Intel Caps Off Difficult Year With Record Sales -- Update
January 21 2021 - 4:48PM
Dow Jones News
By Asa Fitch
Intel Corp. posted record annual revenue but held off on
providing a full-year forecast for this year ahead of the arrival
of a new chief executive at a time the semiconductor giant looks to
fend off competitive pressures and rebuild its technological
leadership.
The company Thursday posted sales of $77.9 billion for 2020, up
from $72 billion the year prior and ahead of the $75.4 billion Wall
Street expected. While Intel has benefited from a boom in demand
for PCs in the work-from-home economy, much of the added buying has
focused on lower-cost laptops that aren't as profitable. Net income
for 2020 came in at $20.9 billion, down from $21.1 billion the
year-prior period.
The earnings mark the end of a challenging yet lucrative year
for the semiconductor giant that saw it surpassed in market
valuation by rival Nvidia Corp., dropped by Apple Inc. as a
supplier for Mac chips, suffer market-share losses and face
activist investor Third Point LLC pushing for strategic
changes.
Departing CEO Bob Swan said, "Intel is in a strong strategic and
financial position as we make this leadership transition and take
Intel to the next level."
Intel's longer-term strategy around the outsourcing of chip
production is in flux ahead of the arrival of Pat Gelsinger as CEO.
Mr. Swan said last year that a decision was forthcoming by early
this year on whether to have the company's advanced chips made by a
third party after Intel fell behind Asian rivals in the development
of the next generation of superfast semiconductors.
The company is considering outsourcing production of some of its
most prized chips to those Asian rivals, and particularly to Taiwan
Semiconductor Manufacturing Co., the largest and most advanced
contract chip maker in the world, according to people familiar with
the matter.
Intel already has decided to send out production of coming
graphics-processing chips to TSMC, and the companies have been in
talks about deepening their relationship further. Mr. Swan visited
TSMC to discuss potential options in December, according to a
person familiar with the trip.
TSMC last year announced plans to build a chip factory in
Arizona, its second in the U.S. And the company last week said it
planned record capital expenditures of as much as $28 billion this
year, a huge increase from last year and an indication, in some
analysts' eyes, that new business from Intel is on the way.
Given the importance of that decision to Intel's long-term
future, a final verdict on outsourcing plans could be deferred
until Mr. Gelsinger takes over in mid-February, analysts say. The
selection of Mr. Gelsinger, the chief executive of VMware Inc., who
spent three decades at Intel earlier in his career, was widely
hailed. Intel's stock is up 10% since his naming last week. But
analysts expect the turnaround in an industry where
product-development cycles are measured in years, not months, to
take time.
"It's a good thing to bring in someone new, and particularly
someone who has worked at Intel and has a tech background, but
whatever path they follow, it will take time to implement," Wedbush
Securities analyst Matthew Bryson said ahead of earnings
Third Point, the activist hedge fund led by Daniel Loeb, took a
position of about $1 billion in Intel's shares and advocated in a
December letter for the company to consider an even more
foundational change: splitting up its chip-design and manufacturing
operations. Such a move would end Intel's decadeslong run as the
leading U.S. integrated chip manufacturer. On Twitter, Mr. Loeb
praised Mr. Swan for stepping aside for Mr. Gelsinger.
Intel is facing other pressures, including from competitors such
as Nvidia and Advanced Micro Devices Inc. Amid Intel's
manufacturing setbacks, AMD has gained market share quickly in
central processors for PCs and servers.
Intel said it expects sales in the first quarter of $18.6
billion. Analysts have projected sales of $16.1 billion.
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Write to Asa Fitch at asa.fitch@wsj.com
(END) Dow Jones Newswires
January 21, 2021 16:33 ET (21:33 GMT)
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