Intel has shocked investors by announcing that revenues for the second quarter to 30 June will fall below expectations.
The company had previously predicted second quarter revenues would be flat or slightly up, but it is now warning that sales could fall to 5% and 10% short of the $6.4 billion (#4 billion) in the first quarter of this year.
Intel blamed the drop on weak sales in Europe and a faster than expected decline in sales of its older Pentium chips.
A spokesman for Intel US commented: "We started seeing pretty significant softness in the numbers, especially out of Europe. Much of the softness is in the company's Pentium processor line, which is seeing a slow-down as users begin to demand Intel's faster, newer processors, particularly the Pentium with MMX technology and the Pentium II."
When Intel reports its second quarter figures around mid-July, gross margins are also expected to slip below the 64% figure achieved in the first quarter. Expenses are also expected to rise by between 7% and 9% in the second quarter from the $1.3 billion spent in the first quarter, Intel warned. For the year, the chip maker expects to spend $2.4 billion in research and development.
The news had an immediate and disastrous effect on Intel's stock price, sending it plummeting $20.76 to $142.94.
Despite the fact that both Microsoft and Dell's stock dropped $6.75 and $8 a share respectively on the same day, analysts said it was just a blip.
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