me that Intel would slice $1 billion off of its quarterly sales forecast. Imagine the heads banging against the wall there as one billion dollars the company expected to get simply evaporated.
That led Intel to issue what Reuters called a "shock warning" Wednesday. The company is seeing weak demand for all products in every corner of the globe. The warning caused tech stocks across the board to tumble. Microsoft shares, for example, hit their lowest point in 10 years Thursday.
How did Intel flub its forecast? Like many companies, it didn't realize how swift and drastic the pullback in spending would be. "Consumers have basically shut down for the holidays," one analyst told Reuters. They're not buying new computers, and businesses have already signaled that they won't be either.
Intel's warning and about a million other signs are showing the economic crisis is worse than expected. And now, experts think it will last longer than expected. But just how far into this mess are we? No one can answer.
Here's what others are saying about Intel's announcement:
"If Intel isn't a bellwether, I don't know who is. A drop in guidance this big is an ominous sign both for the tech sector and the wider economy." -- Collins Stewart analyst Ashok Kumar
“The timing and size of preannouncement imply demand is falling off the cliff.
The large reduction in guidance suggests Intel has zero visibility in
end demand. The fact that Intel
even can’t wait until the previously scheduled mid quarter update (on
Dec 4) highlights how fast business has fallen.” -- analysts at Needham & Co.
"Executives had already planned to take the unusual step of giving investors a business update the week after Thanksgiving. By canceling that update and offering this one, Intel is saying things are so obviously grim there’s no point in sitting on the news to be sure things won’t improve." -- Fortune
Intel shares tumbled after Wednesday's announcement but are actually recovering nicely today. The stock is trading at $13.93, up 3% from Wednesday's close.
Disclosure: I own a very small number of Intel shares.
Related reading:
Companies pull back tech spending
Intel's cloudy fourth-quarter outlook
