(Adds CFO comment, details on chip delay)
By Noel Randewich
SAN FRANCISCO Oct 15 Intel Corp's
third-quarter results modestly beat expectations on Tuesday, but
its current-quarter revenue outlook fell short and it warned
that production of its upcoming Broadwell processors was
The world's top chipmaker is betting that its current
Haswell PC processor with improved battery life will boost sales
for the rest of 2013, beyond the typically strong third quarter
when PC manufacturers buy chips in anticipation of holiday
But preparations for the Broadwell chip, which will succeed
Haswell, have fallen behind projections by about three months
due to technical setbacks, Brian Krzanich told analysts on a
conference call following Intel's quarterly report on Tuesday.
He said production of the Broadwell chips, based on the 14
nanometer technology that is ahead of rivals' technology, will
not begin until the first quarter.
"We and our (manufacturing) partners have a strong desire to
get Broadwell to the market," Krzanich said. "This is a small
blip in the schedule."
Chief Financial Officer Stacy Smith said the delay would not
affect gross margins in the fourth quarter or impact the
competitiveness of Intel's product lineup.
"We're not happy with the one-quarter push but it does point
to how difficult these problems are to solve," he told Reuters.
Much of Intel's strength has historically come from its chip
manufacturing technology, which is the most advanced in the
world and is ahead of rivals by around two years.
Broadwell's delay should have little impact on Intel's
sales, said FBR analyst Chris Rolland, although he added that
investors were sensitive to any hint of technology trouble at
"For these guys, their competitive advantage is based on
manufacturing. It's certainly a small setback. You don't want to
screw with timetables, and you don't want to screw with Moore's
law," Rolland said.
With consumers increasingly favoring tablets and
smartphones, Intel is wrestling with a slowdown in its core PC
market while trying to make inroads in low-power mobile devices.
Adapting to the slow PC industry, Intel also trimmed its
2013 capital expenditure target to $10.8 billion, plus or minus
$300 million, from $11 billion, plus or minus $500 million.
Since taking the helm in May, Krzanich has pushed to improve
Intel's offering of chips for mobile devices. It recently
announced a lineup of ultra-small chips for wearable devices,
which are growing more popular.
Intel dominates the PC industry but it was slow to adapt its
chips for low-power mobile gadgets like smartphones and tablets.
Krzanich has promised Intel's new Bay Trail mobile chip
would find its way into a slew of tablets, but it is still
unclear how much progress is being made and how much those
mobile chips, which sell for less than Intel's latest PC chips,
may affect its gross margins.
Some analysts believe the PC industry's troubles are already
baked into the price of Intel's stock, which has risen about 14
percent in 2013, less than the Standard & Poor's 500's increase
of 20 percent.
Intel shares trade at 12 times expected earnings, only
slightly less than rival Qualcomm Inc's at 14 times
The company said its gross margin in the third quarter was
62.4 percent, and it forecast 61 percent for the fourth quarter.
Analysts had expected 60.92 percent for the third quarter and
60.98 percent for the fourth quarter.
Intel posted net earnings of $2.95 billion, or 58 cents a
share, compared to $2.97 billion, or 58 cents share, in the
year-ago quarter. Analysts had expected earnings per share of 53
cents, according to Thomson Reuters I/B/E/S.
Revenue was $13.48 billion, barely changed from $13.46
billion in the year-ago quarter. Intel forecast revenue of $13.7
billion, plus or minus $500 million for the current fourth
Analysts had expected $13.463 billion in revenue for the
third quarter and $14.004 billion for the fourth quarter.
Shares of Intel were down 2.31 percent in extended trade
after closing down 0.26 percent at $23.39 on Nasdaq.
(Reporting by Noel Randewich; Editing by Richard Chang)