In a research note, Ross said lower unit shipments, high costs and severe price cuts on Pentium 4 chips could contribute to the shortfall for Intel.
Intel was off 38 cents to $27.56 in morning trading, while rival Advanced Micro Devices fell 21 cents to $27.47.
Ross lowered second-quarter earnings estimates from 12 cents per share to 8 cents and fiscal year estimates from 55 cents per share to 45 cents. He also cut 2002 earnings estimates from 75 cents per share to 65 cents.
And he chopped revenue expectations for the second quarter from $6.5 billion to $6.1 billion, and for 2001 from $27.6 billion to $26.7 billion.
According to First Call, Intel is expected to report earnings of 11 cents a share on revenue of $6.59 billion.
Ross said in a note that Pentium 4 unit shipments will be "well under plan" in the second quarter and throughout the rest of the year. For the second quarter, Ross said chip shipments could come to only around half of the 3 million units the company hoped for.
"We believe this is still likely high, according to our sources. For the year, we estimate that Intel will ship roughly 10 (million) P4 units, half the 20 (million) it had originally planned."
The chip's high cost and price pressure may also hurt gross margins.
The problem is that the new Pentium is about twice as big as the Pentium 3 chip, so it ends up costing Intel much more to produce it. The problem won't be alleviated until Intel switches over production to a 0.13-micron process, Ross said, but by then AMD will likely be using the same technology, undercutting any cost savings Intel may gain.
In addition, he said, AMD is rapidly gaining share in desktops. And he said AMD plans to aggressively target the notebook and server/workstation markets in the second half of the year, with new Athlon-based mobile and server/workstation products scheduled to ship next month. He also believes AMD may announce high-end notebook wins in June.
Earlier this month, AMD chief Jerry Sanders said that the PC market is improving, adding that he didn't expect to get into a price war with Intel.
His comments followed a report from the Semiconductor Industry Association that March's semiconductor industry revenue was down 4.7 percent from a year ago, the third consecutive month with year-over-year declines.
Semiconductor analysts have been split on the future of the sector, with some arguing that the market has finally hit bottom, and others saying there's still room to drop.
Last month, Merrill Lynch analyst Joseph Osha issued a "reality check" for semiconductor companies, saying that the market wouldn't bottom out until sometime this summer, especially for Intel.
Intel will give a midquarter update June 7. After reporting one of its worst quarters in years, the company said its PC business had "stabilized," but expected further declines in its communications division.
And last week it began "redeploying" hundreds of workers in its online services group as part of a larger restructuring and cost-cutting program.