eastunder
1 week ago
Intel Surges After Results Spark Optimism Over Turnaround
https://finance.yahoo.com/news/intel-surges-results-spark-optimism-201418916.html
Bloomberg
Ian King
Thu, October 31, 2024 at 4:46 PM MDT 5 min read
(Bloomberg) -- Intel Corp. gave a fourth-quarter revenue forecast slightly above estimates, sparking optimism that itโs capable of reclaiming some lost market share.
Fourth-quarter revenue will be $13.3 billion to $14.3 billion, the Santa Clara, California-based company said in a statement. That compares with the $13.6 billion analysts estimated on average. The company is projecting a profit of 12 cents a share compared with the 6 cents Wall Street projected.
The company gained 9.2% to $23.51 in extended trading, after closing at $21.52 in New York. The shares were down 57% so far this year.
Intel, once the industry leader in computer processors, is now working to preserve cash to fund a turnaround plan โ one Chief Executive Officer Pat Gelsinger called the โmost audacious rebuilding planโ in corporate history, in an interview with Bloomberg.
In the prior quarter, Intel cut jobs, slashed its spending and suspended investor payouts. The total headcount reduction will be 16,500. Now, Gelsinger needs to show that he can counterbalance the cash drain by generating new orders from customers.
โThis was a critical period of time for the company,โ Gelsinger said in the interview. โWe got a lot done.โ
The fall from investor favor for what was once the worldโs largest chipmaker underlines a major shift in semiconductor industry in favor of artificial intelligence hardware. Companies are spending on computers built around accelerator chips for AI, an area where Intelโs offerings have barely made a dent. Instead, customers are fleeing for Nvidia Corp, fueling its massive rise.
Orders for Intelโs AI accelerator chip, Gaudi, have been weaker than projected and it wonโt now reach the companyโs $500 million revenue target this year, Gelsinger said on the post-earnings call with investors. Rival Advanced Micro Devices Inc. earlier this week increased its forecast for a similar product to more than $5 billion. Nvidia is on course to have revenue of more than $100 billion from its AI chip unit this year, according to analysts.
Intelโs decline in value has made it attractive to potential acquirers in various break-up scenarios, according to reporting by Bloomberg and other news organizations. Gelsinger has said some of the business units he thinks are undervalued will seek outside investors or look to sell shares to the public.
Gelsinger said he intends to keep the company together and has the support of the board for his plan. He has a โlot of energy and passionโ to bring to that effort, he said.
โObviously thereโs a lot of attention on Intel which just reinforces what a central role it plays in the technology industry,โ he said in the interview. โWe believe distinct, but better together, is the strategy.โ
The company is in negotiations with potential investors for its Altera programable chip unit. It expects to conclude that process early next year, Gelsinger said on a call with investors. Meanwhile, heโs reviewing options for similar actions for other parts of Intelโs business.
Intelโs leader was one of the chief lobbyists for the Chips and Science Act, a Biden administration industrial policy aimed at bringing back chip manufacturing to the US with tens of billions of dollars in public money support.
Gelsinger, in an interview with Bloomberg Television, said that Intel hasnโt yet received any of the funds to help with construction of new facilities in Arizona and Ohio, and criticized the speed at which support has been made available.
Still, he remains confident that, regardless of who wins the US presidential election, the initiative will continue. โThe Chips Act was a bipartisan act with strong support from both sides of the aisle,โ he said.
The company is also under siege in its traditional stronghold of selling processors for servers and personal computers. For decades, its superior manufacturing made its chips the market leader and locked down an improbably high market share. Since losing its lead in process technology to rival Taiwan Semiconductor Manufacturing Co., others such as Nvidia and AMD have been able to field competitive chips made by the provider of outsourced production.
Gelsingerโs expensive plans to take back leadership in that crucial area involve a new factory network that he plans to fill with orders from other chipmakers, in addition to Intelโs own designs. In the interim, Intel is facing depressed revenue and elevated costs. Thatโs destroyed profit margins that were once the envy of the industry.
Gross margin, or the percentage of sales remaining after deducting the cost of production, was 15% in the quarter. At its peak, Intel regularly reported gross margin of well above 60%.
