A big solution in the fourth-quarter sales look forward to from the world’s largest computer chipmaker augurs a brutal yearend on the side of the tech industry

By Arik Hesseldahl

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After the end of the third quarter, one tech titan in the pattern of another bemoaned a "lack of visibility" into the yearend period. As the U.S. pecuniary crisis worsened in September, it was apparent the rest of the year would have existence rough, but most companies could scarcely take an account of how bad things would get.

The industry is getting all too clear a picture now. The greatest part recent indication came Nov. 12, when Intel (INTC) slit its fourth-quarter sales forecast, citing "significantly weaker than expected call in all geographies and market segments." Intel said it now expects sales of $8.7 billion to $9.3 billion, down from a prior forecast of $10.1 billion to $10.9 billion.

As the world’s largest maker of computer chips, Intel is considered a bellwether for the wider industry. Its warning represents an uncharacteristically dour outlook for the intersecting fourth quarter, while tech companies depend on consumers making yearend holiday gift purchases and companies draining annual IT budgets. "For all intents and purposes, the PC market is just dead," says Edwin Mok, an analyst at Needham & Co. in San Francisco. "We expected something like this already, but we didn’t wait for it to be so bad." Intel also declared PC makers are reducing inventories of chips.

With the new forecast, Intel is on track to be impaired a rare year-over-year decrease in quarterly revenue. Last year, Intel reported sales of $10.2 billion in the fourth divide and had been on track to grow revenues this quarter, if only a slender. Now it’s in hazard not only of reporting lower sales for the quarter, but also the full year. Depending on the final tally despite the fourth quarter, Intel’s full-year sales could advance in below last year’s $38.3 billion. The last duration annual sales contracted was in 2006, when the meeting of friends launched a wide-ranging restructuring and slashed thousands of jobs. Another decline occurred in 2001 after the tech bubble burst.

This time around, Intel also expects narrower gross margins, a key gauge of profitability. Intel now expects margins of 55%, compared through 59% previously. The company also expects to cut spending by dint of. $100 a thousand thousand, to $2.8 billion.

Intel stock dove in extended trading, falling almost 7% to 12.60, from the tidings was announced. Stock in rival Advanced Micro Devices (AMD) also slipped in extended trading. PC makers including Dell (DELL), Hewlett-Packard (HPQ), and Apple (AAPL) also dropped in after-hours trading, any indication tech stocks may be in in opposition to a cragged ride Nov. 13. "If Intel isn’t a bellwether, I dress in’t be aware of who is," says Ashok Kumar, an analyst at Collins Stewart. "A drop in guidance this lofty is one ominous sign both for the tech sector and the wider economy."

Intel’s news follows a notice from Cisco Systems (CSCO), which onward Nov. 5 told investors it expected revenue in its fiscal second quarter, which ends in January, to decrease by 5% to 10% from a year earlier. Analysts had expected second-quarter income growing of about 6%. "The environment has changed dramatically in the last two months, through the financial crisis in September and the economic crisis becoming greater quantity apparent on a global foundation in October," Cisco CEO John Chambers told analysts in a conference call.

Other warning signs have come from the likes of Apple, what one. according to analysts has slashed production of its popular iPhone. The company rarely talks about its manufacturing plans, but analyst Craig Berger at Friedman Billings Ramsey (FBR) uttered in research note on Nov. 3 that Apple’s iPhone extension plans could fall by like much considered in the state of 40%. On Nov. 12, electronics retailer Best Buy (BBY) slashed earnings and sales forecasts, citing "brisk, seismic changes in consumer behavior [that] have created the most difficult climate" the company has ever witnessed. The warning came days after Circuit City (CC) filed for bankruptcy protection amongst weak consumer spending.

When do the clouds lift? Shane Rau, an analyst at emporium researcher IDC, says the outlook may gain ground in the help half of 2009, but recovery may not advance until 2010.