Intel’s outlook points to more challenges ahead. The company is cutting jobs and delaying spending on new factories in hopes of saving as much as $10 billion. It has been particularly hard hit by losing market share to its rivals.
“While the company is no longer a pioneer in chip stocks, it is still an important company,” said Matthew Maley, chief market strategist at Miller Tabak and Co.
“So the fact that stocks are responding so poorly to earnings reports should weigh on the broader market today.”
It was a painful acknowledgment for a company that has been trying for years to revive itself under CEO Pat Gelsinger, who took over as CEO in 2021.
The post-pandemic downturn in Intel’s flagship PC chip business has undermined efforts to get the company’s financial performance back on track. Instead, it just loses more ground.
“I want to remind everyone that we are on a journey that spans many years,” Gelsinger said in a conference call on Friday.
misprediction
The stock has risen 14% this year, part of a rally in chip stocks, but Intel’s decline has wiped out most of that gain.
The company forecasts gross margin (percentage of sales after deducting manufacturing costs) of 39% for the first quarter. This is 14.1 points down for him from the same period last year, putting him more than 10 points narrower than nearest rival AMD.
The chipmaker said first-quarter sales will be between $10.5 billion and $11.5 billion. This compares to Wall Street’s average estimate of his $14 billion ($19.6 billion). Intel expects a quarterly loss of 15 cents, excluding some items. Analysts had expected a profit of 25 cents (35 cents). Excluding certain items, earnings were 10 cents per share. Wall Street said he was looking for a profit of 19 cents on sales of $14.5 billion.
On an adjusted basis, Intel’s first-quarter forecast is its first loss forecast in decades.
To get back on track, computer makers need to quickly destock inventories and get back to ordering components. That would help Intel consolidate its already strained finances from its ambitious plans to upgrade its technology.
Intel is cutting costs to deal with the slowdown. Three months ago, the company said job cuts, slower spending on new factories and other austerity measures would save him $3 billion this year. That number will balloon to $10 billion annually by the end of 2025, the company said.
Under Gelsinger’s plan, Intel aims to accelerate the introduction of new manufacturing technologies, ramping them up at speeds never before attempted in semiconductors.
He also plans to build factories in the United States and Europe, shift production concentration away from Asia, handle outsourced work for other companies, and become more contract manufacturers to challenge Taiwanese semiconductor manufacturing. planning.
On a brighter note for investors, the company remains committed to offering a competitive dividend, Chief Financial Officer Dave Zinsner said Thursday.
expected volatility
The company expects “increased volatility across all markets” this year. The PC market is particularly weak, shrinking to the lower end of Intel’s forecast range. The server market will also shrink in the first half of this year, Intel said. Consumer and education markets were hit particularly hard, with data center sales dropping by a third.
The tough result shows that Intel is further behind its rivals. Its 2022 revenue totals were lower than those of his TSMC, a chip maker that supplies many of its U.S. competitors and allows some customers to design their own components. Once-dominant Intel was already trailing Samsung Electronics in sales.
The computer industry is undergoing a major reset in the aftermath of sales surges fueled by the trend of working from home. Northland Securities analyst Gus Richard estimates that PC shipments will fall by 16% in 2022, to just 260 million units this year. This is down from about 350 million in 2021.
Intel still dominates the market for processors used in servers, with over 70% share. However, its holding power in its profitable market is declining. The company has been slow to launch new products in recent years, leaving rivals such as AMD profitable. Some customers are also developing homegrown chips to replace Intel processors.
All of this resulted in a painful collapse for Intel, which once controlled 99% of the market.
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