Intel's (INTC) stock price slumped to its lowest level in a year Tuesday after several analysts cut their earnings outlook for the Santa Clara chipmaker, which is widely considered a key barometer for the tech industry's health.
Bernstein Research analysts issued a particularly dire assessment, saying Intel's recent efforts to get its chips into smartphones probably won't help it much over the next 18 months, given sluggish sales of personal computers, which generate most of its revenue.
Even if Intel -- due to report its third-quarter earnings Tuesday -- proves successful with its smartphones push, it "likely won't move the earnings needle," Bernstein's analysts said in a note to their clients Tuesday. "In the meantime, should anything happen to their core PC business, the results would be devastating. Simply put, they have more to potentially lose than to gain."
Following Bernstein's warning, Intel's shares fell 61 cents, or 2.7 percent, to close at $21.90. The last time the stock price was lower was Oct. 5, 2011, when it was $21.85.
In response, Intel spokesman Chuck Mulloy noted that the company is in a regulatory "quite period," which limits what it can say about its finances before issuing its earnings, adding, "we never comment on analyst ratings."
Following the recent recession, Intel surprised Wall Street with a succession of earnings reports that beat analysts' predictions. But recently, the chipmaker has offered less upbeat forecasts as the worldwide economy has faltered and PC sales have slowed. Citing weaker demand for its microchips, Intel last month lowered its own third-quarter sales forecast to between $12.9 billion and $13.5 billion -- about $1 billion less than its previous estimate.
Tech analyst Patrick Moorhead remains optimistic about Intel, in part because he said the company is making "an impressive play" to get into smartphones and the personal computer business is far from moribund.
"PC growth has flat-lined," he said, "but there is still not a replacement for a PC. Neither a tablet or a phone can replace a PC -- at least today." Moreover, he said, "for every phone and tablet you need a server in the cloud to power it. Today Intel owns this market, and will still be a force" even if its competitors manage to chip away at its market share.
Even so, analysts at S&P Capital IQ, BMO Capital Markets and J.P. Morgan this month all lowered their previous predictions for Intel's earnings or stock price. They and others expressed concerns about a variety of factors that could hamper Intel's business.
Sterne Agee analyst Vijay Rakesh worried that Intel could be battered by Hewlett-Packard's (HPQ) recent decision to lower its earnings outlook for the next few months. Pointing out that HP is Intel's biggest customer, "that is not a good sign," he concluded in a note to his clients.
Some experts also doubt that the debut later this month of Microsoft's new operating system, Windows 8, will invigorate PC sales. In addition, because of skittishness about the economy and the federal government's financial woes, "we hear companies are deferring PC purchases," according to a note issued Tuesday by analysts at FBR Capital Markets. As a result, they said, "Intel's gross margins are likely to be under pressure."
Yet another concern is the disappointing performance so far of ultrabooks, a notebook-tablet hybrid that runs exclusively on Intel's brainy microprocessors. Intel and some computer makers have been heavily promoting the devices, but many experts contend sales of ultrabooks have been hurt by their relatively high prices.
Research firm IHS reported this month that worldwide ultrabook sales would total only 10.3 million this year, down from its previous estimate of 22 million. And of the 799 notebooks listed on Best Buy's website as of Oct. 7, Sterne Agee reported, "only 51 of them are ultrabooks."
Contact Steve Johnson at 408-920-5043. Follow him at Twitter.com/steveatmercnews.