Intel warns second time on quarter

By Ritsuko Ando and David Lawsky

NEW YORK/SAN FRANCISCO (Reuters) - Microchip maker Intel Corp on Wednesday issued its second revenue warning on the fourth quarter, saying demand for personal computers was even worse than it feared and sparking wide concerns about tech companies.

Shares of the world's biggest maker of the central processing units (CPUs) at the heart of every PC dropped 6 percent, and stocks of other companies in the industry swooned as well.

Intel dropped its fourth-quarter revenue forecast to $8.2 billion from $9 billion in November. In October, the company had expected a range of $10.1 billion to $10.9 billion.

"Clearly we are going to be in an ugly period for corporate earnings," said Tim Ghriskey, an analyst with Solaris Asset Management. "Intel being a bellwether for the industry it will take the industry down as well."

After Intel's warning on Wednesday the index of chipmakers, the Philadelphia Stock Exchange Semiconductor Index, dropped 4.9 percent to 223.12.

The slowing demand for PCs in a weak economy will inevitably affect the bottom lines for PC makers, chip makers and software makers, said analysts who added that consumers are moving down market to miniature computers such as so-called netbooks.

"We've moved beyond the point where you can do this without headcount reductions," said Robert Burlson, an analyst with Canaccord Adams in San Francisco. "There are going to be a lot of layoffs this year."

Intel, which reports earnings on January 15, expects its gross margin to be at the bottom of its previous expectation of 55 percent, plus or minus a couple of percentage points.