Intel Lowers Q4 Revenue Forecast Due to Hard Drive Shortage

Strategic Insights -

Intel's fourth-quarter revenue is expected to fall short of projections by $1 billion, or 11% of its previous forecast, due to a worldwide shortage of hard disk drives caused by the Thai floods. The company forecasts revenue of $13.7 billion, plus or minus $300 million, down from its previous estimate of $14.7 billion, plus or minus $500 million. The shortage, which began in the fourth quarter, is expected to continue into the first quarter of 2012 before recovering during the first half of the year. As a result, Intel has lowered its gross margin expectations for the fourth quarter to 64.5%, down from 65%.

Key Takeaways:

  • Intel's revenue is expected to be $13.7 billion, plus or minus $300 million, in the fourth quarter, down from its previous forecast of $14.7 billion, plus or minus $500 million.
  • The company attributes the revenue shortfall to a global shortage of hard disk drives caused by the Thai floods, which began in the fourth quarter.
  • The shortage is expected to continue into the first quarter of 2012, followed by a rebuilding of microprocessor inventories as supplies of hard disk drives recover during the first half of 2012.
  • Intel expects hard disk drive supplies to be off by a third, describing it as the most significant supply chain disruption to hit PCs in a generation.
  • The company has not seen a replacement of hard disk drives with solid-state drives, but expects this to happen before the shortage is resolved.
  • Ultrabooks, which use flash memory, are expected to hit the market in large numbers next month.
  • Texas Instruments and Altera also trimmed their revenue forecasts last week due to weaker demand.
  • AMD CEO Rory Read reported that his company is not seeing the same level of pressure as Intel in the quarterly forecast, but noted that existing drive supplies have kept the market "going pretty well."

Statistics:

  • $1 billion: Intel's expected revenue shortfall in the fourth quarter.
  • 11%: Intel's revenue shortfall as a percentage of its previous forecast.
  • $13.7 billion: Intel's revised fourth-quarter revenue forecast.
  • $300 million: Intel's revised revenue forecast uncertainty.
  • $14.7 billion: Intel's previous fourth-quarter revenue forecast.
  • $500 million: Intel's previous revenue forecast uncertainty.
  • 64.5%: Intel's revised gross margin forecast for the fourth quarter.
  • 65%: Intel's previous gross margin forecast for the fourth quarter.

Sources:

  • Bloomberg (company statement)
  • Reuters (Intel conference call)
  • Wall Street Journal (Rory Read interview)
  • CNBC (Texas Instruments and Altera revenue forecasts)
  • Reuters (AMD revenue forecast)