By Don Clark
Intel Corp. and Qualcomm Inc., chip makers grappling with a
variety of headwinds, released quarterly results on Wednesday that
offered mixed signs of progress in addressing their challenges.
Intel's quarterly profit fell 51%, reflecting $1.4 billion in
charges mostly due to a plan to reduce its workforce by 12,000
people by mid-2017. The Santa Clara, Calif., company's results
indicate fallout from the declining PC industry is moderating even
as more lucrative server-chip sales grew less than expected.
Brian Krzanich, Intel's chief executive, said the company is
gaining momentum into the second half of the year. Intel's shares
slid nearly 3% in after-hours trading.
Qualcomm, whose fortunes are closely tied to the smartphone
industry, reported a 22% increase in income The company has been
struggling since a 2015 antitrust settlement in China over hardware
royalties. It has signed many of China's largest handset makers,
but some smaller companies haven't complied.
"Our business is looking very strong in China," Steve
Mollenkopf, Qualcomm's chief executive, said in an interview.
Qualcomm's shares jumped nearly 7% on the profit gain.
The two companies have been slashed head count to adjust to
weaker sales growth and free up cash to invest in newer
businesses.
Intel, whose chips power most computers, has unsuccessfully
tried for years to build a foothold in smartphones. That market is
dominated by processor technology licensed to Qualcomm and many
other companies by ARM Holdings PLC, the target of a recent $32
billion takeover by SoftBank Group Corp.
Qualcomm's business is built around cellular modem technology,
which it sometimes combines on chips with processors. Major
customers include Apple Inc. and Samsung Electronics Co. The
company has plans to sell processors for servers, Intel's most
lucrative business, but its products aren't available yet.
The San Diego-based company had expected mobile chip shipments
between 175 million and 195 million for its third quarter. Instead,
that tally climbed to 201 million.
One of the biggest questions surrounding both companies is what
share Intel might win of Apple's modem chip purchases for future
iPhones. Neither Intel or Apple have commented on that possibility,
though Qualcomm's projections have reflected the assumption that it
will lose a portion of Apple's sales.
"That continues to be built into our model," Mr. Mollenkopf
said.
Intel's Mr. Krzanich has tried to position that company for a
new era in which PCs aren't an overriding focus. At present,
however, Intel still gets the largest share of its revenue from PC
chips.
Intel said on Wednesday that its revenue from that "client"
device business that includes PCs declined 3% from the year-earlier
period.
"These results were a little better than we expected," Mr.
Krzanich said.
Intel's business in server chips, driven lately by sales to
large internet companies, rose 5%. Stacy Rasgon, an analyst at
Sanford C. Bernstein, noted that the growth seemed weak in
comparison with prior projections of growth in double-digit
percentages for the year.
Mr. Kzanich is also betting on a trend called the Internet of
Things, which refers to adding computing, sensing and communication
capability to all kinds of everyday devices. Revenue for that
segment rose 2% from the prior year.
In memory chips, a market hit by falling prices lately, Intel
said revenue declined 20%.
Overall, Intel reported a profit of $1.33 billion, or 27 cents a
share, down from $2.71 billion, or 55 cents a share, a year
earlier. Revenue increased 2.6% to $13.53 billion, while the
company's gross profit margin declined to 58.9% from 62.5%.
Excluding the restructuring charge and other items, Intel said
adjusted per-share earnings were 59 cents. Analysts polled by
Thomson Reuters expected per-share profit on that basis of 53 cents
and revenue of $13.54 billion.
For the current quarter, Intel forecast revenue of $14.9
billion, plus or minus $500 million. Analysts had expected revenue
of $14.63 billion.
For the period ended June 26, Qualcomm reported a profit of $1.4
billion, or 97 cents a share, up from $1.2 billion, or 73 cents a
share, a year earlier. Revenue increased 4% to $6 billion
On an adjusted basis, Qualcomm said earnings per share came to
$1.16. Analysts on that basis had predicted earnings of 97 cents on
revenue of $5.58 billion.
For the final quarter of its fiscal year, Qualcomm predicted
revenue of $5.4 billion and $6.2 billion with adjusted earnings per
share in the range from $1.05 to $1.15. Analysts expected adjusted
per-share earnings of $1.08 on revenue of $5.7 billion.
--Tess Stynes and Ezequiel Minaya contributed to this
article.
Write to Don Clark at don.clark@wsj.com
(END) Dow Jones Newswires
July 21, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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