Today: Intel's (INTC) sales revision is worse than expected, sparking worries of a deepening PC slump. Plus: Pandora and Audience shares get hit hard by a pair of moves from Apple (AAPL). Also: Wall Street maintains 4-year highs despite disappointing jobs report.
Intel cuts forecast, raises fears of global slowdown
Intel slashed its third-quarter sales forecast Friday, an ominous sign of weakening PC sales and a continued worldwide economic slump.
The Santa Clara-based chipmaker, seen as a barometer of the state of the tech industry, cut its revenue forecast by 8 percent, from between $13.8 billion to $14.8 billion to between 12.9 billion to $13.5 billion, as demand from corporate customers fell. The move had been expected after leading PC makers Hewlett-Packard (HPQ) and Dell lowered sales forecasts last month, but the extent of the revision came as an unwelcome
"It's worse than everyone expected," Evercore Partners analyst Patrick Wang told Bloomberg News. "Their consumer PC business is getting whacked."
Worldwide computer sales are expected to remain sluggish this year, as economic woes continue in the U.S., Europe and emerging Pacific Rim countries. Typically this would be the time when production ramps up for Christmas sales of tech gadgets, especially with the pending release of Microsoft's eagerly awaited Windows 8 operating system. But an uncertain future isn't helping, as businesses and consumers wait to see which products -- from laptops to smartphones to operating systems -- catch on. "In the absence of knowing what to sell, there's a clear reluctance to build any sort of further inventory," MKM Partners analyst Daniel Berenbaum told Reuters.
Intel shares fell 90 cents, or 3.61 percent, to $24.19. Other Silicon Valley chipmakers were hit hard as well: Advanced Micro Devices sank 21 cents, or 5.74 percent, to $3.45, and Nvidia dropped 33 cents, or 2.4 percent, to $13.40.
Apple deals blows to Pandora, Audience
A pair of moves by Apple had severe repercussions for two other Bay Area companies Friday, as Pandora and Audience shares were sent reeling.
Oakland-based streaming radio service Pandora saw its stock fall 16.7 percent, or $2.10, to close at $10.47, on news that the Cupertino tech giant is planning a similar service. The Wall Street Journal reported Apple is negotiating with music labels to offer a service that would play music from a particluar artist or a similar genre, intended to bolster its iTunes service. As Apple tends to dominate every field it enters, such a move could be a nightmare for Pandora. "We would expect this Apple news to provide a material overhang (on Pandora shares) for the foreseeable future," Citigroup analyst Mark Mahaney told the Journal.
Other analysts saw hope for Pandora, which has yet to make a profit due to the high costs of streaming-music licensing. Megan Guess of Ars Technica noted that "a radio-streaming service might be a defensive measure against the growing popularity of Pandora and Spotify, and it may not be a guaranteed money maker." Albert Fried analyst Richard Tullo told the Journal that Apple's move would validate Pandora's business model, and the company, which last month posted encouraging earnings and growth estimates, is likely to remain a force in the streaming music game. Tullo remains bullish on Pandora stock once the initial Apple hubub dies down: "My guess is after 48 hours this is a buying opportunity."
There was less optimism at Mountain View chipmaker Audience, where shares crashed 63.4 percent, down $11.96 to $6.90 -- a loss of more than $200 million in market value -- after it announced Apple was unlikely to use its chips in the new iPhones.
Audience makes chips that filter background noise and improve voice quality in mobile phones, and their products had been used in previous versions of the hugely popular iPhone. But late Thursday, Audience CEO Peter Santos said "Our technology is not likely to be enabled in Apple's next generation mobile phone," according to Reuters. Apple will instead apparently rely on its own in-house team for that technology.
Licensing deals with Apple made up 37 percent of Audience's revenue between January and June. Older-model iPhones will likely continue with those licensing deals, Reuters reported.
Markets remain at 4-year highs despite troubling jobs report
A disappointing federal jobs report put a damper on Wall Street's enthusiasm of Thursday, but the markets still closed with their best week since June.
The U.S. added just 96,000 jobs in August, well below the estimated 141,000, and while the unemployment rate fell, it was because more people stopped looking for jobs. Hourly pay also fell, and the number of people in the workforce dropped to a 31-year low, according to the Associated Press. "This is definitely a setback for the labor market and the economy," JPMorgan Chase economist Michael Feroli told Bloomberg News.
It's further bad news for President Barack Obama's re-election effort, as the unemployment rate has stayed above 8 percent since February 2009, the longest such stretch since the Great Depression.
But for investors eager for the Fed to provide more stimulus to the economy, bad news may be good news. Economists now expect the Fed to make a move next week, possibly a new round of bond-buying in the hopes of lowering long-term interest rates. "If there was any lingering doubt within the Fed about announcing a new round of quantitative easing next week, this should surely push them over the edge," RBC economist Tom Porcelli told the AP.
The three major stock indexes took a wait-and-see approach, maintaining Thursday's gains and building on four-year highs. Each one rose ever so slightly, led by the Standard & Poors 500's 0.4 percent gain.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Up 0.61 , or 0.02 percent, to 3,136.42.
The blue chip Dow Jones industrial average: Up 14.64 or 0.11 percent, to 13.306.64.
And the widely watched Standard & Poor's 500 index: Up 5.80, or 0.40 percent, to 1,437.92.
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Follow Mike Murphy on Twitter at twitter.com/mmmmurf