SAN FRANCISCO – If you’re looking for bargains on personal computers, bad news from the industry could be good for your pocketbook.

Computer makers are scrambling for ways to goose faltering consumer demand after a weak start to the back-to-school shopping season. That could mean deeper price cuts and other promotions beyond the incentives that the industry dangled in front of shoppers to lure them into stores during the worst of the recession.

The latest sign of trouble came Friday when Intel Corp. lowered its forecast for the third quarter, saying demand for consumer PCs has been weaker than expected.

Because Intel’s microprocessors are used in 80 percent of the world’s PCs, its forecast essentially speaks for the health of the entire PC industry. Plus, its orders are based on how many computers the world’s biggest PC makers expect to make in the coming months, so weak chip sales now could foreshadow weak results to come from those manufacturers.

Even before Intel announced the latest trouble, two leading PC makers — Hewlett-Packard Co. and Dell Inc. — raised red flags last week about what is normally a robust season for sales.

Dell’s chief financial officer, Brian Gladden, called the back-to-school shopping season "a little weaker than we would have expected." Todd Bradley, head of HP’s PC division, complained of "softness" in consumer laptops and said back-to-school shopping was off to a late start.

Barclays Capital analyst Ben Reitzes said another factor could cause PC makers to cut prices: In the past few months, the prices for parts such as hard disk drives and memory have fallen — to their lowest levels of the year in August. That gives PC makers the freedom to lower prices while maintaining profit margins.

"This component environment could potentially now allow companies to invest in more aggressive pricing to stimulate demand into next year," he wrote in a research note Friday.

Intel said it now expects revenue of $10.8 billion to $11.2 billion for the fiscal third quarter, which ends in September. That compares with a previous forecast of $11.2 billion to $12 billion. On average, analysts surveyed by Thomson Reuters had expected $11.5 billion.

Three-quarters of Intel’s revenue comes from its chips and other technologies for PCs. The forecast cut means that PC makers suddenly scaled back or canceled their orders with Intel during the quarter, reflecting the lower demand they’re bracing for in the coming months.

PCs already have low profit margins, and the recession squeezed them further by forcing price cuts to entice shoppers. The strategy worked, but dipping demand could mean that prices will fall even more.

Reitzes said the computer maker with the biggest potential for revenue growth in this market is Apple Inc., whose iPad is seen eating into laptop sales. PC makers such as HP, Dell and others, he said, face a different question in needing to balance aggressive pricing with generating profits.

Consumer spending on discounted computers was instrumental in helping buoy the industry over the past two years, while businesses cut way back.

That trend is now reversing.

Consumers aren’t spending on technology as freely as they were. Uncertainty about jobs is keeping their spending in check.

Meanwhile, businesses have freed their budgets a bit. It’s not necessarily because they’re more sanguine about their prospects. Upgrading technology makes financial sense: Maintaining old machines can be more expensive than buying new ones with more features.

But there are signs business spending is rocky as well.

John Chambers, CEO of Cisco Systems Inc., the world’s largest maker of computer networking gear and another important barometer of technology spending, said in early August that the company was seeing signs that the global economic recovery is slowing down. He said Cisco is getting "a large number of mixed signals" from customers about their spending plans.

Intel’s warning comes a month after the company reported its biggest quarterly profit in a decade.

But those results were fueled by a rebound in technology spending at corporations, many of which held off replacing older computers during the recession.

Intel’s downgrade to its guidance wasn’t entirely a surprise. Many investors simply didn’t believe that Intel would be able to hit the higher numbers because of signals from other PC-industry suppliers that PC sales were collapsing.

Those fears were the main reason why Intel’s stock has fallen about 13 percent since Intel issued its original guidance on July 13. The fall erased about $16 billion in shareholder wealth through Thursday’s close.

After the company released its revised outlook, the company’s shares rose 19 cents, or 1 percent, to close Friday at $18.37, amid a general lift on Wall Street.

Analyst Craig Berger with FBR Capital Markets said that PCs might be "just the first shoe to drop," and that troubles could spread to other chip-makers, such as those that focus on communications, industrial and automotive sectors. He added that Intel’s main rival, Advanced Micro Devices Inc., is also likely being hurt.

Intel is scheduled to report results on Oct. 12 and plans to update its fourth-quarter and full-year outlook then.

The company has benefited from a recovering PC market for about a year and half. In April 2009, Intel CEO Paul Otellini proclaimed that PC sales "bottomed out" and had started recovering — a forecast that even the major PC makers wouldn’t immediately get behind, but proved to be true.

