Intel's Earnings Retreat as CEO Gelsinger Works Toward Revival
By Paul Ziobro
Intel Corp. posted lower quarterly sales and profit while
lifting its full-year outlook as new Chief Executive Pat Gelsinger
fast-tracks efforts to re-energize the U.S. semiconductor giant
against the backdrop of a global chip shortage.
Intel on Thursday said first-quarter sales fell 1% to $19.7
billion, generating $3.4 billion in net income. Excluding the
pending sale of its memory business and other items, Intel said
revenue was $18.6 billion and net income was $5.7 billion. Wall
Street on average expected the company to report first-quarter
sales to $18.6 billion and net income of $4.3 billion, according to
analysts surveyed by FactSet.
"This is a pivotal year for Intel. We are setting our strategic
foundation and investing to accelerate our trajectory and
capitalize on the explosive growth in semiconductors that power our
increasingly digital world" Mr. Gelsinger said in a statement on
Intel's first quarterly earnings with him at the helm.
Intel's stock fell more than 2% in after-hours trading.
Mr. Gelsinger this month laid out an ambitious strategy for
Intel to become a major contract chip maker in addition to making
semiconductors to satisfy its in-house requirements. The plan
includes a $20 billion spending commitment to build two new
semiconductor plants in Arizona.
The CEO, on the job since February, also pledged to make some
production capacity available swiftly to help alleviate a broader
shortage of chips that has caused disruptions across a range of
industries, in particular car production.
The White House this month met with executives from the chip and
other industries to help determine what action it should take to
address the shortage and strengthen the domestic chip-building
industry. President Biden previously pledged to fix the chip
shortages and included $50 billion for the semiconductor industry
in his expansive infrastructure-spending package.
Intel's sales drop comes despite strong demand for chips
broadly. Vivek Arya, a semiconductor analyst at Bank of America,
said ahead of Intel's results that the company is being held back
by several factors. Among those are that a surge in demand for
personal computers is centered largely on lower-end devices like
Chromebooks, while Apple Inc. is ditching Intel for in-house chip
designs on some of its equipment. And after a strong year of
spending on data centers, outlays this year are expected to advance
at a slower pace, he said.
Mr. Arya expects Intel's sales growth to trail that of the
broader sector, which he projects will increase around 15% this
Mr. Gelsinger is trying to rebuild a company that has suffered
repeated setbacks in making its most advanced chip and that has
lost ground to Asian rivals. Mr. Gelsinger last month said the
company was making progress on its newest chips, though analysts
have said they want more detail.
Intel also has said it would increase outsourcing of some chip
production to keep pace, he said.
The company also is contending with increased competition.
Nvidia Corp. -- which last year overtook Intel as American's most
valuable chip company -- and Advanced Micro Devices Inc. have taken
market share. Nvidia this month also said it would start selling
central-processing units for data-centers, a market Intel has long
dominated. Intel this month introduced an enhanced data-center
Intel's effort to become a contract chip maker also isn't
without hurdles. The company has tried to break into that market
before, with little success. And its chief rivals, Taiwan
Semiconductor Manufacturing Co. and Samsung Electronic Co., are
readying their own multibillion-dollar spending plans to expand.
TSMC last week raised its capital-expenditure plan for this year to
$30 billion while lifting its sales forecast. Samsung has earmarked
$116 billion in investment by 2030 to diversify chip
Mr. Gelsinger has said Intel is planning additional chip
investments. The company could benefit from the bipartisan support
in Washington for U.S. chip companies. For instance, Intel is
bidding on a Pentagon contract to help fund domestic chip-making to
meet government security needs.
Intel said it expects revenue for the current quarter of $18.9
billion. The company also said full-year sales should reach $77
billion, $500 million above a forecast issued last month.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
April 22, 2021 16:42 ET (20:42 GMT)
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