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Intel Shares Drop 10% As It Slashes Annual Forecast

On Thursday, Intel Corp cut back its annual profits and sales forecasts, after it missed estimates for its results of the second quarter.

This was because of the slump in demand for its chip, which is used in personal computers, thereby sending the company’s shares down by 10%.

Demand falls

Intel also forecasts the results of the current quarter to also be below expectations, citing the sudden and quick decline in execution issues and economic activity.

People are now spending less money on personal computers, as offices and schools have reopened once more and inflation has become red-hot.

During the pandemic, there had been a great demand for computers because people had been working from home and online studies had also become common.

Moreover, chipmakers are also dealing with pressure because of a number of COVID-19 curbs that have been imposed in China, which is a key market for personal computers.

Apart from that, supply-chain bottlenecks have gotten worse because of the Russia and Ukraine war and this has weighed even more on demand.

According to IT research company Gartner, there will be a 9.5% drop in the global shipments of personal computers.

Expectations

Pat Gelsinger, the chief executive of Intel, stated that the economic shift had turned out to be harder and had resulted in consumption changes in the market.

The CEO said that it had also resulted in some dramatic movements in terms of the inventory position of some important customers.

He said that because of these changes, their business had shifted rather sharply and they had not been able to execute it in a good way.

Now, Intel is expecting to generate revenue between $65 billion and $68 billion in fiscal 2022, even though its earlier forecast had seen it close to $76 billion.

The company also forecast its adjusted profit to be around $2.30 per share, which was a decline from its previous forecast of $3.20 per share.

Nonetheless, the CEO said that the company would continue with its investment in the Ohio mega chip factory of $20 billion.

He said that such factories are not built in a few quarterly cycles and that the semiconductor industry would expand and they would need the capacity to take advantage of it.

Competitors

Even though the latest downturn saw Intel take a hit, its competitors were able to perform much better, including Samsung Electronics Co Ltd. and Taiwan Semiconductor Manufacturing Co Ltd.

Even though the two rivals also warned about dampening smartphone and personal computer demand, they were able to deliver stronger growth in sales in the last quarter.

According to TSMC, if it achieves the sales projected for the current quarter, this would be the highest sales seen in the last 10 quarters. The company also gave its full-year sales forecast a boost.

Intel disclosed that there was a 16% drop in sales generated via its Datacenter and AI Group, which dropped to $4.6 billion, even though analysts had predicted them to be around $6.46 billion.

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