Sales hit by hard drive shortage: Intel

Sales hit by hard drive shortage: Intel New York: Intel Corp warned that hard-disk drive supply shortages would hurt its current quarter revenue, the latest heavyweight in the PC industry to caution over the effects of flooding that has crippled factories in Thailand.

Shares of Intel slumped as the world's largest chipmaker became the latest major company to say it would be affected by the catastrophe.

Hundreds of people have died in the flooding in Thailand since late July that has caused billions of dollars in damage 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 accounts for a quarter of world production 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 will shrink global hard drive supply by 30 percent in the current quarter, according to research firm IHS iSuppli.

Thailand has said that output of hard disk drives fell 52.4 percent in October from a year earlier.

Intel said quarterly revenue is now seen at USD 13.7 billion, plus or minus USD 300 million, below a previous forecast of USD 14.7 billion. Analysts' average forecast is USD 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 5.0 percent to USD 23.75 in morning trading Monday.

Bureau Report