Intel's Earnings Rise but Revenue Outlook Disappoints

By Don Clark 

Intel Corp. reported an 8.7% rise in third-quarter earnings, as a lengthy slide in the personal computer market eased a bit and cloud companies stocked up on servers.

Shares of the chip giant slid 3.6% to $36.39 in after-hours trading as the company also provided a lackluster revenue outlook for the current quarter.

Intel, whose chips provide processing power for the vast majority of computers, in July reported a 51% profit drop on charges resulting from a plan to reduce its workforce by 12,000 people by mid-2017. The company linked those cuts to a strategy to reduce its dependence on selling chips for PCs, emphasizing servers and noncomputer devices associated with a trend called the Internet of Things.

For the moment, though, PC chips remain the company's largest source of revenue. Intel in September boosted its financial guidance for the third quarter, citing moves by PC makers to rebuild their inventories and some signs of stronger customer demand. Gartner Inc. and International Data Corp. last week reported the latest in a series of shipment declines for the PC business, though IDC said the decline was less severe than expected.

Intel reported Tuesday that revenue for its client computing group -- composed largely of PC chips -- increased to $8.89 billion from $8.51 billion a year ago. Besides shipment volumes, revenue in the unit can fluctuate according to whether customers selected higher-priced chips or not.

In the company's data center group, whose products are priced higher and command wider profit margins than PC chips, Intel said third quarter revenue rose to $4.54 billion from $4.14 billion. Analysts had been expecting revenue of about $4.6 billion, according to FactSet, based partly on expectations of higher spending by cloud computing services.

Intel said revenue in its Internet of Things group increased $689 million from $581 million.

Brian Krzanich, Intel's chief executive, said Tuesday that the results show Intel's continuing transformation to a company that powers the cloud and connected devices.

In all, Intel reported net income of $3.38 billion, or 69 cents a share, compared with profit in the year-earlier period of $3.1 billion, or 64 cents a share. Revenue rose to $15.78 billion from $14.47 billion.

Excluding one-time items, Intel put per share profit at 80 cents a share. Analysts on that basis had predicted earnings per share of 72 cents on revenue of $15.6 billion, in line with the figure Intel projected last month.

For the current quarter, Intel projected revenue between $15.2 billion and $16.2 billion. Analysts, on average, had projected revenue of $15.9 billion.

Write to Don Clark at [e-mail]

(END) Dow Jones Newswires

October 18, 2016 16:43 ET (20:43 GMT)

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