Intel shocks high-tech industry

Intel is finding it difficult to find enough European customers for its chips

A profit warning by the world's largest maker of microchips, Intel, has sent shock waves through the computer industry.

Intel's share price tumbled 21% or $12.92 after the company warned that its third quarter revenues would be significantly lower than expected by Wall Street analysts.

High oil prices and a weak euro are putting a squeeze on consumer demand, especially in Europe.

Worries about a slackening European market for high-tech products had already battered some telecoms and technology shares on Thursday. Shares in computer maker Dell dropped 10%, Compaq fell 10.7%, and Gateway plunged 14.2%.

But after Intel's announcement the whole sector was caught in a downdraft, and after hours trading saw shares sliding even further.

Stock market fallout

Dan Scovel, analyst with Needham & Co, said: "One thing is for sure, it seems pretty unlikely PCs are doing better than expected."

"If this is a broader market weakness on PCs, the impact could be much broader than just Intel", he added.

But a slump in Intel's fortunes will not only make an impact on the technology sector, but could hurt stock market sentiment overall.

Intel is a bellwether of the Nasdaq, setting the mood for the market.

The stock of the California-based high-tech firm is also one of the 30 components of the Dow Jones Industrial Average, one of the world's most watched stock market indices.

When the chipmaker's shares dive, so do the indices, potentially scaring away investors.