In the third quarter, the company had a loss of 46 cents a share, excluding certain items, and revenue of $13.3 billion, down 6%. That quarterly sales total is its lowest for the third quarter in more than a decade but came in ahead of company projections, Gelsinger said.
Analysts had estimated a loss of 3 cents a share and sales of $13 billion. Wall Street is projecting a modest increase in overall sales this year from 2024, still leaving the company more than $20 billion below its peak in 2021.
Gelsinger remains confident that Intel is on the right track in the long run. He said Intel has paid the heavy price of catching up to the industry, and now can focus on its finances.
The chipmaker is reporting earnings for the third time under a new business structure that shows the financial performance of its manufacturing operations. Gelsinger has said the restructuring was a necessary step to make operations more efficient and competitive.
Its so-called foundry unit had sales that slipped 8% from the prior-year quarter to $4.4 billion, in line with estimates. PC chip sales were $7.3 billion, versus an estimate of $7.46 billion. Itโs data center and AI chip unit gained 9% for sales of $3.3 billion, compared with an average estimate of $3.1 billion.
For the next two years, the majority of work done by Intelโs factories will come from orders from its own chip design unit. The financial benefit of outside business will start to show up in 2026, Gelsinger said.
Gelsinger emphasized on the call with investors that Intel is โfar from satisfiedโ with where it is.
--With assistance from Ed Ludlow.
(Updates with Gelsinger comments on the Chips Act)
Bull_Dolphin
2 months ago
On Fidelty this morning:
Factbox-Qualcomm's potential bid for Intel turns the spotlight on their products
REUTERS 7:18 AM ET 9/24/2024
Symbol Last Price Change
QCOM 165.96down 0 (0%)
INTC 22.56down 0 (0%)
TSM 174.76up 0 (0%)
MBLY 13.35up 0 (0%)
QUOTES AS OF 04:00:00 PM ET 09/23/2024
(Reuters) - Qualcomm(QCOM) has approached the once-dominant chipmaker Intel(INTC) for a potential buyout, turning the spotlight on the portfolio of products these chip companies have to offer.
A deal would unite Qualcomm's(QCOM) mobile-focused Snapdragon line with Intel's(INTC) dominant PC and server chip divisions, creating a semiconductor powerhouse.
Here are some of the areas where Qualcomm(QCOM) and Intel's(INTC) product lines would come together:
PROCESSORS
Intel (INTC) dominates the PC processor market with its Core series, which is widely used in desktops and laptops, while its Xeon series chips, designed to handle demanding workloads, are extensively used in servers and workstations.
Qualcomm (QCOM) is a leader in mobile chips, producing Snapdragon processors that are widely used in smartphones and tablets.
Intel (INTC) also produces Atom processors for low-power devices, while Qualcomm(QCOM) has been expanding into laptop processors with its own compute platforms.
MANUFACTURING
Intel (INTC) fabricates its chips in-house at company-owned facilities called "fabs," located in various parts of the world.
Qualcomm (QCOM) does not make its own processors but has partnered with contract manufacturers like Taiwan Semiconductor Manufacturing Co(TSM) and Samsung Foundry for chip production.
CHIP ARCHITECTURE
Intel (INTC) primarily uses the x86 computing architecture, which is standard in desktops, laptops, and servers.
Qualcomm (QCOM) relies on Arm Holdings' processor architecture, which powers smartphones and targets low power consumption. Computer code built for x86 chips will not automatically run on Arm-based designs.
Intel (INTC) has previously explored developing Arm-based chips, and software solutions are available to facilitate some compatibility between x86 and Arm architectures.
AUTOMOTIVE BUSINESS
Qualcomm (QCOM) also has a growing automotive business, focusing on technologies like connected cars, infotainment systems, and advanced driver-assistance systems.
Intel's (INTC) chips are used in vehicles, powering infotainment systems, digital instrument clusters, and more. The company's advanced chips for cars support AI features like generative AI and camera systems that monitor drivers and passengers.
Intel (INTC) also owns a majority stake in Mobileye Global(MBLY) and recently confirmed that it would not divest its majority stake in the self-driving tech firm.
(Reporting by Harshita Mary Varghese and Jaspreet Singh in Bengaluru; Editing by Tasim Zahid)