Updated: Intel cuts revenue outlook

The lower revenue expectation is primarily due to softer than expected demand in Europe. Microprocessor units are at the low end of the normal seasonal pattern, with a weaker than expected mix. Intel's enterprise, mobile and communications businesses are in line with expectations. The company continues to expect a seasonally stronger second half.

The second-quarter gross margin percentage is expected to be approximately 49%, plus or minus a couple of points, compared to the previous range of 53%, plus or minus a couple of points, primarily due to the lower than expected revenue and product mix.

Amortization of acquisition-related intangibles and costs is expected to be approximately $230 million in the second quarter, compared to the previous expectation of $115 million, primarily due to a write-off of acquired intangibles related to Xircom PC cards for wireline networking.

The full year amount is expected to be approximately $530 million, compared to the previous expectation of $440 million. All other expectations are unchanged.

The downgraded projection for second quarter revenue and gross margin comes partly from a weaker-than-expected Pentium 4 sales in the quarter and stronger-than-expected lower-end Celeron sales, said Andy Bryant, executive vice president and chief financial officer. That caused blended ASPs for microprocessors, the biggest segment of Intel business, to be lower sequentially from the first quarter, he added.

"When we sell more lower-end units in the processor mix, that hits hard at gross margins," he said.

The Intel CFO said motherboard shipments from Taiwan so far in the quarter are lower than expected. This has caused sales of Intel's new 845G integrated graphics chipsets to be less than projected, he said.

Seasonal sales patterns would have indicated that orders for back-to-school PCs should have started picking up in June, Bryant asserted. "The uptick for back-to-school hasn't started yet. We see some increases, but I can't call it a surge in orders."

As to the slowdown in sales in Europe, Bryant said the dip was across the board in both white box and OEM orders.

He said at this point Intel is maintaining its full-year plan for $5.5 billion in capital spending. "We are expecting the second half to be seasonally strong. Units shipped in the second half should be above what we had expected last December. However, as we look at demand in the second half we may rethinkcapital spending."