Bob Swan, then interim CEO and chief financial officer of Intel Corp., reacted during the inauguration of the company’s research and development center in Bengaluru, India, on November 15, 2018.
Samyukta Lakshmi | Bloomberg | Getty Images
Shares of Intel closed up 6.46% on Thursday after the chip maker reported earnings and revenue that exceeded investor expectations and its own forecasts, driven by strong PC sales.
However, details of Intel’s earnings were obtained on the financial cables minutes before the markets closed, after which Intel relinquished its profits and shares fell above 2%.
The strong earnings report covering the quarter that ended last December is a critical time for the chip giant, as Thursday’s report is the latest with Bob Swan in charge of CEO. On February 15, Pat Gelsinger takes over.
Here’s how Intel did it:
- Earnings per share (EPS): $ 1.52 adjusted versus $ 1.10 expected by Refinitiv consensus estimates.
- Income: $ 20 billion, up from the expected $ 17.49 million according to Refinitiv consensus estimates.
- Forecast: First quarter 2020 revenue of $ 18.6 billion and EPS of $ 1.03.
Intel also increased its cash dividend by 5%, to $ 1.39 per share.
Intel said the strength in PC sales helped exceed its own expectations. It was said that 33% more computers with Intel chips were sold than during the same period last year. PC sales have been strong over the past year as people who work or attend school from home look to upgrade their equipment.
A leadership transition is not the only challenge facing Intel. In December, Third Point activist hedge fund urged Intel’s board of directors to make several changes to the company, including considering outsourcing chip production or disintegrating parts of the business, such as acquisitions.
Third Point CEO Dan Loeb also stated Intel’s biggest problem in his December letter when he noted that Intel has lagged behind Asian chip foundries in terms of its ability to manufacture more advanced processors.
Intel’s latest chips use a 14-nanometer process, as they have done since 2013, while competing chips manufactured by TSMC currently use a 5-nanometer process. A smaller process is better because more transistors can enter the same chip, increasing power and efficiency.
Intel customers such as Apple, Amazon and Microsoft have developed their own processors or have indicated that they intend to do so.
Gelsinger, who was recently the CEO of VMWare, has technical training and is expected to drive Intel to be more competitive in terms of chip manufacturing. Intel said it had begun production of 10-nanometer chips during the quarter and will begin manufacturing more this quarter.
Intel said Mobileye, its subsidiary that works in automatic driving technology, saw sales rise 39 percent during the quarter compared to the same time last year. But Mobileye is still a small part of Intel: in 2020 it recorded sales of $ 967 million, compared to the PC group Intel, which recorded sales of $ 40.1 billion during the year.