Intel Net Climbs as PC Slide Ends -- WSJ
October 19 2016 - 3:03AM
Dow Jones News
By Don Clark
Intel Corp. reported an 8.7% rise in its third-quarter earnings,
as a lengthy slide in the personal computer market reversed and
cloud-computing companies stocked up on servers.
The results came in ahead of Wall Street estimates and the
increased revenue guidance that Intel issued last month. But the
company's estimate for revenue in the current period was slightly
lower than analysts projected.
Its shares slid nearly 6% to $35.54 in after-hours trading.
Intel executives stressed the positive, noting the company set
sales records in its data center, Internet of Things groups, and in
total revenue.
"It was an extraordinary quarter," said Stacy Smith, the
company's longtime chief financial officer, who is taking a new
position as executive vice president leading manufacturing,
operations and sales.
Intel, whose chips provide processing power for the vast
majority of computers, in July reported a 51% profit drop on
charges resulting from a plan to reduce its workforce by 12,000
people by mid-2017. The company linked those cuts to a strategy to
reduce its dependence on selling chips for PCs, emphasizing servers
and noncomputer devices associated with a trend called the Internet
of Things.
For the moment, though, PC chips remain the company's largest
source of revenue. Intel in September boosted its revenue forecast
for its third quarter due to moves by PC makers to rebuild their
inventories and some signs of stronger customer demand. Gartner
Inc. and International Data Corp. last week reported the latest in
a series of shipment declines for the PC business, though IDC said
the decline was less severe than expected.
Intel reported Tuesday that revenue for its client computing
group -- composed largely of PC chips -- increased 4.5% from the
year-earlier period to $8.89 billion. Besides shipment volumes,
revenue in the unit can fluctuate according to whether customers
selected higher-priced chips or not. Intel said average selling
prices for chips used in notebooks rose 3% on a 4% increase in
shipments.
In the next quarter, after moves by computer makers to build
more systems in advance of the holiday selling season, Intel
expects PC chip sales in the fourth quarter to be lower than the
normal seasonal increase, Mr. Smith said.
Bill Kreher, an analyst at brokerage house Edward Jones, said
retailers showed a willingness to put new PCs on their shelves. But
Intel's projection suggests "the sustainability of that PC strength
remains in question," he said.
In the company's data center group, whose products are priced
higher and command wider profit margins than PC chips, Intel said
third-quarter revenue rose 10% to $4.54 billion. Analysts had been
expecting revenue of about $4.6 billion, according to FactSet,
based partly on expectations of higher spending by cloud computing
services.
Brian Krzanich, Intel's chief executive, told analysts
third-quarter revenue from cloud service providers rose 32% from
the year-earlier period.
Intel said revenue in its Internet of Things group rose nearly
19% to $689 million. In memory chips, where Intel and other
suppliers have been hurt by price declines, revenue fell about 1%
to $649 million.
In all, Intel reported earnings of $3.4 billion, or 69 cents a
share, compared with profit in the year-earlier period of $3.1
billion, or 64 cents a share. Excluding one-time items, Intel said
it earned 80 cents a share.
Revenue rose to $15.78 billion from $14.47 billion.
Analysts on that basis had predicted earnings per share of 72
cents on revenue of $15.6 billion, in line with the figure Intel
projected last month.
The company said its adjusted gross profit margin was nearly
65%, ahead of its September projection of 63%.
For the current quarter, Intel projected revenue of $15.7
billion, plus or minus $500 million. Analysts, on average, had
projected revenue of $15.9 billion. The company predicted its
adjusted gross margin would decline to 63%.
Write to Don Clark at don.clark@wsj.com
(END) Dow Jones Newswires
October 19, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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