Global slowdown erodes profits at technology firms
Global economic concern leads to spending curbs on technology and personal computers, depressing the incomes of Intel and IBM
The global economic slowdown is prompting companies to curtail technology spending and pushing consumers to favour mobile devices such as Apple's iPhone over personal computers, eroding profitability at Intel and trimming sales for International Business Machines.
Intel, the largest chipmaker, forecast fourth-quarter gross margins that missed analysts' estimates, while IBM, the biggest computer-services provider, reported third-quarter revenue that fell short of projections.
IBM customers, hurt by anaemic demand in home markets, put off software purchases and computer-maintenance contracts. Budget-strapped consumers are shunning personal computers to buy cheaper handheld devices such as the iPhone, while businesses are shying away from servers that run networks, sapping demand for Intel chips.
The reports bode ill for Microsoft, the No 1 software firm.
"It's not looking good out there," Alex Gauna, an analyst at JMP Securities, said.
Intel's profit is being crimped by expenses to slow factory output and fight rising inventories.
Corporate customers were showing "caution" in placing orders and consumers in developed markets were curtailing purchases of personal computers, chief financial officer Stacy Smith said.