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Intel cuts revenue forecasts after hard drive shortages

Intel has warned that hard-disk supply shortages due to the Thai floods will hit its current-quarter revenue.

Intel is the latest big player in the PC industry to warn of the effects of flooding that has crippled factories in Thailand.

Hundreds of people have died in the floods which have caused billions of dollars in damages since late July and disrupted international supply chains in the PC and automobile industries.

PC makers have been scrambling to buy increasingly scarce hard drives after the flooding shut down factories in the country, which is the world's No 2 exporter of the components.

"In the last two weeks, as the supply became more apparent, we saw a substantial change in our order rate," Intel Senior Vice President Tom Kilroy said.

"Most of our customers are concerned the shortage will continue - especially through the early part of the first quarter."

Major PC makers including Hewlett Packard, Dell, Lenovo and Acer since October have warned to varying degrees that they may build fewer PCs as they use up the current stock of hard drives and struggle to replace them.

Intel said its customers are reducing their stock of chips in anticipation of the hard drive shortage continuing early next year, although it said it still expects sales of PCs to be up in the fourth quarter.

"This is Intel coming to terms with it," said Stifel Nicolaus analyst Kevin Cassidy.

"I think Intel sees a lag effect as inventory gets worked down, then they'll see an accelerated effect as inventories rebuild."

Damage caused by the floods is expected to shrink global hard drive output by about a third in the current quarter.

Western Digital, the hard drive manufacturer hit hardest by the floods, this month resumed production and warned of tight global supplies into next year.

California-based Western Digital, which vies with Seagate Technology for the title of the world's largest maker of hard drives, expects a world shortage of 60 million hard drives in the December quarter.

Seagate's Thai plants have been largely unaffected by the catastrophe, but production has been curtailed due to tight component supplies as factories of some key suppliers were flooded.

Intel said quarterly revenue is now seen at $13.7 billion, plus or minus $300 million, below a previous forecast of $14.7 billion.

Intel said non-GAAP gross margin is expected to be around 65.5 per cent versus previous expectations of 66 per cent.

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