December 13, 2011
Intel Announces Lower Than Expected 4th Quarter Earnings
Intel, the world´s largest maker of microprocessors, announced on Monday, Dec. 12 a reduction of their forecasted earnings for the fourth quarter. They now expect their revenue to be in the range of $13.4 billion to 14 billion, down from $14.2 billion to $15 billion for the holiday quarter. Shares fell 4 percent on the news, dragging the rest of the sector with them.
The reduction in expected revenues is due to the widespread monsoonal flooding taking place in Thailand that has shut down hard drive manufacturing. Thailand is the world´s second largest exporter of hard drives behind China. The flooding has shut down factories that has disrupted supply chains from the PC industry to automobiles, according to Reuters.The reduction in the number of worldwide hard drives has caused PC makers to cut back on their manufacturing of new computers. Thus reducing the orders for the microprocessors.
Tom Kilroy, Intel Senior Vice President, said in a conference call, “In the last two weeks, as the supply became more apparent, we saw a substantial change in our order rate. Most of our customers are concerned the shortage will continue – especially through the early part of the first quarter.”
Western Digital, the world´s largest manufacturer of hard drives and the hardest hit by the floods, recently resumed their production. Western Digital expects a shortage of about 60 million hard drives during December.
Another manufacturer Seagate was largely untouched by the catastrophe, but they are seeing a shortage of components due to their suppliers being affected by the catastrophe.
Intel´s CFO said in a conference call that he expects manufacturers to adopt solid state drive technology. These drives use NAND semiconductors to store data. The drives are faster than traditional hard drives but are also more expensive. Currently they are used in high-end PC´s, such as Apple´s Macbook Air.
PC sales are expected to be up in the fourth quarter. But companies are reducing their inventories of components including microprocessors, due to the hard drive shortage. The shortage is expected to last into the first quarter but is expected to recover in the first half of 2012.
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