Intel Corp CEO Pat Gelsinger slashed sales and profit forecasts for the rest of the year, conceding that the struggling chipmaker needs more time to make its products competitive while assuring investors that this quarter would be the nadir.
The company, which in April reiterated its annual sales forecast, reported steeply lower second-quarter results and said revenue would this year be as much as US$11 billion less than projected, buffeted by a slackening economy and a share loss in the server market.
“It feels like they’re clearing out a lot of the bad news,” said Matt Bryson, an analyst at Wedbush Securities, adding that Intel should have cut projections several quarters earlier.
Photo: EPA-EFE
“If you believe in Intel, you believe in Intel in 2024, or 2025 or 2026,” he added.
The company’s shares tumbled as much as 12 percent in late trading after it gave disappointing sales and profit estimates for this quarter and reduced forecasts for the year.
Annual revenue would be as low as US$65 billion, the company said.
That would be a decline of as much as 13 percent from last year.
While investors had anticipated that a PC slump would weigh on Intel’s second-quarter performance, an unexpected 16 percent drop in revenue from expensive server chips that power data centers dragged down overall sales and profit.
Prices are falling and customers have been turning to rival providers for their orders, Intel said.
The majority of Intel’s shortfall was caused by a slowdown in the economy, but the company’s failure to produce better products on time also contributed to the miss, Gelsinger said.
This quarter would be the low point for Intel’s performance, he said, adding that many of its customers are working through unused stockpiles of chips and have not placed new orders, but would soon need to resume those purchases.
“We feel very confident that it’s the bottom,” Gelsinger said in an interview.
On Thursday, Gelsinger said a delayed server product this quarter hurt Intel, a result of the legacy of projects begun before he rejoined the company last year.
In the second quarter, revenue fell 22 percent to US$15.3 billion, significantly below the average analyst estimate of US$18 billion.
Profit per share excluding some items was US$0.29, Intel said, while analysts had predicted US$0.69.
Sales would this quarter be as low as US$15 billion, compared with projections of $18.7 billion, and gross margin would narrow to 47 percent, Intel said.
Gelsinger said he is not backing off a plan to spend heavily on improving Intel’s manufacturing technology.
The “austerity” of the decline in the economy and Intel’s performance would help the company place its big bets more strategically, while cutting back on areas that are not key to its future, he said.
Second-quarter sales for Intel’s data center division, which generates an outsize portion of profit, slid to US$4.6 billion, missing the average analyst estimate of US$6.04 billion.
The company expects its data center business to grow more slowly than the overall server market this year, Gelsinger said.
Client computing, Intel’s PC chip unit, saw sales plummet 25 percent to US$7.7 billion, compared with an average projection of US$8.76 billion.
The company’s new target for this year’s revenue is US$65 billion to US$68 billion.
Intel said that gross margin would be 49 percent this year, 9.1 points narrower than a year earlier and 3 points shy of what the company had targeted.
That metric of profitability, once touted as an indication of Intel’s strength, is being squeezed by increasing competition and is now more than 10 points narrower than the company’s annual gross margins for much of the past decade.
DIVIDED VIEWS: Although the Fed agreed on holding rates steady, some officials see no rate cuts for this year, while 10 policymakers foresee two or more cuts There are a lot of unknowns about the outlook for the economy and interest rates, but US Federal Reserve Chair Jerome Powell signaled at least one thing seems certain: Higher prices are coming. Fed policymakers voted unanimously to hold interest rates steady at a range of 4.25 percent to 4.50 percent for a fourth straight meeting on Wednesday, as they await clarity on whether tariffs would leave a one-time or more lasting mark on inflation. Powell said it is still unclear how much of the bill would fall on the shoulders of consumers, but he expects to learn more about tariffs
NOT JUSTIFIED: The bank’s governor said there would only be a rate cut if inflation falls below 1.5% and economic conditions deteriorate, which have not been detected The central bank yesterday kept its key interest rates unchanged for a fifth consecutive quarter, aligning with market expectations, while slightly lowering its inflation outlook amid signs of cooling price pressures. The move came after the US Federal Reserve held rates steady overnight, despite pressure from US President Donald Trump to cut borrowing costs. Central bank board members unanimously voted to maintain the discount rate at 2 percent, the secured loan rate at 2.375 percent and the overnight lending rate at 4.25 percent. “We consider the policy decision appropriate, although it suggests tightening leaning after factoring in slackening inflation and stable GDP growth,”
Greek tourism student Katerina quit within a month of starting work at a five-star hotel in Halkidiki, one of the country’s top destinations, because she said conditions were so dire. Beyond the bad pay, the 22-year-old said that her working and living conditions were “miserable and unacceptable.” Millions holiday in Greece every year, but its vital tourism industry is finding it harder and harder to recruit Greeks to look after them. “I was asked to work in any department of the hotel where there was a need, from service to cleaning,” said Katerina, a tourism and marketing student, who would
i Gasoline and diesel prices at fuel stations are this week to rise NT$0.1 per liter, as tensions in the Middle East pushed crude oil prices higher last week, CPC Corp, Taiwan (台灣中油) and Formosa Petrochemical Corp (台塑石化) said yesterday. International crude oil prices last week rose for the third consecutive week due to an escalating conflict between Israel and Iran, as the market is concerned that the situation in the Middle East might affect crude oil supply, CPC and Formosa said in separate statements. Front-month Brent crude oil futures — the international oil benchmark — rose 3.75 percent to settle at US$77.01
RSS