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Originally published Tuesday, October 16, 2012 at 6:38 PM

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Intel earnings drop as demand for PCs declines

Intel reports sharply lower earnings for the third quarter, which did not surprise Wall Street.

The New York Times

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SAN FRANCISCO — Bowing to a pervasive downturn in one of the key markets for its semiconductors, Intel reported sharply lower earnings for the third quarter Tuesday.

The chip-maker, based in Santa Clara, Calif., said net income fell 14 percent to $3.0 billion, or 58 cents a share. Revenue was $13.5 billion, down 5.5 percent from a year earlier.

The results did not come as a surprise to Wall Street. On Sept. 7, Intel warned that third-quarter revenue would be $12.9 billion to $13.5 billion, down from earlier projections of $13.8 billion to $14.8 billion.

As a result, industry analysts were expecting, on average, revenue of $13.23 billion and per-share earnings of 50 cents, according to a survey by Thomson Reuters.

“Our third-quarter results reflected a continuing tough economic environment,” Paul Otellini, Intel’s chief executive, said in a release accompanying the earnings.

Much of Intel’s woe comes from collapsing demand for personal computers, both by businesses and consumers, as people shift to alternative devices like smartphones and tablets.

Last week International Data Corporation estimated that the worldwide PC market contracted 8.6 percent in the third quarter.

While Intel makes chips that go into smartphones and tablets, it tends to have lower volumes and more competition in those products. Intel has tried to revive the PC market with a small and thin design called the ultrabook, but so far this has also been a bust; recently IHS iSuppli forecast that just 28 million ultrabooks would be sold in the second half of 2012, down from an earlier estimate of 35 million units.

The pain is being felt by other chip-makers, too. Last week AMD, a competitor of Intel, said its third-quarter revenue would fall about 10 percent from the $1.4 billion recorded in the second quarter.

Shares in Intel closed 2.85 percent higher at $22.35 on Tuesday but were trending down slightly in after-hours trading.

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