(Adds detail on results, analyst's comment, background)
By Noel Randewich
SAN FRANCISCO Jan 16 Intel Corp's
earnings missed expectations by a penny in the fourth quarter
due to weak spending on servers and the chipmaker gave a
lukewarm forecast for first-quarter revenue that did little to
dispel concerns about a slowing PC industry.
Intel said on Thursday it overestimated the extent of a
recovery in spending among its data center customers and also
pointed to political controversy in Washington, DC.
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 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," said Evercore analyst
Patrick Wang. "Investors were anticipating a fairly healthy beat
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.
But the CFO pointed to new computing devices, such as PCs
with detachable screens and other new designs, as potential
"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 anytime soon and is unlikely to
make up for much of the business 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
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 were down 3.5 percent in extended trade on
Thursday after closing 0.5 percent lower at $25.61 on the
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)