Bob Swan, the then Chief Executive Officer and Chief Financial Officer of Intel Corp., responds on Nov. 15, 2018, during the inauguration of the company’s research and development facility in Bengaluru, India.
Samyukta Lakshmi | Bloomberg | Getty Images
Intel shares closed 6.46% on Thursday after the chipmaker reported earnings and earnings that exceeded investor expectations and its own forecasts, driven by strong PC sales.
However, details of Intel’s earnings became available through financial transfers minutes before markets closed, after which Intel gave up its profits and the stock fell more than 2% at one point.
The strong earnings report for the quarter ending December comes at a critical time for the chip giant, as Thursday’s report marks its last with Bob Swan in the role of CEO. On February 15, Pat Gelsinger takes over.
Here’s how Intel did:
- Earnings per share (EPS): $ 1.52, adjusted, versus $ 1.10 expected by Refinitiv consensus estimates.
- Revenue: $ 20 billion, versus $ 17.49 billion expected by Refinitiv consensus estimates.
- PredictionQ1 2020 revenue of $ 18.6 billion and earnings per share of $ 1.03.
Intel also increased its cash dividend by 5% to $ 1.39 a share. However, his own revenue, earnings per share and operating margin forecasts for the current quarter were all lower than on an annual basis.
Intel said the strong PC sales helped it exceed its own expectations. It said 33% more PCs with Intel chips were sold than at the same time last year, especially laptops. PC sales have been strong over the past year as people who work from home or go to school want to upgrade their computers.
A leadership transition isn’t the only challenge Intel faces. In December, activist hedge fund Third Point urged Intel’s board of directors to make several changes to the company, including a consideration to outsource chip manufacturing or divest parts of the business, such as acquisitions.
Dan Loeb, CEO of Third Point, also addressed Intel’s biggest problem in his December letter when he noted that Intel has fallen behind Asian chip foundries in its ability to produce the most advanced processors.
Intel’s latest chips use a 14-nanometer process, as they have been doing since 2013, while competitor chips manufactured by TSMC currently use a 5-nanometer process. A smaller process is better because more transistors can fit in the same chip, increasing power and efficiency.
Intel customers such as Apple, Amazon and Microsoft have developed their own processors or have indicated their intention to do so.
Gelsinger, who was recently the CEO of VMWare, has a technical background and is expected to drive Intel to become more competitive in chip manufacturing. Intel said it started manufacturing 10 nanometer chips over the quarter and will start producing more this quarter.
Intel said Mobileye, its subsidiary that works on self-driving car technology, saw sales increase by 39% during the quarter compared to the same time last year. But Mobileye is still a small part of Intel – in 2020 it reported $ 967 million in sales, versus Intel’s PC group, which reported $ 40.1 billion in sales during the year.