By Don Clark
SANTA CLARA, Calif.-- Intel Corp. projected more growth next
year, as an improving personal computer market and newer bets pay
off for the chip maker.
Intel executives on Thursday also vowed to stem the heavy losses
from a high-stakes effort to place its chips in tablets. They
predicted gross profit margins for the group that includes tablets
would begin to turn positive in the first half of 2016.
"We are in this business not to lose money but to make money in
the long run," said Brian Krzanich, Intel's chief executive.
Among a series of announcements at its annual analyst meeting,
the company also vowed to increase its annual dividend and reported
its latest progress on improving chips according to the historic
pattern known as Moore's Law.
Intel's shares gained 4.7% to $35.95.
The Silicon Valley giant is the longtime leader in chips used in
PCs and server systems. But it ran into slowing sales after the
introduction of Apple Inc.'s iPad in 2010, when consumer dollars
shifted away from laptop computers.
That picture began improving in 2014, as tablet sales began to
slow and many businesses decided to keep issuing laptops to
employees rather than replace them with tablets.
Intel, which reported 8% revenue growth in the third quarter,
said on Thursday revenue would grow in 2015 by percentages in the
"mid-single digits." Most analysts had expected growth of around
3%, according to a survey by Thomson Reuters.
Intel predicted that its closely watched gross profit margin
would contract somewhat. The company had projected the figure at
about 64% in the fourth quarter; it put the figure Thursday for all
of 2015 at 62%, plus or minus two percentage points.
The margin decline is related to Intel's effort to maintain
Moore's Law, a steady pace of shrinkage in the size of transistors
on chips. That miniaturization can make chips faster and consume
less energy while reducing their manufacturing cost.
As an example, Intel pointed to its latest production process,
which can create circuitry measured at 14 nanometers, or billionths
of a meter. The company's first chip using the manufacturing
recipe, code-named Broadwell, is 37% smaller than a comparable
predecessor but has 35% more transistors, Intel said.
But that product began arriving in limited quantities in
October. Intel's cadence of improvements in prior years would have
pointed to delivery in the first quarter of 2014.
William Holt, Intel's executive vice president in charge of
manufacturing, said the 14-nanometer process still isn't producing
the number of working chips per silicon wafer that Intel had
expected. That deficiency should be corrected next year, he said,
but the delay and cost of developing the next production recipe
will shrink Intel's profit margins temporarily, company executives
said.
The tone of Intel's analyst meeting was much more upbeat than a
year ago, when Mr. Krzanich hosted the event for the first time. At
that time, Chairman Andy Bryant apologized for Intel's slow
reaction to changes in the market, such as successfully placing its
technology in smartphones and tablets.
Mr. Krzanich used the 2013 event to set a high-profile target to
improve Intel's position, predicting the company would put its
chips in more than 40 million tablets in 2014. But hardware
manufacturers balked at the cost of shifting from competing chips
to Intel products. The company responded with subsidies it calls
"contra" revenues.
Intel has paid a heavy price. In the fourth quarter, the group
that includes tablet chips posted a loss of $1 billion on revenue
of just $1 million. Mr. Bryant said the red ink was viewed as a
necessary outcome of Intel being late to providing chips for tablet
computers.
"This is the price you pay for sitting on the sidelines for a
number of years and then fighting your way back into a market," Mr.
Bryant said. "We will improve this. We will get back in."
The company expects to reduce its operating losses for the
mobile chip business by about $800 million in 2015. Mr. Krzanich
that business should also benefit with the arrival of SoFia, a new
product that combines a processor with cellular communications
capability.
Meanwhile, some other Intel businesses are plenty profitable,
including chips for server systems. The company expects revenue in
that area to grow 15% in 2015.
In PCs, following a strong rebound in shipments and revenue in
2014, the company expects unit shipments to be flat in 2015 on a
slight reduction in revenue.
Intel said its dividend would rise by six cents per share on an
annual basis, bringing the total payout to 96 cents a share.
The company put total spending for 2015 at about $20 billion,
with spending as a percentage of revenue down. It put capital
spending at $10.5 billion.
Write to Don Clark at don.clark@wsj.com
Access Investor Kit for Intel Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US4581401001
Subscribe to WSJ: http://online.wsj.com?mod=djnwires