Intel Security Issues and Cost Management in Focus -- Earnings Preview
January 25 2018 - 6:29AM
Dow Jones News
By Ted Greenwald
Intel Corp. is scheduled to report fourth-quarter earnings after
the market closes Thursday. Here's what you need to know:
EARNINGS FORECAST: Analysts expect Intel to report earnings of
86 cents a share on an adjusted basis, according to a survey by
Thomson Reuters, up from 79 cents a year earlier. Intel's adjusted
earnings generally exclude restructuring charges and certain items
arising from acquisitions.
REVENUE FORECAST: Analysts expect total revenue of $16.34
billion for the quarter, down fractionally from $16.37 billion a
year earlier.
WHAT TO WATCH:
SIGNS OF IMPACT FROM CHIP FLAWS: Concern over security holes in
all nearly all processors, which came to light earlier in January,
threatens to overshadow the disclosure of Intel's financial
performance. Intel, which has overwhelming market share in PC and
server processors, has been working to devise software patches and
promised next-generation products will close the holes. However,
the software fixes so far slow down chip performance. Intel has
said it doesn't expect the situation to affect its finances, but
investors will be looking for evidence in the form of shifts in
market share, sales, prices, rebates and the like, said analyst
Blayne Curtis of Barclays PLC.
HOW INTEL IS CONTROLLING COSTS: Intel lately has been squeezing
costs to keep margins up as the PC market has waned and server
growth has slowed. The company has said it would bring its annual
operating expenses to 30% of revenue by 2020, and gave investors a
pleasant surprise by cutting expenses from roughly 35% to 30% of
revenue in the third quarter, said analyst Stacy Rasgon of
Bernstein Research. Investors will be looking for continuing
thrift.
DATA CENTERS PICKING UP THE SLACK: Sales of chips used in PCs
still contribute more than half of Intel's total revenue, but that
percentage has been falling as PC sales continue their persistent
decline. The company has been counting on sales to data centers,
especially cloud-computing providers, to pick up the slack. But
revenue growth in that segment slowed from around 11% in 2015 to
around 8% in 2016. To meet the company's 2017 expectation of high
single-digit data-center growth, the fourth-quarter growth rate
will need to be higher than 8%, said analyst Srini Pajjuri of
Macquarie Capital (USA) Inc.
Write to Ted Greenwald at Ted.Greenwald@wsj.com
(END) Dow Jones Newswires
January 25, 2018 06:14 ET (11:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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