=20

Sponsored = by:

, , ) = lost=20 ground in Tuesday's trading session.

Some analysts believe it's an overreaction.

"There will likely be a knee-jerk reaction to this news, = but for=20 the whole sector, I am not convinced that it wallops all of tech," said = analyst=20 Crawford Del Prete of International Data Corp.

That's partly because Intel's announcement is based on = bad news=20 from a tiny slice of its overall business, NAND flash chips. The = semiconductor=20 industry has been reeling from a glut in these chips, which has sent = average=20 prices falling.

'There will = likely be a=20 knee-jerk reaction to [Intel's news], but for the whole sector, I = am not=20 convinced that it wallops all of tech.'

=E2=80=94 Crawford Del Prete, = International Data=20 Corp.

"It's just NAND prices," said analyst Roger Kay of = Endpoint=20 Technologies Associates. "Intel indicated that overall demand remains = steady. I=20 think the market's overreacting. But there's plenty to react to -- = housing,=20 banking, etc. -- aside from Intel's gross margins."

However, analyst Edwin Mok of Needham & Co. believes = Intel may=20 be grappling with other issues. He said the company's lowered outlook = "implies=20 that Intel plans to take a large NAND inventory write-down, and it faces = mix=20 issues in other areas."

Analyst Daniel Berenbaum of Caris & Co. echoed this = view,=20 writing in a research note, "We harbor doubts that NAND alone is = responsible for=20 the entire margin miss."

He added, however, that the NAND business "is a = commoditized=20 business where pricing will remain challenging." He also noted that his = own=20 investigation suggests "that the core PC-related business is not = trouble-free as=20 demand softens."

And he pointed to NAND's growing importance in mainstream = computing, such as the use of NAND cache to boost PC performance. "Intel = clearly=20 wants to keep a finger in this pie," Berenbaum said.

Mok also focused on the PC market, saying he sees Intel = having a=20 "weaker mix in PC-related sales, which may explain the reduced margin = guidance."=20

"We believe Intel could see a mix shift towards the = lower-end in=20 2008, as consumers tend to buy cheaper computers in the slower economy," = he said=20 in a research note.

Del Prete also said Intel's announcement sheds more light = on the=20 health of the consumer market. "I think it speaks to a weaker outlook = for the=20 consumer segment, and that is certainly an important twist given the = strength we=20 have seen from that sector in recent years."

But he also said that while Intel's news "is an indicator = of=20 weakness in some large sectors such as cameras and smart phones, but it = is not=20 necessarily a great indicator for PC, storage or server demand."

Analyst Glen Yeung of Citigroup also pointed to Intel's = own=20 pronouncements that its "core PC outlook remains unchanged" despite = speculation=20 that weak PC demand would likely be the culprit in any shortfall for = Intel.=20

Yeung also sees the NAND problem being corrected near = term. "While=20 the negative effect of NAND will impair margins throughout 2008 we = anticipate a=20 waning impact as the year progresses," he said in a research note. "We = expect=20 Intel to take action to mitigate the impact of NAND; this may come in = the form=20 of wafer start reduction and potentially an exit from the business = longer-term."=20

Intel had also pointed to problems in the NAND business = in January=20 when it reported revenue and revenue projections that fell below Wall = Street=20 projections.

CEO Paul Otellini said then that his team remained upbeat = about=20 near-term opportunities saying, "Our view ... is not being clouded by a=20 pessimistic view of computing."

He acknowledged that, given all the gloomy predictions = about the=20 economy, "It would be imprudent not to be cautious about it," although = he added,=20 "At this point we don't see anything on the horizon. ... If there's any=20 near-term concern, I think it tends to be focused on the U.S. market." =

Other major tech companies have also said their = operations in=20 overseas markets are helping offset any weaknesses in North America. But = Mok of=20 Needham & Co. said no one is immune to what many believe is a major=20 slowdown.

"For 2008, they're probably right," he said in an = interview. "I'm=20 less convinced about that for 2009 because it takes time for these = things to=20 work out." 3D"End

Benjamin Pimentel is a MarketWatch = reporter=20 based in San Francisco.

Companies in this story

	Intel=20 Corporation (INTC= )

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Does bad news for Intel mean bad news for tech? -=20 MarketWatch

Intraday data provided by Interactive Data Real = Time=20 Services, a division of Interactive Data Corp. and subject to terms of use. = Historical=20 and current end-of-day data provided by Interactive Data Pricing and = Reference=20 Data. More information on NASDAQ = traded=20 symbols and their current financial status. Intraday data delayed 15 = minutes=20 for Nasdaq, and 20 minutes for other exchanges. Dow Jones Indexes(SM) = from Dow=20 Jones & Company, Inc. SEHK intraday data is provided by Comstock and = is at=20 least 60-minutes delayed. All quotes are in local exchange time. =

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