Chip king Intel has become the latest tech heavyweight to warn of lower results in a softening economy, joining Apple, Motorola, and Gateway.
The final piece of the puzzle fell into place Thursday when chip giant Intel warned that its fourth-quarter sales will fall short of analysts' estimates mainly because several large customers cancelled significant orders.
Intel said it now expects sales to be flat or a percentage point or two above or below the US$8.7 billion it recorded last quarter.
In its release, Intel said "recent large cancellations by customers worldwide" were responsible for the shortfall.
Intel shares closed up 56 cents to US$32.31 ahead of the warning before being halted in after-hours trading.
First Call consensus expects Intel to earn 42 cents a share in the quarter.
The warning should come as no surprise considering most major PC makers have already issued profit warnings detailing the demise of the consumer PC market this quarter.
In fact, on November 30 Lehman Brothers analyst Dan Niles predicted Intel would have difficulty meeting analysts' sales estimates.
At the time, Niles cut Intel from a "buy" rating to "outperform" and said the chipmaker would have to "stretch" to even meet its lowered guidance for the fourth quarter.
"We believe that even though Intel gave conservative revenue growth guidance of 4-8 percent quarter over quarter, that this is certainly not in the bag and that Intel is being very aggressive to try and meet this guidance," he said in a research note.
Niles added that a 5 percent sequential sales decline was possible.
"We had originally hoped we could see a surge or great sell through during Thanksgiving, but neither seems to have been achieved," he said. "This makes us cautious on the potential for processor cancellations later in the quarter or a large drop in pricing."
Sure enough, Intel's not going to hit the already watered down sales targets.
Interestingly, Intel said capital spending for 2000 is expected to come in around US$6.5 billion, higher than the US$6 billion it previously estimated.
Last quarter, it earned US$2.9 billion, or 41 cents a share, on sales of US$8.7 billion.
