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.