iPads And Downturn Hammer Intel PC Chip Sales



Intel (NasdaqGS: INTC - news) , the world's biggest silicon chipmaker, has reduced its growth forecast amid fears that the wavering global economy will continue to dampen computer sales.

Intel said shaky economies in Europe (Chicago Options: ^REURUSD - news) and the United States, and a growing consumer preference for Apple (NasdaqGS: AAPL - news) iPad tablets had been taking a toll on the PC industry.

Revenue growth forecasts for Intel have been cut from between 3 and 5%, down from a prior forecast of "high single-digit growth".

Intel chief financial officer Stacy Smith said consumer spending in Europe and the United States appeared softer than previously thought.

She (SNP: ^SHEY - news) said: "At the beginning of the year, we would have expected, along with most economists, that economic growth would start picking up and that would lead to an increase in consumer sales.

"Those expectations are now more muted."

Fears that global PC sales may be worse than expected have helped push Intel's shares down about 10% since the end of April. Intel's stock has recently traded around 10 times expected earnings.

Intel forecast current-quarter revenue of $13.8bn (£8.81bn) to $14.8bn (£9.45bn), while analysts on average had expected $14.6bn (£9.32bn).

Revenue rose to $13.5bn (£8.62bn) from $13.03bn (£8.32bn) in the same period last year.

China and other emerging markets have been a key source of growth in recent quarters for chipmakers, helping make up for developed economy weakness.

Intel UK managing director Graham Palmer told Sky News Business that year-on-year growth of 15% remains in global enterprise IT spending as data centres increasingly power the internet and "cloud" computing.

"It's true to say the market is very tough, but if you look at the second quarter we have performed pretty much as expected there," Mr Palmer said.

"And our continued investment in R&D has helped us deliver some real innovation into the market."

Intel supplies processors for 80% of the world's PCs, but it has yet to make significant progress in fast-growing tablets or smartphones, products that use chips based on technology from British-based ARM Holdings (LSE: ARM.L - news) .

While the tablet market is still small, demand for the devices is growing much more quickly than for PCs. Shipments of tablets including the iPad are expected to grow 90% this year, according to IHS (NYSE: IHS - news) iSuppli.

Texas Instruments (NYSE: TXN - news) , Nvidia (Xetra: 918422 - news) and Samsung make many of the power-efficient processors used in tablets and smartphones.

On Tuesday, Samsung announced that it would pay Cambridge (SES: E2:J91U.SI - news) -based CSR (LSE: CSR.L - news) £200m for its handset R&D operations and for the associated technology, including connectivity and location technology such as bluetooth, wifi and GPS.

While Samsung has many of the necessary pieces of smartphone platforms, it lacked handset connectivity in the increasingly important location technology market.

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