Intel Shares Plunge After Warnings of 4Q Profit Shortfall

Intel shares closed at $24, down four percent after the announcement and a short Intel investor call. They're still up more than 14 percent for the year.

Santa Clara, Calif.-based Intel blamed the recent floods in Thailand for creating shortages of disk drives which its PC customers insert into their products. Last week, Texas Instruments, the biggest U.S. supplier of communications chips, also lowered estimates citing broadly lower demand across a wide range of markets.

Shares of Texas Instruments plunged Dec. 9 after the warning but then recovered, closing at $29.94, down two cents. In Monday trading, though, shares of Dallas-based TI fell 2.7 percent, to $29.13. Shares are down 10 percent for the year.

Intel chopped its fourth-quarter revenue forecast by as much as $1 billion, to $13.7 billion, although it said sales could be as much as $500 million more. Gross margins, or profit left after expenses, will fall to 64.5 percent from the expected 65 percent, the semiconductor giant said.

The shortfall is hitting us in order patterns at the low end of the order stream, Intel CFO Stacy Smith said in an morning investor call. While demand for chips for servers, laptops and other products remains high, the PC makers have cut orders into the quarter. Profit may not decline as much as feared because Intel is beginning to make its latest 22-nanometer chips for ultra-thin laptops which will carry high average selling prices, he added.

Jefferies analyst Mark Lipacis lowered his Intel fourth-quarter earnings estimates a dime to 61 cents a share and trimmed his full-year estimate to $2.32, below the consensus of $2.62 posted before Monday's announcement. It was only a matter of time before Intel joined other chipmakers in lowering estimates, Lipacis said. He attributed the miss an an industry wide inventory correction as PC makers shift away from desktops to laptop and tablet-like products.

Intel's problems could also extend into 2012 because the company has said it expects as many as 50 customers to unveil new tablet-like laptops using its Ultrabook chips at the January Consumer Electronics Show in Las Vegas. Intel Senior VP for Sales and Marketing Tom Kilroy said in the call demand for those new products remains strong.

But coming after Texas Instruments' prior warning, the double whammy could indicate damage from the Thai floods is more severe than expected and that demand for global electronic products is down. Intel's Smith and Kilroy said demand remains strong but has just shifted. Intel customers preparing for Lunar New Year on Jan. 23 are preparing now for first-quarter sales.

The Philadelphia Semiconductor Index, which includes the leading chipmakers, fell more than 2.8 percent to close at 365.15.