Intel warned of lower than expected revenues in the second half of the year as PC makers hold back from ordering its computer chips in the face of economic uncertainty and the October launch of Windows 8 .

The world's largest chipmaker by revenues and a bellwether for the PC industry, predicted 2012 sales would rise around 4 per cent, down from its earlier expectations of high single-digit growth. Its forecast of \(\$ 14.3 \mathrm{bn}\) in third-quarter sales was below Wall Street expectations of \(\$ 14.6 \mathrm{bn}\).

Paul Otellini, chief executive, told an analyst conference call that a recovery expected in the US and western European markets, where there had been 'softness' for several quarters, had failed to materialise.

In the emerging economies of Brazil, Russia, India and China, PC prices had been rising with the value of the dollar, while China's economic growth had been slowing.

'While we still see growth [in China], we don't see quite as much as we first thought,' he said.

Advanced Micro Devices, Intel's main microprocessor rival, warned last week that its second-quarter revenues would be down about 11 per cent on the first quarter, after previously predicting a 3 per cent rise. It blamed softer sales late in the quarter in China and Europe, along with a weaker consumer buying environment for PC makers.

Intel said inventory levels for its microprocessors were healthy, but were being 'managed below historical averages'.

Mr Otellini said Windows 8 was not appearing until the fourth quarter and PC makers had moved to just-in-time ordering of Intel's chips.

He was upbeat about Ultrabooks - a thin and light laptop category promoted by Intel - although analysts view current prices of \(\$ 800\) and upwards as beyond the mainstream consumer.

The chief executive said more than 140 models were in the pipeline based on its latest processor, with more than 40 touch-enabled and a dozen convertible into tablets. He was 'very confident' there would be \(\$ 700\) systems in the market this autumn.

The company is beginning to break into tablets and smartphones. It reported the launch of Intelbased smartphones in India, China and Europe during the quarter and said more than 20 Windows 8based tablets would use its processors.

Intel reported second-quarter revenues a shade lighter than expected at \(\$ 13.5 \mathrm{bn}\), blaming softness in its Nand Flash memory business. Profits of 54 cents a share topped Wall Street forecasts of 52 cents.

The main strength was in its data centre group, where its 'Romley'-codenamed server chip helped sales grow 15 per cent year-on-year for the division. It also helped overall gross margins to increase to 63.4 per cent, up from 60.6 per cent a year earlier.

Intel shares initially rose in after-hours trading in New York on the news before trading 1 per cent lower at \(\$ 25.15\).

Discussion points

1 How does just-in-time ordering by customers affect the profitability of a suppplier?

2 To what extent has strategic management accounting information contributed to this commentary on the company's performance?