Now, it appears the market is starting to dip again.

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AP Business Writer Andrew Vanacore contributed to this story from New York.

NEW YORK – The seemingly recession-proof smart phone is suffering from a side effect of the rough economy: Manufacturers simply can’t build enough of the gadgets because chip-makers that rolled back production last year are now scrambling to play catch-up.

The chip shortage means Apple Inc.’s rivals are having trouble making enough phones to compete with the iPhone, a problem expected to persist through the holidays. It’s also affecting wireless carriers, some of which are seeing delays in improving their networks, and it could even raise computer prices.

There isn’t an across-the-board shortage of chips, but rather problems with certain components here and there. If just one of the 20 to 30 critical chips that go into a smart phone is unavailable, the whole production line screeches to a halt.

Sprint Nextel Corp., for instance, couldn’t satisfy demand for HTC Corp.’s EVO 4G, the first phone to use a faster "4G" network, in parts of the country. Motorola Inc. said shortages of a wide range of chips, from memory to camera sensors to touch-screen controllers, are contributing to problems supplying enough of the new Droid X phones to Verizon Wireless. The carrier’s online store reports a two-week wait for shipping orders.

The chips that go into smart phones compete for production capacity with other chips at the gigantic factories run by contract manufacturers such as Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp. Makers of a vast array of electronics, from TVs to data center switches, also depend on the factories.

The chip-making industry had a tough start to 2009. February sales were only $14.2 billion, down 30 percent from the year before, according to the Semiconductor Industry Association.

Although sales sprang back later in the year, manufacturers were spooked and reined in investment in chip factories. Capital spending plunged 41 percent to $25.9 billion in 2009, after dropping 31 percent the year before, according to research firm Gartner Inc. Total chip production capacity shrank.

Now the factories are having trouble scaling up production fast enough. The chip factories, or "foundries," are running at 96 percent capacity, up from 56 percent at the depth of the recession, according to the SIA.

"The semiconductor guys are really continuing to operate on all cylinders," said Linley Gwennap, president of research firm The Linley Group.

Gartner predicts worldwide investment in the chip industry zooming 84 percent this year to $47.5 billion. That forecast is up from March, when it looked for a 56 percent increase.

While investment is recovering, it takes months to set up new production lines and upgrade existing ones. That’s why executives see shortages lasting until next year. Gwennap also sees caution in the industry because the global economic recovery is starting to look quite tentative.

"Even where companies are facing shortages, they’re saying ‘Nah, I’m not sure I want to invest right now, because demand could turn down any minute.’ That makes for a very difficult environment," he said. "In normal times, companies would be hiring, investing in more equipment and factories and trying to increase supply, but these aren’t normal times."

Though consumers may have to wait for new phones, they’re unlikely to notice price increases. Phone prices are heavily subsidized by carriers, and competition in the industry means it’s likely someone in the supply chain will absorb higher prices for the chips.

However, research firm iSuppli warns that prices for PCs could rise this year because of short supplies of memory chips. The prices for these commodity chips are highly volatile. Smaller memory-chip manufacturers need to replace factory equipment, and tool suppliers are struggling to keep up, iSuppli said.

Makers of computer and phone networking equipment were the first to report problems this spring. They continue to face constraints, which means trouble for U.S. wireless carriers that are struggling to increase network capacity to cope with data traffic from the iPhone and other smart phones.

Alcatel-Lucent and LM Ericsson AB, the two largest makers of equipment for U.S. phone companies, have both reported problems making deliveries. They’re both suppliers to AT&T Inc., which has complained that it can’t beef up its wireless data network as fast as it would like, as it’s trying to deal with traffic from the iPhone.

Computer networking giant Cisco Systems Inc. is also feeling the pinch and expects problems to continue through the year.

"We continue to see challenges in procurement of components this quarter," Cisco CEO John Chambers said recently. "Supplier lead times now appear to have stabilized, but are still longer than we would like."

Apple is an exception. Although the company can’t keep the iPad and iPhone 4 in stock, it blames that on demand outstripping assembly line capacity, not on problems procuring the right chips.

That may be partly "dumb luck" on Apple’s part, Gwennap said, but it could also be a case of it being "good to be the king."

"As a chip supplier, you’re going to service your best customers first," he said. "If my choice is to try to make Apple happy or some smaller customer of mine, I might take all of my supply and give it to Apple."

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AP Business Writer Annie Huang in Taipei, Taiwan, contributed to this report.

