Intel cuts forecast amid softer PC demand Intel, the world's biggest chipmaker by revenues, has issued a sales warning as consumers spend more on tablets and smartphones and the PC industry slows ahead of the release of Windows 8. The Silicon Valley company, whose microprocessors feature in four out of every five PCs sold, said chip sales would probably be more than $1bn less than forecast for the third quarter. Its shares fell more than 2 per cent, while those of rival chipmakers Nvidia and AMD dropped more than 2 per cent and 5 per cent respectively. PC makers have been running down inventories in a slow period for sales and with uncertainty over demand ahead of the release of Microsoft's Windows 8 operating system on October 26. Intel said: "Relative to the prior forecast, the company is seeing customers reducing inventory in the supply chain versus the normal growth in third-quarter inventory; softness in the enterprise PC market segment; and slowing emerging market demand." Strength in the enterprise and emerging markets had helped Intel in recent quarters as consumers spent less on PCs and more on mobile devices such as the iPad and iPhone. However, PC shipments to China fell 4.5 per cent in the second quarter - their first ever year-on-year decline, according to a report last week from Gartner, the research group. The company said another area of strong demand, for server microprocessors used in data centres, was meeting expectations. But "weaker-than-expected demand in a challenging macroeconomic environment" meant revenues were anticipated to be $13.2bn, plus or minus $300m, compared to a previous forecast of $13.8bn to $14.8bn. Sumit Dhanda, analyst with the ISI research firm, said: "While Intel's pre-announcement itself was not wholly unexpected, the magnitude of the reduction in revenue guidance seems large." Intel is expected to show off thin Ultrabook laptops with touchscreens and hybrid tablet/laptop convertibles at its annual developer conference in San Francisco next week. But these will only be introduced in the fourth quarter and PC makers are still struggling to bring costs down and make such devices affordable for mainstream consumers. The IHS iSuppli research firm predicted this week that an era of "Wintel" dominance was coming to an end due to the much faster-growing tablet and smartphone markets, where chips based on designs of the UK's Arm and operating systems from Apple and Google held commanding leads. It forecast that Windows" share of the PC, tablet and smartphone market would slip from 44 per cent in 2011 to 33 per cent in 2016, while Intel's share would drop from 41 per cent to 29 per cent. However, it said the total size of the market would double over the five years. Intel has failed to make any serious inroads into the smartphone and tablet markets thus far and will face a challenge in laptops, with a version of Windows for PCs being released next month that will run on Arm-based chips for the first time. Intel reduced its third-quarter gross margin forecasts by one percentage point on Friday, from 63 per cent to 62 per cent. It said capital spending for the year was now expected to be below the low end of its previous forecast of $12.1bn to $12.9bn, with the company accelerating the reuse of existing equipment for its next "shrink" of microprocessors to circuits that will be 14 billionths of a metre wide.