Intel Corp. warned Friday that third-quarter revenue could fall short of its own estimates by more than $1 billion, reinforcing doubts about the strength of a technology sector recovery.
But shares in the industry bellwether, which dominates the market for PC microprocessors, gained 1% Friday because investors had braced for bad news and were relieved that the downward revision had not been worse.
Analysts said more companies with exposure to a struggling personal computer industry — fighting rising inventory and flagging demand from slowing growth in Europe, China and the U.S. — might warn of revenue shortfalls in coming weeks.
Baird & Co analyst Tristan Gerra expects weakness to persist over several quarters before demand bounces back in the second half of 2011, but warned of a longer-term threat from tablets like Apple Inc.'s iPad replacing PCs.
Other analysts pointed to a silver lining: Intel said resilient corporate demand was helping to prop up average prices even though consumer demand in mature markets was weaker than expected.
"Even though the news is bad, the bad news is already in the valuation. Obviously, business isn't going great there, but the stock is so cheap this doesn't matter," said Stephen Massocca, managing director at Wedbush Morgan.
Intel shares closed up 19 cents Friday at $18.37, after falling to $17.81, their lowest level since July 2009. Shares in the world's largest chip maker have declined 15% since mid-July.
Trading in the stock was halted earlier Friday as it appeared to trip a circuit breaker shortly after the Santa Clara, Calif., company's revenue warning set off a flurry of trading.
Intel now expects third-quarter revenue of $10.8 billion to $11.2 billion, down from a previous forecast of $11.2 billion to $12 billion and below analysts' average expectation of $11.5 billion, according to Thomson Reuters I/B/E/S.
"People were relieved it was not worse," Avian securities analyst Dunham Winoto said.