SEATTLE – Dell Inc.’s purchase of a storage provider for $1.13 billion marks another step in the personal computer industry’s quest to expand into more profitable businesses.

As PC prices have plummeted in recent years, computer manufacturers such as Dell and Hewlett-Packard Co. are moving to meet emerging demand for technology services — hoping they’ll find better profit margins there.

With the acquisition of 3Par Inc., which makes enterprise data storage equipment, Dell is boosting its ability to help companies manage information technology in new ways, through services generally referred to as "cloud computing."

Many companies no longer want to buy expensive server computers and pay to maintain them and keep software up to date. Instead, they are starting to pay to have the same software delivered over the Internet on a subscription basis. Storage for data and files is a key part of the cloud equation, and the 3Par products add to Dell’s portfolio.

Dell is offering $18 per share for 3Par, an 87 percent premium over the company’s Friday closing price of $9.65. Shares of 3Par surged to close Monday at $18, while Dell’s stock slipped 5 cents to $11.96. The deal is expected to close this year.

Dell is the world’s second-largest maker of personal computers, behind HP, and it has fallen behind its rival in establishing more profitable lines of business beyond PCs.

HP’s revenue was $116 billion in the most recent fiscal year, which ended Oct. 31. That’s more than twice Dell’s revenue of $53 billion in its past fiscal year, which ran through Jan. 29.

PCs still made up more than half of Dell’s revenue, compared with just under third at HP. Servers and storage made up 15 percent of Dell’s revenue and 13 percent of HP’s. But HP also operates a technology services and outsourcing division that accounts for about another third of its revenue, built on the 2008 acquisition of EDS for $13 billion.

Cloud computing helps cut technology costs by making more efficient use of server computer hardware. As companies need more or less storage space or computing power, the systems can automatically scale up or down behind the scenes.

Dell, which is based in Round Rock, Texas, is angling for a bigger slice of this new market, both as a provider of cloud services and as a technology vendor for companies that want to set up their own clouds. The 3Par products join those from several other storage acquisitions.

In July, Dell bought Ocarina for an undisclosed price and gained technology that helps compress data and remove duplicate information. In February, Dell acquired Exanet, a file storage software maker, for $12 million. In 2008, it bought data storage appliance maker EqualLogic for $1.4 billion.

The Fremont, Calif.-based 3Par make pricey systems designed to efficiently use available storage space through so-called "thin provisioning," which makes it easy to add capacity when needed. The company had an early lead in this technology, but competitors such as NetApp Inc., EMC Corp., IBM Corp. and HP are starting to catch up.

Dell will be adding the 3Par products to its high-end and middle-market data storage appliances. Dell also has a low-end data storage product called PowerVault.

David Scott, the CEO of 3Par, said during a conference call Monday that adding 3Par’s products to Dell’s existing storage offerings creates the strongest lineup in the industry.

"Other vendors will be left in danger of being flat-footed with tired product lines and few options," Scott said.

Maynard Um, an analyst at UBS, said that the deal strengthens Dell’s cloud computing play, and that Dell can use its size and global reach to help 3Par sales grow.

But Kaufman Bros. analyst Shaw Wu said Monday that he believes the purchase price for 3Par is high. He also noted that Dell already sells EMC products under the Dell/EMC brand.

The analyst wrote in a client note that acquiring 3Par "could negatively impact Dell’s relationship with EMC." Wu estimates EMC represents about a quarter of Dell’s $2.2 billion storage revenue in the most recent fiscal year.

Brad Anderson, a Dell senior vice president in the enterprise product group, waved off such concerns, saying there was little overlap between Dell’s EMC customers and prospective 3Par buyers.

"EMC is a very important partner of ours," Anderson said. "Our plan is not to change anything."

Wu said by e-mail that buying 3Par puts Dell in a better position than before.

But, the analyst cautioned, "Competing against HP, IBM, EMC and NetApp is never easy."

NEW YORK – Threats by the governments of India, the United Arab Emirates and Saudi Arabia to shut down BlackBerry’s corporate e-mail services reflect unease about a technology that the U.S. government also took a while to accept.

The foreign governments are essentially a decade behind in coming to terms with encryption, a technology that’s fundamental to the Internet as a medium of commerce.

Encrypted communications are scrambled in a complex process to ensure that only the intended recipient can read them, using the proper digital key. This often takes place behind the scenes, without the user needing to do anything. When you submit your credit card number on a shopping site, the communication is encrypted. When you log in to your bank’s site, that connection is encrypted as well.

