Sat, Oct 26, 2019 - Page 10 News List

Intel Corp bullish due to demand for data-center chips


Intel Corp on Thursday gave an upbeat sales and profit forecast, citing improved demand for semiconductors that power cloud-computing data centers, while shrugging off concerns that the trade dispute between the US and China is hurting the electronics industry.

The chipmaker forecast that fourth-quarter revenue and profit would come in ahead of analysts’ projections, sending its shares about 3 percent higher in after-hours trading.

Intel also reported better-than-expected third-quarter results.

While Intel’s peers are reporting increasing difficulties amid the China-US trade dispute, the company is benefiting from a rebound in orders for the lucrative server chips that run giant data centers.

Intel’s customers are buying more of its priciest chips, boosting revenue even as the number of total units sold slightly declined.

The company also committed to buying back an additional US$20 billion of its shares in the next 18 months, a move that chief executive Bob Swan said underlines Intel’s belief that investors should have more faith in its growth plan.

“The headline number was impressive,” Sanford C. Bernstein analyst Stacy Rasgon said. “The controversy will come around how much of this is sustainable.”

Demand for the company’s chips is “fundamentally strong,” Intel chief financial officer George Davis said in an interview.

Unlike some other chipmakers, Intel is not seeing demand being hit by the trade tensions. Moves by some customers to stockpile chips ahead of tariffs that might increase prices does not explain the majority of the improvements, he said.

“China was a modest positive relative to expectations,” Davis said.

Intel shares climbed as high as US$56.95 in extended trading following the report.

Sales in the third quarter were little changed at US$19.2 billion, the Santa Clara, California-based company said.

Analysts on average had forecast US$18 billion, data compiled by Bloomberg showed.

Net income was US$6 billion, or earnings per share of US$1.35, compared with forecasts for US$1.17.

Gross margin, or the percentage of sales remaining after deducting the cost of production, was 58.9 percent in the quarter.

Revenue in the fourth quarter would be about US$19.2 billion and earnings per share would be about US$1.28, Intel said in a statement.

That compared with average analysts’ estimates of US$18.9 billion and US$1.16.

The company has been struggling with manufacturing and supply problems, as well as weaker underlying demand in the chip markets it dominates.

Swan committed to increasing the output of Intel factories next year so that customers get all of the chips they need.

Shortages have been the firm’s biggest problem this year, he said.

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