Intel Corp. is the latest computer chip manufacturer to see a drop in sales and profits. Share price fell by over 7% in European trading after Intel slashed its final quarter sales forecast, confirming that the credit crunch is affecting global technology spending.
Intel’s computer chips run more than three-quarters of the world’s computers. It has reduced its revenue estimate by about $1 billion, stating that “significantly weaker” demand for all of it products is to blame.
Its profit margin is also predicted to fall short of previous forecasts.
This is further evidence that global orders for computers and gadgets are not as resistant to the economic slowdown as originally thought. Applied Materials Inc., the top maker of semiconductor equipment, and National Semiconductor Corp., the supplier of chips for the biggest mobile-phone companies, are cutting jobs as they cope with their worst slump since the dot-com bubble burst in 2000. In addition to this, BT, Britain’s largest telecommunications company, announced that 10,000 jobs will have to go over the next year to reduce costs.
“It’s shockingly bad. I and most of us have been wrong on how bad this could get. The holiday season is a bust. Scratch 2008 out and maybe some kind of recovery will come, but this is a disaster.” Hans Mosesmann, Raymond James & Associates Inc. in New York.
Intel’s stock value has plummeted this year as the company has seen its value halve over the last year. The MSCI Asia Pacific Information Technology Index dropped as much as 6.5 percent.
According to research firm IDC.com technology spending in 2009 will grow far less than previously predicted. Spending will rise 2.6%, down from an earlier estimate of 5.9%, the Framingham, Massachusetts-based company said. Growth in the U.S. will probably slow to 0.9%, less than a quarter the pace IDC forecast in August.
Intel’s report came minutes after National Semiconductor reduced its revenue forecast and announced plans to cut about 5 percent of workers. Applied Materials reported a 45 percent drop in fourth-quarter profit and said it will cut 1,800 jobs.
“It’s just starting now — it’s not just going to be a few months. There are going to be job losses going into the first half of the year. That’s going to drive down the economy more.” Applied CEO Mike Splinter, a former Intel executive.
Technology companies generally make more sales in the final quarter, as many of their products are popular in the holiday shopping season.
Microsoft, the world’s largest software maker, also fell yesterday. Applied Materials decreased 4.3% to $9.52, while National Semiconductor dropped 7.8% to $10.45. Micron Technology Inc., the largest U.S. producer of computer memory, declined 20 cents, or 6.5%, to $2.90.
Semiconductors take as long as three months to go through production lines. The sudden drop in orders may reflect the eagerness of computer makers to avoid being stranded with expensive stockpiles of unused parts. Lean inventory may help chip makers’ earnings improve more quickly after demand rebounds.
It seems that all consumers are cutting back. Companies are reducing their IT and hardware budgets, making do with older computers and older technology, and the general public are also deciding not to buy the latest gadgets and computers at the moment. Maybe most people are planning to hold off until Christmas, and then treat themselves to the latest gadgets, phones, consoles and computers. However, one problem is that at the moment it seems that hardware is developing faster than software changes. Although there is a lot of new web and offline software technology available, uptake seems to have slowed. People are mostly happy with the current functionality of their mobile phones and personal computers, and see no great benefit in buying the latest models. If you are just surfing the net, chatting to mates on Skype or GMail, or being sociable on Facebook, then older chips work just fine.
