Intel disappoints with results

disappointment-valleyChipzilla reported strong quarterly profit last night but the news was overshadowed by concerns about slowing revenue growth in its highly profitable data centre business.

Chief Executive Brian Krzanich tried to deal with the slump in PC chips by focusing on the business of supplying chips for high-end servers.

The world’s largest chipmaker reported data centre revenue of $4.31 billion in the fourth quarter ended December 26. Given the amount of focus Intel had been placing on high-end servers Wall Street had expected Intel to make $4.42 billion.

Revenue in the business rose only 4 percent from the preceding quarter, compared with the 8 percent growth in the third quarter.

What the figures showed was that companies were not upgrading their own data centre because they are planning a cloud push soon. This means that they will keep their old servers running and not upgrade them to the latest Intel chips.

In October, Intel warned that its 2015 revenue growth forecast for the data centre business would be lower because companies were slashing spending due to weak macroeconomic growth.

Intel forecast revenue of $14.1 billion, plus or minus $500 million for the first quarter ending March. This is down 6 percent from the fourth quarter, the company said.

Krzanich said on a post-earnings call said that the first quarter outlook reflects some caution for overall demand, particularly in China, we continue to expect solid growth in the business in 2016.

Revenue in the personal computer business fell about 1 percent to $8.76 billion from a year earlier.

Intel completed its $16.7 billion purchase of programmable-chip maker Altera in December, a deal that adds a new class of products to Intel’s portfolio.

The company’s net income fell to $3.61 billion from $3.66 billion in the fourth quarter. Net revenue rose to $14.91 billion from $14.72 billion. Analysts on average had expected a revenue of $14.80 billion.

Shareholders were disappointed and Intel’s shares fell 4.7 percent to $31.20.