Intel earnings report beats the Street

Santa Clara computer chip maker Intel reported better than expected fourth-quarter and yearly earnings Thursday, bucking the headwinds of a declining demand for chips that power personal computers.

Intel reported quarterly earnings of 74 cents a share and quarterly revenue of $14.9 billion. Analysts polled by Thomson Reuters expected fourth-quarter revenue of $14.8 billion and earnings of 63 cents a share.

Annual revenue of $55.4 billion and earnings of $2.33 a share topped analysts’ estimates of $55.24 billion and $2.23 a share. Annual revenue was down 1 percent from 2014. Profit of $11.4 billion was down 2 percent from 2014. Quarterly profit was down 1 percent, at $3.6 billion.

CEO Brian Krzanich called the results “a strong finish to the year” and confirmation that his strategy to build a company for the emerging smart connected world is working.

Intel “is no longer just a PC company,” said analyst Betsy Van Hees of Wedbush.

She said Intel’s spending, which includes the $16.7 billion acquisition of Altera, has been growing — up from the third quarter and up again in guidance for the first quarter of this year. “But the company is changing, and developing new markets. You have to spend to get there. They are investing in their future.”

Still, the PC is the company’s mainstay. Intel announced its sixth-generation processor, Skylake, last fall and is counting on adoption of Windows 10 to help drive sales of new PCs this year.

“It’s not like they can get out of the PC business,” said industry analyst Jack Gold of Gold Associates. “They own most of it.” And it’s a lot of sales, he said.

Krzanich said recently that the PC “is the engine of the company right now,” generating new technology from the continuous improvement of processors and revenue for investment, “I believe that will shift as we go into the decade, but right now the PC is a huge asset to the company that provides the scale and volume” to grow the rest of the company.

Patrick Moorhead, industry analyst with Moor Insights and Strategy, said he remains optimistic for Intel in the coming year. While the PC business may be declining, “I’m not willing to throw in the towel on a 275 million-unit business that’s hundreds of billions of dollars in industry revenues,” he said.

Intel’s PC chip business was $32 billion, down 8 percent from 2014; its data center revenue grew by 11 percent to $16 billion, and the Internet of Things Group was up 7 percent with $2.3 billion in revenue. Memory chip sales were up 21 percent, while software and services were down 2 percent.

Research firm IDC this week reported a 10.6 percent decline in global PC shipments in the fourth quarter, partly due to economic troubles in China, but said it expects PC sales to grow in the second half of 2016 on increased corporate adoption of Windows 10 and replacement of aging computers.

Just over 276 million PCs were shipped by vendors last year, according to IDC.

Photo: Brian Krzanich, Intel CEO (Mercury News archives)


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