Intel Corp shares plunged as much as 14 percent in late trading after chief executive officer Lip-Bu Tan (陳立武) gave a lackluster forecast and warned that the chipmaker was struggling with manufacturing problems.
First-quarter projections for revenue and earnings fell well short of Wall Street estimates and a conference call with analysts, in which Tan said it would take “time and resolve” to turn around the company, sent the shares down further.
Production snags have hampered the comeback bid, a disappointment for investors who anticipated more of a boost from new products.
Photo: AFP
“We are on the multiyear journey,” Tan said.
Intel, the largest maker of personal computer processors, is suffering from low manufacturing yields — the percentage of usable chips coming out of its factories. That has made it harder to fill orders.
Demand is “quite strong” and the company is working hard to fix its manufacturing problems, Tan said in an interview.
However, Intel used up much of its inventory in the fourth quarter, he said.
“Our yield and production manufacturing are not up to my standards,” he said. “We need to improve that.”
Intel shares fell as low as US$46.75 in extended trading during the conference call.
The company would not have additional supply, particularly of lucrative server computer chips, until the end of the first quarter, Intel chief financial officer Dave Zinsner said on the conference call with analysts.
Intel has burned through its stockpiles and making more products will take several months, Zinsner said.
Supply would increase each quarter this year, he said.
Spending on new plants and equipment this year would be similar to last year, marking a shift from Intel’s recent efforts to cut its budget, but any boost in output from new machinery would not arrive until next year, he said.
Another challenge is that although demand for server chips is solid, the company cannot shift production toward that market too aggressively without hurting its PC customers, Zinsner said.
There is also concern that higher prices for memory chips would translate into more expensive laptops and weaker demand, Tan said.
After helping orchestrate the US government’s investment in August last year, US President Donald Trump recently touted the stock’s gains.
The shares have been the best performer on the Philadelphia Stock Exchange Semiconductor Index this month, adding to an 84 percent surge last year.
“There’s been a lot of optimism around Intel potentially turning a corner,” said Matt Bryson, an analyst at Wedbush Securities Inc. “Hearing that yields are difficult, that’s not a great start.”
First-quarter revenue would be US$11.7 billion to US$12.7 billion, the company said.
The midpoint of that range was lower than the US$12.6 billion estimated by analysts.
The company expects to break even in earnings per share (EPS), excluding certain items.
Wall Street had projected a profit of US$0.08 per share.
In the fourth quarter, revenue fell 4.1 percent to US$13.7 billion. Profit was US$0.15 per share, excluding some items.
Analysts had estimated sales of US$13.4 billion and EPS of US$0.09 on average, according to data compiled by Bloomberg.
Gross margin, the percentage of revenue remaining after deducting the cost of production, was 37.9 percent in the quarter on an adjusted basis. For the current period, that key measure of profitability would contract to 34.5 percent.
When Intel was at the height of its powers, it regularly reported margins north of 60 percent.
Zinsner said that current margins are “by no means acceptable.”
The Santa Clara, California-based company has a long way to go to restore its former chip-industry glory. Its annual revenue of US$53 billion last year was roughly US$25 billion shy of the company’s peak revenue, achieved in 2021.
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