Intel (INTC) hits the wall

Intel (NASDAQ: INTC) cuts its revenue forecast for the fourth quarter by nearly $1 billion. That is a remarkable number given that the quarter is not even half over. It is also 10% of Intel's projected revenue for the period. In other words, it is a catastrophe. The world's largest chip company said it now expects fourth-quarter revenue to be $9 billion, plus or minus $300 million, lower than its previous prediction of between $10.1 billion and $10.9 billion..

Stating the obvious, the news is bad for PC companies like Dell (NASDAQ: DELL) and server companies like Sun (NYSE: JAVA) which use Intel chips in most of their products. It is also bad for retailers who hope to sell lots of PCs for the holiday.

But, it also points to something more profound. It has been assumed for some time that the US consumer would pull back spending. Corporate IT spending has been another matter. There has been some hope that enterprise investments in technology would not slow a great deal because hardware and software need regular upgrades to remain efficient. In other words, corporations save money by having better computing which should improve productivity. IT is an investment worth making.

It appears that the corporate upgrade cycle has been busted by concerns that earnings will drop and financing for any new expenditure may not be available. Spending on technology is now being hammered by consumer and corporation alike.

Douglas A. McIntyre is an editor at 24/7 Wall St.