Shares in Intel Corp., the world's largest microchip maker, tumbled nearly 20 percent on Friday, a day after the company cut its second-quarter revenue outlook beyond investor expectations, dimming hopes for a recovery in the beleaguered technology industry any time soon.
"Intel yanked the rug out from under the optimists yesterday with a weak revenue outlook and a surprisingly low gross margin target for the second quarter," Merrill Lynch analyst Joe Osha wrote.
Intel shares fell $5.00, or 18.5 percent, to $22.00, on Nasdaq, and during the day touched $21.70, their lowest level since October. Shares of rival Advanced Micro Devices Inc., fell $0.80, or 7.5 percent to $9.81 on the New York Stock Exchange.
Intel's revised outlook caused a decline in the broader market. The Nasdaq composite index fell 1.25 percent and the Philadelphia Stock Exchange Semiconductor Index dropped almost 3 percent.
Intel, known for its Pentium microprocessors that are the brains of most personal computers, said on Thursday during a mid-quarter conference call that it expected second-quarter revenue of $6.2 billion to $6.5 billion, compared with its April forecast of $6.4 billion to $7.0 billion.
Intel said its gross profit margin will be 49 percent, far less than the 53 percent, plus or minus a couple of points, it had forecast in April. Intel also said it still expected "a seasonally stronger second half."
"With (information technology) purchases remaining highly scrutinized, our belief is that spending recovery in the second half is highly unlikely," said Ashok Kumar, an analyst at U.S. Bancorp Piper Jaffray in a note to clients. "With a weak back-to-school season, we do not expect to see signs of seasonality until the latter part of the September quarter."