Intel Narrows Fourth-Quarter Forecast

SAN JOSE, Calif. - Intel Corp. narrowed its fourth-quarter sales forecast Thursday but left the midpoint unchanged as the world's largest chip maker said demand has been consistent with its earlier expectations

The Santa Clara, Calif.-based company said it expects revenue of $10.4 billion to $10.6 billion in the three months ending in December, compared with the previous range of $10.2 billion to $10.8 billion. The company does not release earnings forecasts.

"Growth in emerging markets, demand for mobility and advances in manufacturing are delivering healthy growth in Intel's revenue and gross profits," said Andy Bryant, Intel's chief financial officer.

But the new range is slightly lower than Wall Street estimates. Analysts were expecting Intel to earn 43 cents per share on sales of $10.61 billion for the period, according to a survey by Thomson Financial.

Intel shares lost 77 cents, or 3 percent, to $24.93 in extended-session trading after the update was released. Earlier, they lost 45 cents to close at $25.70 on the Nasdaq Stock Market.

In October, Intel said sales could be affected by supply constraints and a buildup in client inventory.

"They are more capacity constrained — more than they're letting out," said Apjit Walia, a semiconductor analyst at RBC Capital Markets. "They're missing some of the upside — and essentially that business will fall into the next quarter."

Bryant said the inventory buildup has been working itself down. At the same time, the company has begun integrating chipsets built by third-party vendors in its motherboards to help relieve short supplies of the chips that serve as the nervous system for computers.

"We think that will continue to improve through the first part of the year," Bryant said.

Intel also continues to face stiff competition from smaller rival Advanced Micro Devices Inc., which has been selling server and PC chips that have beat Intel's offerings in some performance tests. AMD also could see its share of the market rise as a result of Intel's tight supplies.

Intel narrowed its gross margin percentage — a measurement of the difference between sales and the cost of the products sold — to 63 percent, plus or minus a point, with the final number expected to be slightly above the midpoint of the new range.

Previously, the company said it expected a gross margin percentage of 63 percent, plus or minus a couple points. In the fourth quarter of last year, the gross margin was 56 percent.

In another change, capital spending for 2005 is now expected to be below the midpoint of its previous forecast of $5.9 billion, plus or minus $200 million.