Intel's disappointing outlook hits tech shares

NEW YORK (Reuters) - Technology shares fell across the board on Wednesday after global microchip leader Intel Corp (INTC.O) gave a disappointing outlook, stoking concerns of a U.S. economic recession.

Shares of Intel's customers, such as computer makers Dell Inc (DELL.O) and Hewlett-Packard Co (HPQ.N), fell more than 2 percent, while shares of other tech bellwethers like Cisco Systems Inc (CSCO.O) and Microsoft Corp (MSFT.O) fell more than 3 percent, all in sympathy, analysts said.

"The immediate knee-jerk (reaction) is that there must be something wrong with the PC industry," said Stifel Nicolaus analyst Cody Acree, adding that investors were worried that any weakening of personal computer demand could spread to the entire technology sector.

Late on Tuesday Intel forecast current quarter revenue of $9.4 billion to $10.0 billion, compared with the average expectation of analysts for revenue of $10.0 billion.

Intel said fourth-quarter net income rose to 38 cents per share, below Wall Street expectations for 40 cents. Revenue rose 10.5 percent to $10.7 billion, compared to the average forecast of $10.8 billion, according to Reuters Estimates.

RBC Capital analyst Mark Sue, who covers telecom equipment suppliers such as Cisco, said Intel's outlook stirred concerns of potential weakness in other technology segments.

"It's a logical conclusion," he said. "They're all suffering in sympathy."

Sue pointed to anecdotal signs that technology spending could be more conservative than expected this year.

"When we look at the overall technology spending environment in 2008, our initial indications are that their actual spend will lag their planned spend," he said.

Intel's microprocessors are the computing engines of about 80 percent of the world's personal computers and it's making a big push this year to get more of its chips into consumer electronics gadgets, such as set-top boxes.

Intel shares were down almost 12 percent at $19.99 on Nasdaq, where Dell shares were down more than 2 percent at $20.43. This was worse than the Nasdaq index's IXIC.O decline of 1.5 percent. Hewlett-Packard shares were down 3 percent at $43.69 on New York Stock Exchange.

Microsoft stock was down 3.1 percent at $32.95 and Intel's rival, Advanced Micro Devices Inc (AMD.N), fell 6 percent to

$6.49.

After dipping below $25, Cisco shares were down 2.4 percent to $25.22 in late morning trade. Mobile phone maker Nokia (NOK1V.HE) also saw its U.S. shares (NOK.N) fall more than 3 percent to $33.91.

(Reporting by Sinead Carew, editing by Dave Zimmerman)