Intel Shares Down After 7nm Chip Delay; 2Q Earnings, Revenue Beat

By Michael Dabaie

Intel Corp. shares were down 13.5% premarket to $52.27.

The company after the market close Thursday reported second-quarter revenue of $19.7 billion, up from $16.5 billion and above FactSet consensus for $18.5 billion.

Adjusted EPS was $1.23, beating FactSet consensus for $1.11.

The company also said it shifted its seven-nanometer-based CPU product timing about six months relative to prior expectations. The primary driver is the yield of Intel's 7nm process, which is now trending about 12 months behind the company's internal target.

"We have identified a defect mode in our 7-nanometer process that resulted in yield degradation. We've root caused the issue and believe there are no fundamental roadblocks, but we have also invested in contingency plans to hedge against further schedule uncertainty," Chief Executive Robert Swan said in the company's conference call.

Raymond James said in an analyst note that "our view is that outsourcing has now become inevitable. By outsourcing leading edge technology, presumably to ... INTC would give up what has been its main source of competitive advantage for 50 years and compete only on architecture, which we don't think is enough to maintain the dominant market share and premium margins that are now expected."

J.P. Morgan said that although the announced six-month delay in Intel's 7nm process was a disappointment, it believes the executive team has made a strategic decision that they will no longer hold back their product leadership, roadmaps and new product introductions on manufacturing delays and that they already have a strong contingency plan in place to move to an outsourced manufacturing model.

Write to Michael Dabaie at [e-mail]

(END) Dow Jones Newswires

July 24, 2020 08:35 ET (12:35 GMT)

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