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The world's biggest maker of the central processing units (CPUs) at the heart of every PC dropped its fourth-quarter revenue forecast to $8.2 billion, down from $9 billion in November. In October, the company had expected a range of $10.1 billion to $10.9 billion.
"Clearly we are going to be in an ugly period for corporate earnings," said Tim Ghriskey, an analyst with Solaris Asset Management. "Intel being a bellwether for the industry it will take the industry down as well."
The November warning reverberated throughout the markets for days. After Intel's warning on Wednesday the index of chipmakers,, was down 3 percent to 227.61.
Intel, which reports earnings on Jan. 15, expects its gross margin to be at the bottom of its previous expectation of 55 percent, plus or minus a couple of percentage points.
Intel also took a hit from its equity investments, including a low year-end share price in Clearwire Corp , which delivers Internet access using Intel's WiMAX wireless technology.
It predicted a net loss from equity investments and interest of between $1.1 billion and $1.2 billion, far greater than its previous expectation of about $50 million.
Intel shares fell 64 cents, or 3 percent, to $14.73 in Nasdaq trading, and together with a weaker-than-expected jobs report, weighed down the overall market.
Advanced Micro Devices, the other maker of CPUs, was down 12 cents, or 4 percent, to $2.66.
Microsoft was down 65 cents, or 3 percent, to $20.11.
Some analysts found some good news in Intel's statement that it reduced operating expenditure to around $2.6 billion from a previous outlook of $2.8 billion, and said the lowered sales forecast was not entirely surprising.
"If you are surprised by this news, then you've been on a desert island. We all know the economy is weak," said Walter Todd, portfolio manager at Greenwood Capital Associates.
"If you're holding Intel today ... it's because this is a leading industry player with a great balance sheet and longer-term it will really look great," he said, "But 2009 for Intel and others in technology, and outside of technology, will be a very rough earnings year."
(Writing by David Lawsky, additional reporting by Jim Finkle, Dan Wilchins, Jonathan Spicer and Elinor Comlay; Editing by Derek Caney and Maureen Bavdek) Keywords: INTEL/ (ritsuko.ando@thomsonreuters.com; +1 646 223 6084; Reuters Messaging: ritsuko.ando.reuters.com@reuters.net)
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