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 Intel said on Thursday it overestimated the extent of a recovery in
spending among its enterprise customers, sending its stock lower,
and pointed to political controversy in Washington, D.C.
In the December quarter, Intel's PC revenue stayed flat, which it
said was slightly better than the company expected.
Microsoft Corp's plan to stop supporting its Windows XP operating
system in April had spurred hopes that some corporations will
replace employees' PCs. But Intel Chief Financial Officer Stacy
Smith said the Windows refresh had a minor impact on the quarter.
Personal computer sales are losing ground to tablets and smartphones — a market Intel has been slow to enter — but some analysts believe
the industry's decline is tapering, potentially giving Intel
breathing room as it struggles to develop better processors for
mobile gadgets.
The company has also bet that sales of high-end server chips will
help offset lower revenue from PCs this year, as the proliferation
of smartphones creates demand for data centers to provide
Internet-based services like video and social media.
But Smith said Intel's data center group revenues in 2014 would
probably come in toward the bottom of his previous growth estimate
of 10 percent to 15 percent.
The 8 percent increase in server revenue in the fourth quarter was
less than Intel and some analysts expected.
"The incremental nugget we got from Q4 earnings was that datacenter
group disappointed again," Evercore analyst Patrick Wang said.
"Investors were anticipating a fairly healthy beat and raise."
Intel forecast revenue of $12.8 billion, plus or minus $500 million,
for the first quarter, which ends in March. Analysts had expected
$12.79 billion on average.
Intel has been slow to adapt its processors for smartphones and
tablets, markets now dominated by rivals like Qualcomm Inc and
Samsung Electronics Co Ltd.
And its core market is crumbling. Global PC shipments fell 10
percent last year, the worst annual drop since research firm Gartner
began tracking them.
HOPE SPRINGS ETERNAL
Smith partly blamed Intel's miss in fourth-quarter server chip sales
on quarreling over U.S. fiscal policy.
"We saw a tapering off in order patterns across certain customers in
certain segments at the end of the quarter, and we think that was
driven by the government shutdown and the uncertainty around the
debt ceiling," he told analysts.
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But the CFO pointed to new computing devices, such as PCs with
detachable screens and other new designs, as potential growth
drivers.
"The PC market was a little stronger than we thought," Smith told
Reuters. "What's driving PCs right now are the innovative form
factors we've been working on."
At the Consumer Electronics Show in Las Vegas last week, Chief
Executive Officer Brian Krzanich showed off a handful of wearable
computing devices, including prototype earbuds with a built-in heart
rate monitor.
But industry watchers believe smart clothing is not ready to make a
splash with consumers any time soon and is unlikely to make up for
much of the business that Intel has lost due to a shrinking PC
industry.
Intel posted fourth-quarter net earnings of $2.6 billion, or 51
cents a share, compared with $2.5 billion, or 48 cents a share, in
the year-ago quarter as the chipmaker grapples with a shrinking PC
industry and finds support from demand for more servers.
Wall Street had expected 52 cents a share on average, according to
Thomson Reuters I/B/E/S.
Fourth-quarter revenue was $13.8 billion, compared with $12.5
billion in the year-ago quarter, it said in a statement on Thursday.
Analysts had expected $13.72 billion in revenue for the fourth
quarter, according to Thomson Reuters I/B/E/S.
Shares of Intel slid 4.8 percent in extended-hours trading on
Thursday after ending the regular session down 0.49 percent at
$26.54 on the Nasdaq.
One analyst pointed to heightened spending in the first quarter as
potentially worrisome.
"You're getting quite a bit less earnings in the first quarter than
the Street may have been looking for," said RBC Capital Markets
analyst Doug Freedman. "This management team is not running this
company to deliver earnings."
(Editing by Matthew Lewis and Jan
Paschal)
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