Intel reports Bleak Quarter as PC sales slow, but investors are happy | Job Binary

what is happening

Intel’s revenue and profits continued to fall amid tough economic times and years of struggling to regain its technology leadership, but layoffs and other cost-cutting measures helped boost the stock.

Why does it matter?

Intel is trying to bring more chip manufacturing jobs to the US after beating out Taiwan’s TSMC and South Korea’s Samsung.

After months of being punished by skeptical investors, Intel shares rose 10% after the company reported better-than-expected earnings on Thursday. But that was against a bleak backdrop as the chipmaker cut expectations for full-year results amid tough economic conditions.

Intel reported net income of $1 billion, or 25 cents per share, in the third quarter, down 85% from a year earlier. Adjusting for items such as stock compensation and restructuring charges, earnings of 59 cents per share were well above estimates of 32 cents by analysts polled by Yahoo. Its revenue of $15.3 billion was close to the $15.2 billion expected.

CEO Pat Gelsinger said the company faces “worsening economic conditions” but said the company is cutting costs, saving $3 trillion in 2023 and $8 billion to $10 billion a year in 2025. financial results.

Intel shares rose 10% to $28.87 midday Friday.

Bernstein analyst Stacy Rasgon called the quarter “terrible” in a report Friday, pointing to weak sales, shrinking profit margins and a “fuming” server processor business. He is also concerned about the scale of the layoffs: “The cuts appear to be swift and aggressive, which carries a significant risk of disrupting current operations.”

But not all analysts had the same attitude. New Street Research’s Pierre Ferragu said Intel is “entering full response mode” and gave the company’s stock a “buy” rating.

Intel lowered its full-year revenue estimate to between $63 billion and $64 billion. That’s down between $2 billion and $4 billion from three months ago, when Intel first reported serious sales problems. dismal June quarter.

Intel is in the midst of a massive transformation under Gelsinger, as the company hopes to regain its status as a leading chipmaker. To that end, Intel is spending heavily on new chip plants, Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung are trying to tap into the manufacturing technology already offered, and is competing directly against those two Asian giants with a new foundry business. Processors for customers like Qualcomm.

If successful, Intel will reinvigorate the U.S. chip industry and breathe new life into computer hardware that has been out of date for years. Apple ditched Intel for its M1 and M2 processors, built by TSMC and offering a compelling balance of performance and battery life.

Gelsinger said Thursday that Intel has stabilized market share losses in PCs. But it will be a long time before its second major division, which sells server processors to companies like Dell and Google, has more competitive products to counter the rising AMD.

Before Gelsinger returns to Intel in 2021, some observers expected Intel to follow in the footsteps of IBM and AMD by divesting its chip manufacturing business and relying on other foundries to make its processors. But Gelsinger wants to maintain the company’s chip-making operations, with new technology and higher manufacturing volume, through the foundry business.

“There are three types of conductor companies: big, very niche, or you’re dead,” Gelsinger said this week. It’s aiming big, but the years-long, ambitious effort hasn’t gone down well with investors.

Intel saw big declines in its two biggest chip groups, which make the processors for the computers we buy and the servers that power the data centers of companies like Meta and Google. PC chip group revenue fell 17% to $8.1 billion, while data center group revenue fell 27% to $4.2 billion.

Progress with Meteor Lake, new server chips

Gelsigner tried to paint a rosy picture of their upcoming products.

On the PC side, that includes Meteor Lake, a PC chip scheduled for release in 2023 that includes a new 3D stacking technique. Today’s Alder Lake laptop chips and Raptor Lake desktop computer chips are making “amazing numbers,” Gelsinger said.

And for the Xeon line of server processors, Intel has been hampered by delays on its current Sapphire Rapids, but things are looking good for its 2023 and 2024 successors, called Emerald Rapids and Granite Rapids, respectively. Gelsinger also made progress with a lower-powered sibling called the Sierra Forest in 2024.

“We had a particularly good quarter on the execution front,” Gelsinger said, naming Sapphire Rapids, Granite Rapids, Emerald Rapids and Sierra Forest. “The next three generations of products are making really good milestones, and I really feel like the worst of our execution is behind us.”

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