Intel says sales hit by hard drive shortage

(Reuters) – Intel Corp warned that hard-disk drive supply shortages would hurt its current-quarter revenue, the latest heavyweight in the PC industry to caution about the effects of flooding that has crippled factories in Thailand.

The warning sent Intel shares down 4.8 percent and weighed on Wall Street.
Intel is the world’s largest chipmaker.

Hundreds of people have died in flooding in Thailand that has caused billions
of dollars in damages since late July and disrupted international supply chains
in the PC and automobile industries.

PC makers have been scrambling to buy increasingly scarce hard drives after
the flooding shut down factories in the country, which is the world’s No 2
exporter of the components.

“In the last two weeks, as the supply became more apparent, we saw a
substantial change in our order rate. Most of our customers are concerned the
shortage will continue — especially through the early part of the first
quarter,” Intel Senior Vice President Tom Kilroy told analysts on a conference
call.

Major PC makers including Hewlett Packard, Dell, Lenovo and Acer since
October have warned to varying degrees that they may build fewer PCs as they use
up the current stock of hard drives and struggle to replace them.

Intel said its customers are reducing their stock of chips in anticipation of
the hard drive shortage continuing early next year, although it said it still
expects sales of PCs to be up in the fourth quarter.

“This is Intel coming to terms with it,” said Stifel Nicolaus analyst Kevin
Cassidy. “I think Intel sees a lag effect as inventory gets worked down. Then
they’ll see an accelerated effect as inventories rebuild.”

Damage caused by the floods is expected to shrink global hard drive output by
about a third in the current quarter.

Western Digital, the hard drive manufacturer hit hardest by the floods, this
month resumed production and warned of tight global supplies into next
year.

California-based Western Digital, which vies with Seagate Technology for the
title of the world’s largest maker of hard drives, expects a world shortage of
60 million hard drives in the December quarter.

Seagate’s Thai plants have been largely unaffected by the catastrophe, but
production has been curtailed due to tight component supplies as factories of
some key suppliers were flooded.

Intel said quarterly revenue is now seen at $13.7 billion, plus or minus $300
million, below a previous forecast of $14.7 billion. Analysts’ average forecast
is $14.65 billion, according to Thomson Reuters I/B/E/S.

Intel said non-GAAP gross margin is expected to be around 65.5 percent versus
previous expectations of 66 percent.

Intel shares were down 4.8 percent to $23.82 in afternoon trading Monday.

Source: Reuters

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