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Tickers in this Article: INTC, DELL, HPQ, MU, SMSC
Talk about a big miss - let's amend that to a really big miss. Last week, Intel (NYSE:INTC) chopped its guidance for fourth quarter revenue expectations from $9 billion to $8.2 billion, or down 23% from last year. The miss comes less than two months since Intel's last guidance downgrade, making things look downright dismal for Intel. But If investors can remember one thing, it should be that the chip industry is notoriously cyclical. Semiconductor companies face constant booms and busts in demand for products.

If you look at the technology market, consumer spending has collapsed. Computer-makers like Dell (NYSE:DELL), Hewlett-Packard (NYSE:HPQ) and Asian-based electronic manufacturers (which are some of Intel's biggest customers) are frantically bracing themselves for a hefty drop in sales. The result is a drastic effort to shrink their inventories, and Intel is feeling the pinch.

Inventory crunches like this occur about every two years, and microchip and computer memory makers are quick to slash their forecasts as inventory piles up. Micron Technology (Nasdaq:MU) acknowledged this week they were competing in an oversaturated market, while Standard Microsystems (Nasdaq:SMSC) offered a gloomy outlook for its fiscal fourth quarter despite better-than-expected results for its recent quarter. (For further reading, see The Industry Handbook: The Semiconductor Industry.)

So, there is a chance that the industry's aggressive moves to further tighten them could pave the way for a demand recovery in 2009. Indeed, the darkest days tend to have been the best time to buy Intel shares. Trading near $14, Intel stock hasn't been this low since the deep technology recession of 2002. So, if the global recession ends before 2010, bombed-out Intel could turn out to be a bargain. (For more, see The Bright Side Of The Credit Crisis.)

Then again, that's a big if. The global economy and consumer demand may take much longer than a year to recover. These days, the credit crunch is hitting both distributors and buyers of consumer electronics worldwide. And, the strength of the U.S. dollar against some foreign currencies is making chips more costly, making the next quarter or two very important for Intel.

If you're a value investor, looking for a long-term investment, then buying now and waiting until the time comes when inventories fall to a level where computer makers have no choice but to grow purchases may seem worthwhile. Getting in ahead of that point is the big trick for Intel investors.

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