Intel quarterly results better than expected
16 Jul 2015
Intel posted better-than-expected quarterly results yesterday as growth in its data centres and Internet-of-Things businesses helped compensate weak demand for personal computers that used the company's chips.
Shares of the world's largest chip maker, which also cut its full-year capital expenditure forecast for the second time, were up as much as 9.2 per cent after market before shedding some of their gains.
The company has been adding to its line-up of higher-margin chips used in data centres to counter demand drop from the PC industry and agreed to the acquisition of Altera for $16.7 billion in April as part of the efforts (See: Intel acquires Altera for $17 bn).
Revenue from the data centres business, Intel's second-largest, rose 9.7 per cent to $3.85 billion in the second quarter from a year earlier, with help from continued adoption of cloud services and demand for data analytics.
''We continue to forecast robust growth rates of the data center group, Internet of Things group and NAND businesses, which we expect to mostly offset the PC decline,'' chief financial Stacy Smith said on a post-earnings call, Reuters reported.
Revenue from the PC business, Intel's largest, was down 13.5 per cent to $7.54 billion in the quarter ended June 27th.
''Our expectations are that the PC market is going to be weaker than previously expected,'' Smith said.
While Intel missed out on providing chips to the expanding smartphones and tablets markets, its processors continued to power data centres needed for the applications that made those mobile devices attractive to consumers.
The company might also be eating up share of Advanced Micro Devices Inc in personal computer chips even as total demand for the devices declined.
''They had really good PC client revenues, better than expected,'' said Ian Ing, an analyst at MKM Partners who recommends buying the stock, Bloomberg reported. ''It could be some additional share gains from AMD. Cloud computing is still strong.''
Intel's earnings were no longer a prisoner of the PC market, chief financial officer Stacy Smith said. While the company expected that market would now fall more than earlier expected, the company estimated revenue would not change much this year - - down about 1 per cent.
''You can really see the transformation of our business,'' Smith said in an interview. ''In a world where the PC market is down in the high single digits, we're going to be slightly down overall.''
He added, Intel got 40 per cent of revenue and 70 per cent of operating profit from data centre processors, flash memory chips used in computer storage and chips used to add computing power to everything from cars to air conditioners.
