Intel's Earnings Rise but Outlook Disappoints
October 18 2016 - 5:10PM
Dow Jones News
Intel Corp. reported an 8.7% rise in third-quarter earnings, as
a lengthy slide in the personal computer market eased a bit and
cloud companies stocked up on servers.
Shares of the chip giant slid 3.6% to $36.39 in after-hours
trading as the company also provided a lackluster revenue outlook
for the current quarter.
Intel, whose chips provide processing power for the vast
majority of computers, in July reported a 51% profit drop on
charges resulting from a plan to reduce its workforce by 12,000
people by mid-2017. The company linked those cuts to a strategy to
reduce its dependence on selling chips for PCs, emphasizing servers
and noncomputer devices associated with a trend called the Internet
of Things.
For the moment, though, PC chips remain the company's largest
source of revenue. Intel in September boosted its financial
guidance for the third quarter, citing moves by PC makers to
rebuild their inventories and some signs of stronger customer
demand. Gartner Inc. and International Data Corp. last week
reported the latest in a series of shipment declines for the PC
business, though IDC said the decline was less severe than
expected.
Intel reported Tuesday that revenue for its client computing
group—composed largely of PC chips—increased to $8.89 billion from
$8.51 billion a year ago. Besides shipment volumes, revenue in the
unit can fluctuate according to whether customers selected
higher-priced chips or not.
In the company's data center group, whose products are priced
higher and command wider profit margins than PC chips, Intel said
third quarter revenue rose to $4.54 billion from $4.14 billion.
Analysts had been expecting revenue of about $4.6 billion,
according to FactSet, based partly on expectations of higher
spending by cloud computing services.
Intel said revenue in its Internet of Things group increased
$689 million from $581 million.
Brian Krzanich, Intel's chief executive, said Tuesday that the
results show Intel's continuing transformation to a company that
powers the cloud and connected devices.
In all, Intel reported net income of $3.38 billion, or 69 cents
a share, compared with profit in the year-earlier period of $3.1
billion, or 64 cents a share. Revenue rose to $15.78 billion from
$14.47 billion.
Excluding one-time items, Intel put per share profit at 80 cents
a share. Analysts on that basis had predicted earnings per share of
72 cents on revenue of $15.6 billion, in line with the figure Intel
projected last month.
For the current quarter, Intel projected revenue between $15.2
billion and $16.2 billion. Analysts, on average, had projected
revenue of $15.9 billion.
Write to Don Clark at don.clark@wsj.com
(END) Dow Jones Newswires
October 18, 2016 16:55 ET (20:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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