Intel Corporation (INTC) has announced that its revenues for the upcoming third quarter would be impacted by a slowdown in the consumer PC environment. Intel now expects revenues of around $11 billion, give or take $200 million. The company’s previous guidance for the quarter was $11.2-$12 billion.
Intel’s revenue guidance during the second quarter earnings announcement, as well as its continued optimism regarding the consumer segment was met with skepticism, although analysts generally adjusted estimates in-line with Intel’s call. As a result, the Zacks Consensus for the quarter was $11.579 billion.
While we were hoping that the enterprise side of the business could pull up overall results, it now appears that this growth will not allow Intel to maintain guidance. Worth noting, however, is the fact that the $11 billion expected in the third quarter is still a 17% increase from the recession-dampened third quarter of 2009 and an 8% increase from the third quarter of the preceding year.
Third quarter demand is generally driven by the back-to-school season, which again is dependent on consumer spending. Consumers appear to be spending less in both the U.S. and Europe and these regions still account for a third of total revenues. Therefore, a slowdown here necessarily has a significant impact on the top line number.
Management did not comment on the impact on earnings, which we pegged at 55 cents when the company reported second quarter results.
However, many analysts have lowered estimates over the past 30 days, as the various data points provided further clarity regarding the slowdown in the second half of the year. This lowered the Zacks Consensus estimate by a penny each in the third and fourth quarters of 2010, totaling a couple of cents for the year. The Zacks Consensus estimate for 2011 also fell 4 cents, reaching $2.13.
Intel shares appeared unperturbed, rising 1.2% from yesterday’s close.
We reiterate our Neutral rating on Intel shares.
INTEL CORP (INTC): Free Stock Analysis Report
Zacks Investment Research
