Brokerages cut their outlooks on Intel Corp's stock by as much as 20 percent after the chipmaker, facing depressed demand for PCs, forecast a weak fourth quarter.

Stifel Nicolaus cut its price target to $28 from $33, Roth Capital to $20 from $25, UBS to $29 from $30.50, while others cut their targets lesser amounts. Intel shares were down 2.4 percent at $21.81 in early trading on the Nasdaq.

The world's largest chipmaker said on Tuesday it expected revenue of $13.60 billion for the current quarter, plus or minus $500 million. Analysts had been expecting $13.74 billion on average.


Intel shares were down 2.4 percent

Both Intel and rival Advanced Micro Devices have repeatedly warned that tablets such as Apple Inc's iPad are hitting sales of laptop and desktop computers. A slowing global economy and reduced IT spending have not helped either.

“While nobody knows the tablet cannibalization impact on PCs, we generally think every 2.5 tablets sold now cannibalize one PC,” FBR Capital Markets & Co analysts wrote in a note, cutting their price target on Intel to $23 from $24.

Intel, which is yet to successfully tap into the tablet market, is running its factories at less than half of capacity in an effort to reduce inventory.

“We are encouraged that Intel has finally reset its expectations for PC demand and is lowering inventory,” said JP Morgan analysts, who maintained their “neutral” rating.

Intel said charges related to excess capacity would reduce fourth-quarter gross margins to about 58 percent on a non-GAAP basis. Analysts had been expecting about 62 percent.

“There is a perfect storm pressuring gross margin,” Piper Jaffray's Auguste Gus Richard said, referring to surplus capacity, low demand and the rising need to invest in new technology.

In an effort to revive demand, Intel has been promoting a new category of thin Ultrabook laptops with touch screens, powered by Microsoft's upcoming Windows 8.

“Ultrabooks were meant to be the solution to the problem, but Intel's second-half guidance validates our earlier view that OEMs are much less bullish about the prospect for Ultrabooks than is Intel,” Susquehanna Financial Group analyst Chris Caso said. Caso cut his share price target to $21 from $23.

The Ultrabooks launched so far have been criticized for being expensive, and manufacturers have shipped fewer than expected.

Intel had significantly overestimated the demand for Ultrabooks and is overly optimistic about what consumers are willing to pay for them, Piper Jaffray said.


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