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Intel knocks $1bn off profit forecasts

The US semiconductor giant Intel warned yesterday that third-quarter revenues could fall short of its own estimates by more than $1bn (£649m) on weaker-than-expected demand for personal computers.

The company, which dominates the market for PC chips, said it expected its third-quarter revenue to be between $10.8bn and $11.2bn, compared with its previous forecast of $11.2bn to $12.0bn.

Intel shares closed 19 cents higher at $18.37 on Nasdaq, after falling to $17.81 – their lowest level since July 2009. Shares in the world's largest chip-maker have fallen by 15 percent since mid-July. "I think people were relieved it was not worse," said Dunham Winoto, an analyst at Avian Securities.

A number of computer-makers have reported sharp falls demand for PCs this summer. Analysts say sales in the key "back to school" season is also looking weak and price cuts of 5 to 10 per cent are now likely. Intel reduced its forecasts of gross margins in the period of 65 per cent to 67 per cent. It had previously forecast gross margins of 67 per cent. Separately, Intel and Infineon are set to unveil a deal that involves the sale of at least part of the German firm's wireless business.