Chip giant Intel?s shares tumbled by nearly $10 yesterday when it announced that its turnover and profit for its first quarter were expected to fall by 10 per cent.
Intel blamed ?weakening demand? for PCs for the shortfall, but the news is expected to have a widespread effect across the whole PC sector.
Intel was unable to say what the reasons were for the drop in demand, but orders from its large OEMs are down, largely due to consumers failing to bite the bullet at Christmas and adopt the Pentium II's Slot One architecture.
In an official statement, Intel said: ?Weaker than anticipated demand, particularly in OEM orders, is expected to cause revenue and net income levels to fall below Intel?s expectations for the first quarter from 1998.?
It said that revenue would fall by approximately 10 per cent from its fourth quarter $6.5 billion turnover and gross margin is expected to now be 53 per cent. Its acquisition of Chips & Technologies would incur a one-time charge of $165 million, while its expenses are expected to rise three per cent higher than its last quarter.
Intel has been forced in some respects to trim its sales and target the low end PC. In mid-April it will release its Celeron (formerly Covington) range of processors, which are essentially cu-down Pentium IIs. It is doing so to address a marketplace that is demanding cheaper and cheaper PCs, and to some extent is being supplied with them by Intel?s competitors National Semiconductor-Cyrix and Advanced Micro Devices (AMD).
Intel has already made efforts to slash its processor prices to boost volumes and profitability and to convince the market the Pentium II is needed. It has further aggressive price cuts throughout this year, exclusively revealed by 'VNU Newswire' last week.
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