Intel's lowered forecast 'isn't a good sign' for PC industry

Computerworld - The PC industry got another does of sour news Friday when Intel announced it's cutting its third-quarter revenue outlook.

The world's largest chip maker lowered its revenue forecast from an expected $13.8 billion to $14.8 billion for the quarter to $13.2 billion, plus or minus $300 million. The company blamed a reduction in supply chain inventory, a sluggish enterprise PC market and waning demand in emerging markets.

None of that is good news for a PC industry that has been repeatedly hammered by the growing popularity of small, cool tablets and several years of a slow economy.

It's also not good news for the overall tech industry, since analysts generally agree that Intel itself is a bellwether for the high-tech industry.

"Intel is a bellwether of the overall health of the PC market and the cut of its revenue estimate certainly isn't a good sign," said Dan Olds, an analyst with The Gabriel Consulting Group. "Chips are the bellwether for tech. Right now, however, it looks like it's the PC segment that's sick, not the industry overall."

He was quick to point out that server demand, for instance, is reasonably solid.

"Customers are paying more attention to what they're buying and the associated price tags, but they're still buying," said Olds.

The fact that the PC market and the chip market are struggling comes as no surprise.

Late last month, industry analyst firm IHS iSuppli downgraded its 2012 forecast for the global semiconductor market based on slumping economic conditions and chip revenue. Analysts there noted that the worldwide chip market, which had been expected to grow by less than 3% for the year, is projected to decline by 0.1%

The downgrade for the chip market is relatively new, though.

In March, analysts at Gartner felt the industry was set for a solid turnaround this year, predicting that global computer chip revenue would reach $316 billion, a 4% increase over 2011.

IHS iSupply, however, isn't seeing that. And analysts there say the lagging PC market is largely to blame.

"The overall PC industry is challenged right now, including PC makers, distribution channels and component suppliers," said Patrick Moorhead, an analyst with Moor Insights & Strategy. "This PC slowdown couldn't have come at a worse time, given the close proximity to the holiday selling season, where 50% of all consumer PCs are sold."

Rob Enderle, an analyst with the Enderle Group, noted that many PC makers may have scaled back production as they nervously wait to see whether Microsoft's Windows 8 operating system will be popular with buyers. That, he said, is one of several issues affecting the PC market, and hence the chip market, as well.