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Thailand Flooding Throws Wrench in Intel's Earnings

Thailand Flooding Throws Wrench in Intel's Earnings
By Jennifer LeClaire

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The shortages will drive a 3.8 million-unit shortfall in PC shipments in the first quarter of 2012 compared to the August forecast, according to IHS iSuppli. The situation will cause global PC shipments to expand by only 6.8 percent in 2012, down from the previous outlook of 9.5 percent growth.

Blaming hard-disk drive supply shortages in the wake of massive flooding in Thailand, Intel on Monday warned investors that the company's fourth-quarter results might be below its previous outlook.

Intel now expects fourth-quarter revenue to total about $13.7 billion. That's significantly lower than the previous expectation of $14.7 billion, plus or minus $500 million. The news sent tech shares downward on Monday.

The saving grace, if there is one, is Intel's gross margin won't suffer much. Intel expects the fourth-quarter gross margin to be 64.5 percent, plus or minus a couple of percentage points. That's only slightly lower than the previous expectation of 65 percent. Intel noted that all other expectations remain the same.

"In the last two weeks, as the supply became more apparent, we saw a substantial change in our order rate," said Intel senior vice president Tom Kilroy. "Most of our customers are concerned the shortage will continue -- especially through the early part of the first quarter."

More Bad News

Although sales of personal computers are expected to see fourth-quarter gains, Intel is facing a revenue-denting reality: The worldwide PC supply chain is reducing inventories and microprocessor purchases as a result of hard-disk drive supply shortages. Making matters worse, Intel expects hard-disk drive supply shortages to continue into the first quarter before recovering sometime in the first half of 2012.

"I am a bit surprised -- I had thought that there would still be enough supply that Intel would be able to make its forecast," Daniel Berenbaum, an analyst at MKM Partners LP, told Bloomberg. "This is obviously not great news."

It's not good news for any PC maker. Indeed, Intel is not the only company to feel the impacts of the Thai flooding and the resulting hardware shortages. The likes of Dell, Hewlett-Packard, Lenovo and Acer will likely be forced to manufacturer fewer PCs, which will have a ripple effect on the components industry.

Even More Bad News

The shortages will drive a 3.8 million-unit shortfall in PC shipments in the first quarter of 2012 compared with the August forecast, according to IHS iSuppli. The situation will cause global PC shipments to expand by only 6.8 percent in 2012, down from the previous outlook of 9.5 percent growth.

While PC shipments typically decrease in the first quarter compared with the peak holiday-selling season in the fourth quarter, the drop in 2012 will be far sharper than the 6 percent historical average decline. And total PC unit shipments in 2012 are forecast to amount to 376 million, compared with the previous prediction of 399 million, partly due to the HDD shortage.

"The PC supply chain says it has sufficient HDD inventory for the fourth quarter of 2011," said Matthew Wilkins, senior principal analyst for compute platforms at IHS. "However, those stockpiles will run out in the first quarter of 2012, impacting PC production during that period."

Tell Us What You Think


Maykit Here:

Posted: 2011-12-12 @ 2:57pm PT
Gee, maybe if they didn't make them over there it wouldn't be a problem. Try doing it here. Problem solved.

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