Sunday 4 December 2016

Intel says its data centre business is to grow less than expected

Published 14/10/2015 | 07:37

Intel Sign at its corporate headquarters.
Intel Sign at its corporate headquarters.

Intel cut the revenue growth forecast for its highly profitable business of making chips for data centres as businesses reduce spending due to weak macroeconomic growth.

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The world's biggest chipmaker's shares reversed course to trade down as much as 3.8pc after the bell on Tuesday following the forecast.

Intel has been counting on the data center business to help offset declining demand for its chips used in personal computers, its biggest revenue generator.

The company agreed in June to acquire Altera  for $16.7bn to expand its line-up of the higher-margin chips used in data centers.

Intel said on Tuesday it expected the data center business to grow in "low double digits" in 2015, compared with its earlier forecast of about 15 percent growth.

The business, the company's second biggest, had grown 19.2pc in the first quarter, 9.7pc in the second and 12pc in the latest quarter.

The company was not "rethinking the long-term growth" of the business, Chief Executive Brian Krzanich said on a post-earnings conference call.

"It's a combination of two things — data center weakness and units — it looks like their units are still pretty weak, they are seeing upside from pricing," analyst Stacy Rasgon of Bernstein said.

The weak data centre forecast took the shine away from the company's better-than-expected profit and revenue in the third quarter.

The company also trimmed its 2015 capital expenditure for the third time to $7.3bn, plus or minus $500m

Intel had previously forecast capital expenditure of $7.7bn, plus or minus $500m.

The company said it expected fourth-quarter revenue of $14.8bn plus or minus $500m. The midpoint of the range is a marginal increase from a year earlier.

Analysts on average were expecting revenue of $14.83bn, according to Thomson Reuters I/B/E/S.

Intel said revenue from its PC business fell 7.5pc to $8.51bn in the third quarter ended September 26.

Worldwide shipments of personal computers fell 7.7pc in the third quarter, according to research firm Gartner.

Intel's net income fell to $3.11bn, or 64 cents per share, from $3.32bn, or 66 cents per share, a year earlier.

Analysts on average had expected a profit of 59 cents per share.

Net revenue declined to $14.47bn from $14.55bn, but beat analysts' estimate of $14.22bn.

Up to Tuesday's close of $32.04, Intel's stock had fallen 11.7pc this year, steeper than the 9.4pc fall in the broader semiconductor index.

Reuters

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