Most companies use encrypted connections for their corporate e-mails, at least if employees need to access e-mail outside the office through virtual private networks and other secure systems. One of the reasons Research In Motion Ltd. has been so successful with its BlackBerry phones is that it brought that level of security to e-mail-capable phones.

Encryption, however, poses a problem for law enforcement officials. They can intercept encrypted messages, but can’t read them, unless the encryption is poor and agents have vast computer resources to use in unscrambling them. Traditional investigative tools such as wiretaps don’t work. Canada’s RIM and other technology companies stress that they agree to legal requests from law enforcement, but in RIM’s case, it can’t decrypt the messages on its corporate e-mail service.

BlackBerrys seem to have been singled out by foreign governments because the devices provide an easy and convenient way to communicate securely. But there are many other ways to communicate in an encrypted fashion, and any government that’s serious about squelching encrypted communications would need to go after them as well.

According to a representative of Indian Internet service providers, the Indian government plans to go after Google Inc., presumably for its Gmail service, and Skype SA for its voice and video conferencing software.

The U.S. State Department has waded into the issue, saying it hopes to broker a compromise that addresses the legitimate security concerns of some governments while ensuring that the free flow of information is not compromised.

That’s somewhat ironic, considering the U.S. restricts exports of encryption technology. The restrictions are light, but were quite comprehensive before 1999. The U.S. was concerned that it couldn’t easily spy on foreign countries that used encryption for military and government communications.

In fact, until 1996, encryption at the level commonly in use today was classified as a munition. Companies that exported Web browsers and other software products had to make alternative versions with much weaker encryption for use abroad.

The First Amendment made it impossible to restrict encryption technology inside the U.S. But the Clinton administration still tried to get the industry to adopt the "Clipper Chip," a device that would encrypt communications but leave a "backdoor" for the government to decrypt messages. The idea led to a public outcry and had technical shortcomings, and it was ultimately abandoned.

With the rise of the Internet as a consumer medium in the 90s, encryption became a household technology. It became clear that restricting the use of tough encryption only to U.S. Internet users wasn’t feasible.

Still, when the Clinton administration relaxed export controls, it was over the objections of its attorney general and FBI director.

The relaxation of export restrictions in 1999 wasn’t the end of the debate, either. Two days after the 9/11 attacks, Sen. Judd Gregg, R-N.H., called for a global prohibition on encryption products that didn’t have backdoors for government surveillance; he was reviving the "Clipper Chip" idea.

In 2003, the Justice Department circulated draft legislation that would lengthen prison sentences for people who used encryption in the commission of a crime. Encryption defenders said it would do little to help catch terrorists, and it went nowhere.

Since then, the U.S. government has more or less accepted that encryption is here to stay. Wholesale access by law enforcement to encrypted communications may not be possible, but BlackBerry e-mails are decrypted at the corporate servers, and can be obtained from there with a warrant. Gmail connections are encrypted, but the messages are in the clear on Google’s servers, and Google cooperates with law enforcement. Intercepting Skype is trickier because the audio and video conversations aren’t stored, but security experts say there are ways to deal with this.

Then there’s always human error. The alleged Russian spy ring that was arrested in the New York area in June used encryption, but one of them also left a password lying on his desk, where it was found by FBI agents who broke in. That enabled them to decrypt hundreds of messages.

RIM, the company behind the BlackBerry, doesn’t have years to wait for foreign governments to adopt the more relaxed U.S. stance toward encryption. It has until the end of the month to comply with orders from Indian government, and it may have no way to do so short of shutting down service in the country.

The RIM system doesn’t seem to be designed to give a backdoor to anyone, not even to those in the company, said Maribel Lopez, a technology analyst and consultant.

"It’s not like RIM is sitting there with everybody’s keys looking at everybody’s stuff," she said. That doesn’t give them much leeway in dealing with governments that want keys.

"This is actually a bit of disaster for them right now because there doesn’t seem to be any good compromising midpoint," Lopez said.

SAN FRANCISCO – The Federal Trade Commission is trumpeting its settlement with Intel Corp. as a victory for consumers who have overpaid for computer chips for a decade, though computer buyers shouldn’t expect a sudden drop in prices.

The deal announced Wednesday represents the end to the harshest antitrust lawsuit Intel has faced yet from government regulators, and it imposes the strictest set of changes onto the way Intel does business.

But any changes as a result of the FTC’s actions would likely be gradual, and possibly imperceptible, to most people.

One reason is that the prices for computer chips have steadily fallen anyway as technological advancements make it cheaper for companies such as Intel to make more powerful chips. Consumers have gotten used to getting more computer for less money every time they go shopping.

