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Slowing data center revenue growth dims Intel’s profits

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Slowing data center revenue growth dims Intel’s profits

January 15
12:52 2016
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intel-buildingConcerns about slowing revenue growth in Intel’s highly profitable data center business overshadowed its strong quarterly profit, sending its shares down about 5.6% in after-market trading.

The company’s chief executive Brian Krzanich has looked to weather a slump in demand for chips used in personal computers by focusing on the business of supplying chips for high-end servers.

The world’s largest chipmaker reported data centre revenue of $4.31 billion in the fourth quarter ended December 26, missing consensus estimate of $4.42 billion.

Revenue in the business rose only 4% from the preceding quarter, compared with the 8% growth in the third quarter.

In October, Intel had cut its 2015 revenue growth forecast for the data centre business, as companies cut spending due to weak macroeconomic growth.

Excluding items, Intel forecast revenue of $14.1 billion, plus or minus $500m for the first quarter ending March.

“While the outlook for the first quarter reflects some caution for overall demand, particularly in China, we continue to expect solid growth in the business in 2016,” Krzanich said on a post-earnings call.

Revenue in the personal computer business fell about 1% to $8.76 billion from a year earlier.

Global personal computer shipments fell 10.6% in the quarter ended in December from a year earlier, IDC said earlier this week, the largest decline since the research firm started tracking PC shipments.

The fourth quarter of 2015 marked the fifth consecutive quarter of worldwide PC shipments decline, according to rival research firm Gartner.

Intel completed its $16.7 billion purchase of programmable-chip maker Altera Corp in December, a deal that adds a new class of products to Intel’s portfolio.

The company said its net income fell to $3.61 billion from $3.66 billion in the fourth quarter. On a per share basis, earnings were flat at 74 cents.

Net revenue rose to $14.91 billion from $14.72 billion.

Analysts on average had expected a profit of 63 cents per share and revenue of $14.80 billion, according to Thomson Reuters I/B/E/S.

Intel Corporation, founded in 1968,  is an American multinational technology company headquartered in California. The company makes motherboard chipsets, network interface controllers and integrated circuits, flash memory, graphics chips, embedded processors and other devices related to communications and computing.

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