Santa Clara (CA) – Intel today cut its first quarter revenue forecast even below a conservative estimate provided by the company last January. The target range between $9.1 billion and $9.7 billion has been revised to between $8.7 billion and $9.1 billion, due to weaker than expected demand and a “slight” market segment share loss.
In a time when AMD appears to be almost effortlessly adding new customers for its processors, Intel is beginning to struggle to meet short-term revenue expectations. While chief executive Paul Otellini had mentioned back in January that there is less than expected demand for certain products and that the company would start 2006 ” a bit more in a hole than we thought,” Intel had to cut its estimates by another 4-6% today.
According to Intel, “weaker than expected demand” is one of the factors of the lowered revenue expectations, which indicates that the inventories created by system builders in Q4 are more substantial than initially believed and that efforts to reduce products in stock are lagging behind in Q1. Analysts, however, appear to take the phrase of “slight market segment share loss” more seriously. “The risk is that the momentum that exists at AMD is going to seriously damage Intel’s market share,” said Robert Sellar, analyst for North American Equities at Aberdeen in a research note.
As Intel is talking about “market segment,” we will have to wait until another quarter sales update from IDC and Gartner to find out just which segments have been impacted; however it appears that AMD is able to continue its momentum at least in the server segment with its Opteron processors. According to Intel documents seen by TG Daily, the firm’s executive management expects to take on water in this space throughout the first half of 2006. While Xeon processors based on Paxville DP and MP cores are expected to create a foundation for the Bensley platform, the company considers further market segment share loss as “possible,” at least until Woodcrest arrives in late Q3 or early Q4 of this year.
According to a press release, Intel said that lower revenues will also negatively impact the firm’s gross margin percentage and decrease the spending on research on development.
Intel’s stock was trading at $20.08 by mid-day Friday, down about 2%.