By Noel Randewich
SAN FRANCISCO, July 17 Intel Corp cut
its full-year revenue forecast and said it is scaling back
capital spending as it adjusts to a painful contraction of
personal computer sales and economic weakness in China, one of
its biggest markets.
The forecast and cut in capital spending were announced on
Wednesday in the company's quarterly earnings report, the first
under new Chief Executive Brian Krzanich.
The soft-spoken manufacturing guru, who took over as CEO in
May and faces falling PC sales and a hyper-competitive mobile
market, was quick to acknowledge Intel's past errors. He said
the top chipmaker would aggressively speed up the rollout of new
Atom mobile chips.
"Intel was slow to respond to the ultra-mobile PC trends,"
Krzanich said. "We will move Atom even faster to our
leading-edge silicon technology."
Within days of taking over in May, Krzanich launched a
sweeping company reorganization. He has also been spending a lot
of time with manufacturing customers, meetings that will quickly
lead to more mobile business for Intel, Chief Financial Officer
Stacy Smith told Reuters.
Intel dominates the PC industry, but it has been slow to
make its chips suitable for smartphones and tablets.
Smith said that in the fast-expanding mobile market, where
Qualcomm is the leading chip supplier, customers want
"They want alternatives in a market kind of becoming
dominated by one player and they see us as being a very capable
supplier," Smith said. "They wanted to look Brian in the eye,
and now he's looking back and saying 'We're going to double our
Smith, said in an earlier interview on CNBC that the
chipmaker had seen softer sales in China than it had
Faced with slow demand, Intel said it was cutting 2013
capital spending to $11 billion, plus or minus $500 million. The
cut follows a similar reduction from $13 billion to $12 billion
Intel said it expects 2013 revenue to be flat from the year
before. Last quarter Intel forecast a low single digit
percentage increase in 2013.
Bernstein analyst Stacy Rasgon compared Intel's reduction of
expectations on Wednesday to a similar "reset" in 2012.
"Last year, they had a come-to-Jesus moment two-thirds of
the way through Q3. This time at least they seem to be reacting
a bit sooner, but you have to ask if it's enough," Rasgon said.
Global shipments of personal computers dropped 11 percent in
the second quarter, the fifth straight quarterly decline in a
market that has been devastated by the popularity of tablets.
Intel has shown some recent signs of improvement in mobile,
progress Krzanich is eager to build on.
Samsung Electronics has chosen an Intel
processor for one of its top-tier Android tablets for the first
And in May, the U.S. chipmaker unveiled Silvermont, the most
extensive overhaul of its mobile processors to date, with
improved performance and lower power consumption that some
experts believe might help it compete better against Qualcomm.
Shares of Intel have risen about 16 percent this year and
trade at the equivalent of 12 times expected earnings, a
valuation similar to that of Qualcomm's stock.
Krzanich left open the possibility of opening Intel's
factories to more customers making chips designed with
architectures that differ from Intel's own, a side business that
so far has remained very small. Wall Street has speculated in
recent years that Intel could strike a deal to manufacture
Apple's iPhone chips.
"We are taking each customer individually and looking at
them as an opportunity and what is the right thing for the
shareholders," he said.
Intel posted second-quarter revenue of $12.8 billion and
said revenue in the current quarter would be $13.5 billion, plus
or minus $500 million.
Analysts expected $12.896 billion in revenue for the second
quarter and $13.732 billion for the current quarter, according
to Thomson Reuters I/B/E/S.
For the second quarter, Intel reported net earnings of $2.0
billion, or 39 cents a share, in line with expectations. That
compared with $2.827 billion, or 54 cents, in the same quarter
Shares of Intel fell about 4 percent in extended trade after
closing down 0.41 percent at $24.15 on the Nasdaq.