Intel Corporation, the world's largest chipmaker, expects cold winds to blow this autumn.
Consumers continue to shift their spending toward tablets and a weak global economy curbs corporate spending on computers.
When it reported third-quarter results last night, Intel said the usual bounce in sales due to the Christmas season is likely to be cut in half this year.
This is despite the fact that Microsoft is launching a new operating system that it says will get consumers excited about PCs again.
In the quarter just ended, Intel's revenue from personal computer chips fell 8% from a year ago, in line with reports from research firms IDC and Gartner that said worldwide PC sales fell more than 8%.
The shift away from PCs and toward tablets is a threat to Intel because most tablets do not use Intel processors. Instead, they use cheaper chips similar to the ones found in smartphones. Intel wants to get its chips into tablets.
The launch of Windows 8, Microsoft's new operating system, on October 26 gives it a chance to do that, since the software is designed both for PCs and tablets. But Intel's expectations for the Windows 8 launch are muted.
Normally, PC makers ramp up production for Christmas, but Intel chief executive Paul Otellini said he expects that increase to be halved this year, partly because manufacturers are cautious about how consumers will take to Windows 8.
The new software is a radical departure from previous Windows versions in terms of how people are expected to use it to control their PCs.
While the outlook for the fourth quarter was glum, Intel beat expectations for the third quarter, after it had lowered those expectations twice. The Santa Clara, California, company said its third-quarter net income was $2.97 billion, or 58 cents per share, down from $3.47 billion, or 65 cents per share, a year ago.
Intel said it earned 60 cents per share, handily beating the average estimate of analysts at 50 cents per share.
Revenue fell 5.5% to $13.5 billion. Analysts were expecting $13.22 billion, in line with the midpoint of Intel's own forecast. Intel said it expects about $13.6 billion in fourth-quarter revenue, below forecasts of $13.7 billion.
More significantly, it said it expects a gross margin of 57%, well below the average for the last three years of 64%. The gross margin is Intel's revenue minus the cost of making and selling the chips, so the lower forecast points indirectly to lower profit in the fourth quarter.
The reduction is due to lower utilisation of its factories, and a shift toward to a new processor technology, which will idle some factories for retooling.