The FTC’s case is built on the argument that those prices haven’t fallen as fast as they could have. It has accused Intel of contributing to that by abusing its position as the No. 1 supplier of both central processing units (CPUs) and graphics processing units (GPUs) to box rivals out of the market and stifle competition.

CPUs are the "brains" of computers and are among their most expensive parts, often making up about 15 percent to 20 percent of a computer’s price. GPUs are chips that make graphics look good on computer screens.

FTC Chairman Jon Leibowitz said Intel’s behavior stepped well over the line — moving beyond "the type of aggressive competition on the merits that we all encourage and into the realm of unfair, deceptive and anticompetitive conduct."

Intel has long denied the charges and has pointed to the industry’s falling prices as evidence that the market is functioning normally.

Its argument has supporters.

Last week, the "special master" appointed by a federal court in Delaware to oversee class-action lawsuits against Intel argued in Intel’s favor that consumers have benefited from the controversial discounts that Intel gives computer makers. The reason? Those savings are often passed along.

Intel’s general counsel, Doug Melamed, said the settlement "provides a framework that will allow us to continue to compete and to provide our customers the best possible products at the best prices." Melamed added that the settlement puts an end to the "expense and distraction" of the litigation.

Investors appeared unmoved by the FTC settlement, which was expected. Shares fell just 2 cents to close Wednesday at $20.73.

"I think it’s more of a formality than anything else and don’t think it materially changes the game for anybody," said Patrick Wang, a semiconductor analyst with Wedbush Securities. A settlement that didn’t have any major surprises "was never going to impact the stocks. If anything, it’s a relief."

The settlement is a reminder that Wall Street cares less about Intel’s antitrust tussles than it does the company’s vulnerability to swings in the economy and changes in demand for computers.

Over the past five years, shares of Intel, a component of the Dow Jones Industrial Average, have mostly traded in the $20 to $25 range, except for the clobbering they took during the worst of the recession, when demand for the most expensive types of personal computers — and Intel’s most expensive chips — nosedived.

As part of the deal, Intel has agreed not to pay computer makers for avoiding rivals’ chips or retaliate against them when they do pick competing products — things Intel has long maintained it wasn’t doing anyway.

Those were essentially the terms of a $1.25 billion settlement Intel struck last year with Advanced Micro Devices Inc., a key rival whose complaints piqued regulators’ interest. The aftershocks of AMD’s campaign still reverberate: Intel is still contesting a $1.45 billion antitrust fine in Europe and separate cases in South Korea and New York state.

The FTC deal goes further than previous cases in mandating that Intel needs to be friendly to its rivals in other significant ways.

Those include modifying its intellectual-property agreements with AMD, Nvidia Corp. and Via Technologies Inc. so that those chip-makers can more easily do mergers and joint ventures with other companies without the immediate threat of a lawsuit from Intel.

That is important because AMD’s recent decision to spin off its factories into a separate company — which AMD needed to avert financial ruin — triggered a showdown with Intel over the legality of that move. Intel’s leverage over AMD in that matter was key to wringing a settlement out of AMD for far less money than AMD could have won at trial.

Jim McGregor, a semiconductor analyst with market researcher In-Stat, said technology companies have long used such agreements as weapons.

"We’ve seen that over and over again where they’ve used that as a hammer," he said. The FTC’s case is a "huge statement to the industry that, ‘You’re reaching too far.’"

McGregor added that chip prices typically fall about 20 percent per year, and chip-makers try to counteract that by rolling out newer products that command higher prices. He said the FTC is "reaching a bit" with its argument that consumers would see better prices as a result of the settlement, adding that "we’ve seen dramatic decreases in prices over the past decade."

Other parts of the settlement:

• Intel must now tell customers that its "compilers" — which are used in software development — aren’t in fact objective and are biased toward Intel’s chips. Software written using them performs better on Intel’s products than on rivals’. Intel has to reimburse customers up to a total of $10 million if they feel they were misled and want to fix their software.

• Intel has agreed to maintain a key type of technology in its chips, called a PCI Express bus, in a way that won’t degrade the performance of other types of chips that connect to Intel’s chips. That part of the settlement speaks to the growing animosity between Intel and makers of graphics chips. GPUs are increasingly taking over chores that CPUs have traditionally handled.

"The FTC is trying to spell out the rules of engagement for the high-tech industry," McGregor said. "This is kind of a warning shot: ‘You guys have to play nice.’"

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Associated Press Technology Writer Joelle Tessler in Washington contributed to this report.