SANTA CLARA — Semiconductor giant Intel on Tuesday said strength from its ongoing focus on data-center technologies and improvements in the PC market helped it report better-than-expected third quarter earnings and sales.
However, Intel’s fourth-quarter sales outlook proved a disappointment to investors, who sent the company’s shares down by more than 5 percent in after-hours trading.
Intel said that for the three months ending in September, it earned 69 cents a share, on $15.8 billion in revenue, compared with a profit of 64 cents a share, on $14.5 billion in sales, in the same period a year ago. Excluding one-time items, Intel earned 80 cents a share.
And that proved better than the consensus estimate of 73 cents a share, on $15.58 billion in revenue, that was forecast by analysts surveyed by Thomson Reuters.
On a conference call to discuss Intel’s results, Chief Executive Brian Krzanich said Intel “continued to realign our resources” as it focuses more on cloud-based technologies and high-end, high-profit data-center products. Sales of chips for data-centers posted a 10 percent year-over-year gain, to reach $4.5 billion, while Intel’s internet of things revenue climbed by 19 percent to $689 million.
However, client computing, which includes PCs and mobile computing products, still remains Intel’s biggest source of revenue, and rose 5 percent from a year ago, to $8.9 billion. Intel’s security group revenue of $537 million rose by 6 percent from a year ago.
Programmable solutions, also known as the division created by Intel’s acquisition of chipmaker Altera, was an area of some concern, as its $425 million in revenue fell by 9 percent from the second quarter of the year. Intel didn’t include Altera revenue in its third-quarter results a year ago.
“The one black mark is the Altera acquisition, as it’s integral to Intel’s data center and communications infrastructure strategy,” said Mark Hung, semiconductor industry analyst with Gartner. “The company will need to make sure it’s on a growth trajectory soon if it wants to fend off challengers in the server market and grow its share in the communications market.”
Rob Enderle, technology analyst with the Enderle Group, said that Intel, “overall had a very strong quarter across the board” and there appears to be no negative impact from Intel’s plans to cut 12,000 jobs, which the company announced in April. However, Enderle said next year Intel will have to prove it can continue to succeed with it strategy with fewer employees on hand.
“(Negative effects) may not become evident until early to mid-next year because adverse impacts from changes like this tend to lag the effort’s execution by up to a year,” Enderle said.
As for the rest of 2016, Intel seemed to temper expectations for a big, end-of-the-year surge in business.
The company said it expects fourth-quarter revenue to be between $15.2 billion and $16.2 billion. Analysts had forecast Intel to post sales for the period of $15.86 billion, and the potential revenue shortfall raised some concerns about Intel’s direction that could stretch into 2017.
“Sustaining numbers like this will significantly depend on major world events currently largely outside of Intel’s control,” Enderle said. “A large portion of these sales are to firms that build PCs who are now filling the sales channel in preparation for the holidays. And should holiday sales be disrupted by reactions to an election or other major event, the resulting excess inventory will crater first-quarter sales, which is typically weaker regardless.”
