Uptick in PCs Bolsters Intel -- WSJ
April 28 2017 - 3:02AM
Dow Jones News
By Ted Greenwald
Intel Corp.'s quarterly earnings soared 45%, as strong sales of
high-end processor chips outweighed high costs in what is normally
its most profitable business.
Revenue rose 8% to $14.8 billion in the first quarter. Intel
benefited especially from improvement in the personal-computer
business, with operating profit in the segment that sells PC chips
jumping 61% from a year earlier, as sales rose 5.7% to $7.98
billion.
Amid the overall strength, though, profit in the division that
sells chips for the servers used in data centers was hurt by an
earlier shift to a more advanced manufacturing process that can
improve chip performance but initially costs more. Intel said
operating profit in its data-center division narrowed by 16%, while
revenue rose 5.8% to $4.23 billion.
Shares fell nearly 4% in after-hours trading. Intel's share
price generally has lagged behind that of its semiconductor peers,
losing roughly 2% in the year to date.
Intel dominates its core markets of processor chips for PCs and
servers. But its overwhelming market share leaves limited room to
grow, and competition lately has emerged in both areas. A
revitalized Advanced Micro Devices Inc. is building momentum in the
PC market and has plans to sell server chips. Meanwhile, processors
from Nvidia Corp. have found a place in data centers, and chips
based on technology from ARM Holdings PLC are beginning to make
headway.
The PC market has been in a persistent decline, but PC shipments
in the first quarter were better than expected. Research by
International Data Corp. showed a marginal uptick in the first
quarter, year on year, compared with its forecast of a 1.8%
falloff.
Sales of server chips have been expected to compensate for any
PC shortfalls in 2017, driven by gargantuan internet operations
such as Alphabet Inc.'s Google Cloud Platform, Amazon.com Inc.'s
Amazon Web Services, and Microsoft Corp.'s Azure. The three
cloud-computing giants together spent $31.54 billion on data
centers in 2016, according to company filings -- up 22% from the
previous year.
Intel aims to spur growth by investing heavily in areas where it
has room to gain share. In March, it agreed to spend $15.3 billion
to buy Israeli car-camera pioneer Mobileye NV in a deal it expects
to close by the end of the year, and it has budgeted $12 billion in
annual capital expenditures, largely to build its memory business
and beef up its manufacturing facilities, it has said.
Opportunities in automotive, memory, mobile, and the addition of
computing and communications to a wide variety of items -- a trend
known as the Internet of Things -- will amount to a total market of
$220 billion by 2021, Intel has said.
Overall for the quarter, Intel reported net profit of 61 cents a
share. Adjusted earnings, excluding restructuring charges and
certain items arising from acquisitions and related taxes, were 66
cents a share. Analysts surveyed by Thomson Reuters expected
adjusted earnings of 65 cents per share on $14.81 billion in
revenue.
For 2017, Intel raised its adjusted profit projection by a
nickel to $2.85 a share, and said it expects $60 billion in
revenue. It had previously guided for the top line to remain flat
from 2016's $59.4 billion.
Write to Ted Greenwald at Ted.Greenwald@wsj.com
(END) Dow Jones Newswires
April 28, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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