Intel addresses processor shortages, CEO hunt after reporting disappointing fourth-quarter results

[The AchieVer]

Intel addresses processor shortages, CEO hunt after reporting disappointing fourth-quarter results

Intel heads into 2019 facing a number of challenges.

 

 

Stealing a page from Apple’s recent earnings warning, Intel blamed a lack of demand in China as one of the reasons for reporting healthy fourth-quarter profits that were nevertheless less than Wall Street expected.

Intel’s fourth quarter, traditionally the company’s strongest, capped what Intel said was a record-breaking year in terms of revenue. But Intel blamed China, weakness in cloud-computing customers, a weakened modem market, and an inability to manufacture enough processors as reasons the company’s revenues did not meet expectations. Intel’s manufacturing woes have been a source of questions since 2018, as has been when Intel will name a replacement for Brian Krzanich, Intel’s former chief executive, who unexpectedly stepped down about seven months ago. 

Interim CEO Bob Swan addressed both issues, at least in part. Swan predicted that Intel’s manufacturing problems, which caused a shortage of its CPUs, would be fixed by the end of the second quarter. And as for a new CEO, Swan said the board would name a replacement “very soon.”

 

 

 

Intel’s fourth quarter, by the numbers

Intel disappointed Wall Street by reporting $5.2 billion in profits, compared to $18.7 billion in revenue. (Analysts polled by Yahoo Finance had expected earnings per share of $1.22 on revenues of $19.01 billion.) They also expected Intel to forecast $17.37 billion in revenue for the first fiscal quarter, ending in March. Instead, Intel said it expected to book $16.0 billion in first-quarter 2019 sales.

Intel blamed a number of factors, but China was a high-profile scapegoat. Apple had previously blamed for its own earnings warning. For the current quarter, Intel sad that a slowdown in China, weaker sales to cloud customers, a weakening NAND flash market, and weaker modem demand contributed to the lower fourth-quarter sales. Looking forward, Intel said it sees trade and “macro” concerns intensifying, especially in China.

 

 

Intel’s Client Computing Group saw strong demand for its higher-performance products, including gaming. Intel’s PC-centric CCG grew 10 percent during the fourth quarter, to $9.8 billion overall. CCG still is Intel’s largest business, though Intel’s Data Center Group continues to climb: the unit reported $6.1 billion, up 9 percent year-over-year. PC volumes, though, fell by 2 percent, which Swan blamed on Intel’s inability to manufacture enough chips.

“We expected a stronger finish” to 2018, Swan said.

What Intel’s processor shortages mean for you

Swan told analysts that part of Intel’s inability to meet expectations has come as the company has struggled to transition to the 10nm manufacturing node. Intel spent the recent CES in Las Vegas describing the company’s wholesale switch to 10nm, including Ice Lake, its next-generation processor, which is still on track to ship by the 2019 holiday season, Swan said. 

 

 

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