Intel Cuts Q4 Outlook Again, Blames Weak Demand Through OEMs, Distribution

Microprocessor giant Intel (NASDAQ: INTC ) blamed weak PC demand through its supply chain distributor and OEM channels for its second Q4 earnings warning since November.

Analysts watching the PC supply chain said the announcement from Intel comes as no surprise.

"Intel's updated guidance reflects further weakness in end demand and inventory impacts as OEM and distributor customers work to lower component and finished good inventories," says FBR Research in a brief report issued after Intel's warning. "Remember that our most recent PC channel checks suggested Q4 PC builds were set to fall 15 percent sequentially, while Q1 PC builds were set to fall 21 percent sequentially."

The FBR report notes that Intel's new forecast is still a few points worse than FBR had expected, "suggesting that some incremental estimate risk for Q1 remains."

Intel said in a statement issued Jan. 7 that it now expects Q4 revenue of $8.2 billion, a decline of 20 percent sequentially and 23 percent year over year.  The company had issued a similar dire Q4 earnings warning in November 2008.

The November warning had placed Q4 revenue at $9 billion, plus or minus $300 million.  That was down from Intel's original estimate of $10.1 billion to $10.9 billion.

Intel said that its gross margin estimate for Q4 will also be "at the bottom of the previous expectation of 55 percent, plus or minus a couple of points."

FBR Research says that the steep drop in revenues may be followed by the announcement of more layoffs during Intel's Jan. 15 earnings call with analysts.

Intel offered, and a handful of channel executives accepted, buyout offers from chipmaker in 2008, including Shirley Turner, director of North American channel marketing and Nick Davison, director of North American channel sales.

Intel also recently reportedly disbanded its channel platform group, the unit within Intel charged with developing products specifically for channel partners.