Bob Swan, then interim CEO and chief financial officer of Intel Corp., is reacting to the inauguration of the company’s research and development facility in Bengaluru, India, on November 15, 2018.
Samyukta Lakshmi | Bloomberg | Getty Images
Intel shares closed 6.46% on Thursday, after the chip maker reported gains and revenues that exceeded investors’ expectations and its own forecasts, driven by strong computer sales.
Details of Intel’s earnings became available on the financial lines a few minutes before the markets closed, however, after which Intel gave up gains and shares fell by more than 2% at one point.
The strong revenue report covering the quarter ending in December last year comes a critical time for the chip giant, as Thursday’s report is the last with Bob Swan as CEO. On February 15, Pat Gelsinger takes over.
Here’s how Intel did it:
- Earnings per share (EPS): $ 1.52, adjusted compared to $ 1.10 expected by Refinitive consensus estimates.
- Income: $ 20 billion, compared to $ 17.49 billion expected by Refinitive Consensus estimates.
- Forecast: Revenues in the first quarter of 2020 of $ 18.6 billion and EPS of $ 1.03 billion.
Intel increased its cash dividend by 5% to $ 1.39 per share. However, its own forecasts for revenue, EPS and operating margin for the current quarter decreased from year to year.
Intel said the strength in PC sales has helped it exceed its own expectations. He said 33% more Intel chips were sold than in the same period last year, especially laptops. PC sales have been strong over the past year as people who work or attend home school seek to improve their computers.
A leadership transition is not the only challenge Intel faces. In December, activist hedge fund Third Point asked Intel’s board of directors to make several changes to the company, including considering outsourcing chip production or divesting parts of the business, such as acquisitions.
Dan Loeb, CEO of the third point, also acknowledged Intel’s biggest problem in his December letter, when he noted that Intel lagged behind Asian chip makers in terms of its ability to to produce the most advanced processors.
The latest Intel chips use a 14-nanometer process, as they have done since 2013, while competing chips manufactured by TSMC currently use a 5-nanometer process. A smaller process is better because more transistors can fit into the same chip, increasing power and efficiency.
Intel customers such as Apple, Amazon and Microsoft have developed their own processors or have indicated that they intend to do so.
Gelsinger, who was the latest CEO of VMWare, has technical experience and expects to push Intel to become more competitive in chip manufacturing. Intel said it began production of 10-nanometer chips in that quarter and will begin producing more this quarter.
Intel said Mobileye, its automotive subsidiary, saw sales grow 39 percent in the same quarter from the same period last year. But Mobileye is still a small part of Intel – in 2020 it reported sales of $ 967 million, compared to the Intel computer group, which reported sales of $ 40.1 billion during the year.