Intel slashed its annual sales and profit forecasts on Thursday after missing estimates for second-quarter results as demand for its chips used in personal computers cools, sending shares down 10 percent. The company also forecast current-quarter results well below expectations, blaming the "sudden and rapid decline" in economic activity and execution issues.
Runaway inflation and the reopening of offices and schools
have led people to spend less on PCs than they did during lockdowns, when many
bought computers for work and school as they stayed home during the pandemic.
Chipmakers are also under pressure from a spate of COVID
curbs in key PC market China and the Ukraine war that have worsened
supply-chain snarls and dragged demand further. Global shipments of PCs are
expected to drop 9.5 percent this year, according to IT research firm Gartner.
"The economic shift was harsher and drove not only
consumption changes in the marketplace, but also dramatic moves in the
inventory position of key customers," Intel Chief Executive Pat Gelsinger
told Reuters.
"Those effects caused a very sharp shift in the
business, and we didn't execute particularly well."
Intel now expects fiscal 2022 revenue between $65 billion and
$68 billion, compared with its earlier forecast of $76 billion. It also
forecast adjusted profit of $2.30 per share, down from a prior outlook of $3.60
per share.
Still, Intel will not delay its $20 billion investment for a
new mega chip factory in Ohio because of this tougher period, Gelsinger told
Reuters. "You just don't build factories like this based on a couple of
quarter cycles," said Gelsinger. "The semiconductor industry is
doubling over the decade and I need capacity to grow into that opportunity."
While Intel took a major hit with the latest downturn, its
competitors fared much better. Taiwan Semiconductor Manufacturing Ltd and
Samsung Electronics Ltd, which, while warning about dampening PC and smartphone
demand, delivered stronger sales growth in the by-gone quarter.
TSMC projected current quarter sales if achieved could be
its highest in the 10 quarters, and raised its full year sales forecast.
Intel said sales from Datacenter and AI Group (DCAI) fell 16
percent to $4.6 billion, coming in lower than analysts' target of $6.46 billion,
despite strong growth analysts expect for the overall datacenter market.
"Intel is very dependent on the PC industry, as well as
data centers, and OEMs have slowed orders for 2H22," said analyst Ryan
Reith of market intelligence firm IDC. "Peers Samsung and TSMC have much
broader exposure into mobile, auto, etc..."
Intel, which draws about half of its revenue from selling
the chips that power desktops and laptops, also forecast current quarter
revenue in the range $15 billion to $16 billion, also lower than an average of
estimates of $18.62 billion, according to Refinitiv.
For the reported quarter, sales at Intel's Client Computing
Group (CCG), which supplies PC makers and is the largest contributor to the
company's revenue, fell 25 percent to $7.7 billion in the reporting quarter.
According to IT research firm Gartner, global shipments of PCs are expected to
drop 9.5percent this year.
Intel's revenue dropped 22 percent to $15.3 billion - its
seventh straight quarter of decline and were below expectations of $17.92
billion.
On an adjusted basis, the company earned 29 cents per share,
missing expectation of 70 cents.
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