Intel Lowers Earnings Estimates For Q3

Intel on Friday said it expects revenue of $10.8 billion to $11.2 billion and gross margin of 66 percent, down from the $11.2 billion to $12 billion and gross margin of 67 percent the company forecast in its July Q2 earnings report. Intel's move to lower its forecast was prompted by weak consumer PC demand and fears of a global economic slowdown, according to a report in The Wall Street Journal.

The situation has changed dramatically since July when Intel reported record earnings of $ 2.9 billion in its fiscal second quarter. At the time, the semiconductor industry was experiencing a surge in demand and appeared to be recovering from the recession. The outlook was also bright for Intel's netbook-friendly Atom line of products. Intel reported that Q2 Atom microprocessor and chipset sales amounted to $413 million, up 16 percent sequentiall.

"The PC and server segments are healthy and the demand for leading-edge technology will continue to increase for the foreseeable future," Intel CEO Paul Otellini said at the time.

However, as noted by the The Wall Street Journal, the industry shift toward cloud computing and mobile devices poses a threat to Intel's desktop and notebook PC processor business. Uncertainty regarding the shift toward the cloud, mobile devices, and better chip security to deal with both, may be weighing on investors, as shares of Intel are down nearly 12.5 percent this month.

Intel is responding by seeking acquisitions of advanced technology outside of the traditional micro-processor market. Intel is increasing its focus on mobility and last week acquired McAfee for $7.68 billion. Intel is also reportedly interested in acquiring Infineon Technology AG's wireless unit, which makes the processors that runs Apple's iPhone.