- Intel is sinking as much as 8% after the bell on Thursday after missing Wall Street expectations on revenue and earnings.
- The company says that the worsening situation in China and elsewhere could spell more trouble to come.
- Intel didn’t have any updates on its CEO search, and has been without a permanent chief executive since June.
Intel reported disappointing earnings Thursday and warned that a worsening situation in China could spell more trouble to come.
The chip-making giant’s fourth-quarter revenue and earnings both fell short of analysts’ expectations. And it forecast that its first-quarter revenue and earnings would not only be below Wall Street’s outlook, they wouldn’t even meet its year-earlier results.
In October, when the company offered a preview of its forecast for 2019, it expected its business opportunities and challenges to be in relative balance, Bob Swan, the company’s interim CEO, said on a conference call with analysts. But since then, its outlook has changed.
“Our trade and macro [economic] concerns, especially in China, have intensified,” he said.
In recent after-hours trading, the company’s stock was down $US3.31, or 6.7%, to $US46.45. Earlier in the extended session, its shares were down as much as 8%.
Here’s what the company reported and how that compared with Wall Street’s expectations:
- Q4 ’18 revenue: $US18.7 billion. Analysts polled by Bloomberg had forecast $US19.01 billion. In the fourth quarter of 2017, the company posted $US17.05 billion in sales.
- Q4 ’18 earnings per share: $US1.12. Wall Street was looking for $US1.17, according to Bloomberg. In the same period a year earlier, Intel lost 15 cents a share, thanks to one-time tax charges.
- Q1 ’19 revenue (guidance): $US16 billion. Analysts had previously predicted $US17.34 billion. The company saw $US16.07 billion in the same quarter a year ago.
- Q1 ’19 EPS (guidance): 81 cents. Wall Street had forecast 96 cents a share. In the first quarter last year, it earned 93 cents a share.
- Full-year 2019 revenue (guidance): $US71.5 billion. Analysts had forecast $US73.01 billion. Intel saw $US70.8 billion in sales in 2018.
- Full-year 2019 EPS (guidance): $US4.35. Wall Street was also predicting $US4.35 a share. In 2018, Intel earned $US4.48 a share.
Excluding costs such as the amortization of intangible assets and the marking to market of certain securities, Intel said it would have earned $US1.28 a share in the fourth quarter. On that basis, analysts polled by FactSet were expecting it to earn $US1.22 a share.
Although the company’s fourth-quarter results were up from the year-ago period, they marked a deterioration from the third quarter of 2018. Total sales fell 2.6% and earnings dropped by 18%. By contrast, the company’s fourth-quarter revenue and adjusted income in 2017 improved on its third-quarter results.
The sequential sales decline from the third to the fourth quarter last year hit all of the company’s major units. Its unit that makes PC chips saw its sales fall 4% from the third quarter. Revenue at its server chip-making unit fell 1% quarter over quarter. And its group that offers products for Internet of Things manufacturers saw its sales drop 11%.
In addition to China, other factors weighed on Intel’s results and its forecast for the first quarter, Swan said. Demand for its server chips from cloud providers has cooled as they absorb they purchases they made earlier last year. Prices for its flash memory chips has fallen. And the revenue the company generates from selling modems or communications chips for smartphones was $US200 million less than Intel expected.
Intel gets the bulk of its modem revenue from Apple, which has already warned of disappointing iPhone sales in the fourth quarter.
The chipmaker has been operating without a full-time CEO since June, when its former head, Brian Krzanich, resigned after Intel discovered he’d violated its policies by having a relationship with a company employee. Intel’s board continues to evaluate candidates for the post, said Swan, who also serves at the company’s chief financial officer.
Bloomberg reported earlier this month that Intel’s directors had hoped to name a CEO before it reported its fourth-quarter earnings.
“I’m convinced the board will close on its new CEO in the near future,” Swan said. “In the meantime,” he continued, Intel’s management and employees “will not be distracted by the void.”
Intel’s stock closed regular trading up $US1.82, or 3.8%, to $US49.76.
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