Intel all doom and gloom

Intel has warned that sales for its third quarter are expected to be slightly lower than $6.6bn, which was at the lower end of previous forecasts.

The chip giant also narrowed its range of estimates, saying revenue is now most likely to fall between $6.3bn and $6.7bn. Intel had previously projected revenue between $6.3bn and $6.9bn.

The company said microprocessor shipments are at the low end of what is typical for this time period, and that demand for communications products remains soft.

If there's a bright spot, it's that the market is moving back to more familiar norms, with the second half of the year recording stronger sales than the first, Intel President Paul Otellini said during a conference call. Recent price cuts have also slightly brightened projections for September.

Otellini said: "We've seen very strong distributor channel sales out after our price move in early September. That gives us confidence. Our [sales] backlog gives us the rest of the confidence. I feel very good about the range we've projected here materialising within the quarter."

Otellini said the company's product mix - the number of Pentium 4 chips versus Celeron chips it sells - is not expected to change much from the second quarter. Intel sold a greater number of Celeron chips than usual during the second quarter as PC buyers snapped up low-price PCs.

A number of analysts lowered earnings estimates in advance of Intel's Thursday conference call. On Wednesday, Merrill Lynch analyst Joe Osha trimmed yearly estimates to 51 cents, excluding charges, and lowered third-quarter estimates to 11 cents.

Prior to the call, the consensus estimates were for quarterly earnings of 13 cents a share, excluding charges, and 55 cents for the year.

Although PC sales slightly exceeded expectations in the first quarter and exacerbated component shortages, there's been little other good news.

Worldwide shipments of desktops remain down from 2001 totals, which were themselves down from shipments seen in 2000. Revenue from servers worldwide declined 12.8 per cent in the second quarter, according to Gartner. Sales of many tech products in the United States, Europe and Japan are off, and revenue gains in growing markets such as China have even slowed a bit for some products.

Intel, which makes about 83 per cent of the PC processors in the world, AMD, and a number of PC makers reported revenue and earnings lower than original expectations for the second quarter.

Intel's efforts to get into markets beyond the PC haven't much helped the company's bottom line. Both its communications and wireless groups have lost money for the past several quarters, and executives have said the outlook, especially in communications, isn't promising.

Michael Kanellos writes for News.com