Tech Industry Takes Hit As Intel, A Bellwether, Lowers Its Q3 Outlook Customers Cutting Inventory When the No. 1 chipmaker sees demand softening, others are likely to follow.(A)

Byline: JAMES DETAR

Intel surprised analysts Thursday by saying sales would lag expectations by about $430 million this quarter, while profit also would fall short.

The world's biggest chipmaker has been caught with a lot of excess inventory at a time when it says its customers are cutting their inventories of components.

The company is closely watched for signs of where overall tech spending is headed, so its latest report adds to theories that a tech comeback that began last year has slowed.

"It's a tough environment out there," said Banc of America Securities analyst John Lau.

Intel said sales this quarter will be $8.3 billion to $8.6 billion vs. the $8.88 billion consensus of analysts polled by Thomson First Call.

Intel also said its gross profit margin would slip to 58%. It forecast 60% in mid-July, itself a decline from its earlier forecast of 62%. A key profit measure, gross margin is the percentage of revenue after deducting costs.