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Intel Inventory Problems

Despite posting a second-quarter profit that nearly doubled year over year, Intel marred investors’ relief by lowering the profit margin forecast for 2004 to 60% from 62%. Third-quarter outlook “was surprisingly upbeat at the revenue level but well below expectations at the gross margin level.” Intel has recently been running its microprocessor manufacturing operations at a level above what was justified by demand, which led to a rise in inventories. Intel’s calculated risk of hoping for “an improved demand environment” had not played out. In order to meet its strong revenue target of $ 8.6 billion to $ 9.2 billion in the third-quarter, Intel will do two things: cut prices to get rid of inventory and make a push in the chipset and integrated graphics businesses, to the detriment of companies such as NVIDIA and ATI.

Despite posting a second-quarter profit that nearly doubled year over year, Intel marred investors’ relief by lowering the profit margin forecast for 2004 to 60% from 62%. Third-quarter outlook “was surprisingly upbeat at the revenue level but well below expectations at the gross margin level.” Intel has recently been running its microprocessor manufacturing operations at a level above what was justified by demand, which led to a rise in inventories. Intel’s calculated risk of hoping for “an improved demand environment” had not played out. In order to meet its strong revenue target of $ 8.6 billion to $ 9.2 billion in the third-quarter, Intel will do two things: cut prices to get rid of inventory and make a push in the chipset and integrated graphics businesses, to the detriment of companies such as NVIDIA and ATI.

TeamVR
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VR-Zone is a leading online technology news publication reporting on bleeding edge trends in PC and mobile gadgets, with in-depth reviews and commentaries.

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