Intel Earnings: What to Watch
April 27 2017 - 8:29AM
Dow Jones News
By Ted Greenwald
Intel Corp. is expected, after the market closes Thursday, to
announce first-quarter earnings for the fiscal year that ended in
March. Here's what to look for.
EARNINGS FORECAST: Analysts expect Intel to report diluted
earnings per share of 65 cents on an adjusted basis for the
quarter, according to a survey by Thomson Reuters, up 20% year on
year. Intel's own adjusted per-share earnings figures exclude
restructuring charges and certain items arising from acquisitions,
as well as related taxes.
REVENUE FORECAST: Analysts expect total revenue of $14.8 billion
for the quarter, up 8.1% from the same quarter a year earlier.
WHAT TO WATCH:
-- DATA CENTER REVENUE: The Intel division that supplies
industrial-strength processors to internet giants and corporate
operations accounts for nearly 30% of the company's revenue and
brings relatively high margins. While sales to big online companies
are "growing nicely," enterprise sales have been soft, said analyst
Vijay Rakesh of Mizuho Securities USA LLC. Intel earlier this year
scaled back its estimate for annual revenue growth in the division
from low double digits to high single digits. Investors will be
looking to see that performance aligns with the new guidance.
-- PERSONAL COMPUTER REVENUE: Chips for laptops and desktops,
where Intel holds overwhelming market share, make up more than half
the company's revenue. The chip maker faces two challenges in this
area: A persistently declining market and emerging competition from
a revived Advanced Micro Devices Inc. Intel has guided for an
annual decline of mid-single digits in segment that reports PC chip
sales, but some analysts expect flat growth, since PC shipments
moderated in the first quarter according to top industry
researchers and AMD is gathering steam. Still, the situation
warrants scrutiny going forward. "AMD is competing more
effectively, and that could have a significant impact this year and
next," said analyst Tom Sepenzis of Northland Securities Inc.
-- MEMORY INVESTMENT: Intel has said it would boost capital
spending to $12 billion this year from $9.6 billion in 2016,
dedicating part of the increase to building its memory business.
That Is an investment "investors are struggling to understand,"
said Srini Pajjuri, an analyst with Macquarie Capital (USA) Inc.
Sales at memory specialist Micron Technologies Inc., Intel's
partner in the data-storage technology known as NAND Flash, brought
a 20% gross margin in 2016 compared with Intel's 61%, he said. But
Intel's gamble on memory may have paid off in the quarter: Short
NAND supplies drove spot prices up 42% over the last 12 months,
according to research by TrendForce Corp.'s DRAMeXchange,
potentially yielding a bonus in Thursday's results.
Write to Ted Greenwald at Ted.Greenwald@wsj.com
(END) Dow Jones Newswires
April 27, 2017 08:14 ET (12:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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