Intel Revenue Gets a Pop -- WSJ
January 26 2018 - 3:02AM
Dow Jones News
By Ted Greenwald
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 26, 2018).
Intel Corp. reported record growth in fourth-quarter revenue as
sales in its data-center business jumped 20%, while the company
swung to a quarterly loss as it booked a $5.4 billion charge after
recent changes in U.S. tax law.
Overall revenue rose 4% to $17.05 billion. Intel reported a $687
million loss, compared with a profit of $3.56 billion a year
earlier, largely because of the tax impact.
The company said it expects a 2018 tax rate of 14%, compared
with an adjusted rate of 23% in 2017, which doesn't account for the
tax impact.
The chip giant also announced a 10% rise in its annual dividend
to $1.20 a share.
Sales in the division responsible for server chips and other
data-center gear -- a critical area as personal-computer sales wane
-- climbed to $5.6 billion. That pushed full-year growth in the
segment to 11%, above Intel's goal of high single-digit growth for
2017.
In an interview with The Wall Street Journal, Intel finance
chief Bob Swan attributed the growth to demand from cloud vendors
and communications networks, as well as surprisingly strong sales
to corporate data centers, which had been sluggish.
"We saw strong customer demand for high-performance products
across the board," he said. He cautioned, however, he doesn't
expect the rising pace of sales to corporate customers to
continue.
Intel's report Thursday came as the company continues to work on
closing recently disclosed security holes in virtually all its
processors.
The company has said that it doesn't expect the security flaws
to affect its finances, but questions linger about just how
seriously customers are affected, especially those that operate
large data centers, and what redress they might demand. At the
outset of the company's conference call with analysts, Chief
Executive Brian Krzanich said Intel is working around the clock to
fix the flaws, but conceded that "while we've made progress, I am
acutely aware that we have more to do."
In the personal-computer division, where Intel faces stepped up
competition from Advanced Micro Devices Inc., sales fell 2%, in
line with the quarter's drop in PC shipments tallied by industry
researcher Gartner Inc.
Intel has been trimming costs to keep margins up as it
transitions from PCs to a broader technology portfolio. It has
pledged to bring annual operating expenses to 30% of revenue by
2020. In the quarter, it cut those costs to 31% of revenue,
compared with 34% in the year-earlier period and averaging 33.7%
for the year.
The company also posted strong growth in some areas where it has
been seeking to expand its market, though the businesses for now
are much smaller than PC and data-center chips.
Sales of programmable chips, which can be reconfigured on the
fly, were up 35%, while sales of chips for a variety of items known
as the Internet of Things, were up 21%. Memory, where Intel is
investing heavily, achieved profitability, Intel said, though sales
growth slowed to 9%, a slightly steeper drop than some analysts
expected.
Intel shares were up 3.5% after hours, having fallen 0.5% to
$45.30 in regular New York trading. Through Thursday's close, the
stock was up 29% since late July, when surging second-quarter
revenue and profit sparked investor confidence that the company
could overcome its challenges.
The company's forecast for the current year was for profit of
about $3.55 a share on an adjusted basis, on revenue of about $65
billion, compared with $3.46 a share in adjusted profit and $62.8
billion in revenue for 2017.
Intel reported per-share earnings of $1.08 for the quarter on an
adjusted basis, which excludes the tax-law impact and other items
such as restructuring and acquisition-related costs. Analysts
surveyed by Thomson Reuters had expected adjusted profit of 86
cents a share on $16.35 billion in revenue.
--Maria Armental contributed to this article.
Corrections & Amplifications Sales in Intel's division
responsible for server chips and other data-center gear rose 20%
from a year earlier. An earlier version of this article incorrectly
put the figure at 11%. And its PC division sales fell by 2%. The
earlier version said they rose 3%. (Jan. 25)
Write to Ted Greenwald at Ted.Greenwald@wsj.com
(END) Dow Jones Newswires
January 26, 2018 02:47 ET (07:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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