Uh-oh! Intel and ARM both see slowdown ahead

Intel

Intel expects its third-quarter sales to be between $300 million and $1.9 billion lower than previous forecasts, the chip giant said Friday. Many see this as a sign of the weakening PC market, especially after HP and Dell posted such disappointing results in part because of a slowdown in PC sales.

But this isn’t just about PCs. ARM, the company that provides the IP inside chips for virtually all of the smartphones and tablets out there, also warned that it anticipates slower sales ahead. Earlier this week it said it planned to halt recruitment efforts and said its customers such as Texas Instruments and Qualcomm are bracing for a slowdown in holiday sales of devices.

Most companies and chip analysts are citing the economic downturn in Europe as the reason for their new forecasts, and some are worried about the impact of further economic shocks. That’s right. This isn’t a PC slowdown or a gadget slowdown — or rather it is — but it’s also an economic slowdown. As my colleague Om Malik wrote last week, chips are the canaries in the tech sector coal mine. And when their sales drop the rest of the industry better make plans for their survival through some tough times ahead.

The chip companies can help forecast weakness in enterprise and consumer demand for tech. For a more enterprise focused viewpoint, keep an eye on Cisco’s numbers in November. It’s another company that tends to see the impact of downturn slightly ahead of the rest of the business. And despite having a decent quarter when it reported in August, Cisco’s CEO John Chambers also signaled concerns about the economic climate in Europe and fears for the months ahead.

So the chips are down and Chambers is worried. My advice to entrepreneurs is close those financing rounds while you still can.

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