News Intel faces more losses as PC makers slash chip purchases; shares tumble
Jan 26 (Reuters) – Intel Corp (INTC.O ) surprised investors on Thursday when it said it expected to report a loss for the current quarter, with a weaker-than-expected outlook for the personal computer market and its key data center unit. growth slowed down.
Shares of the company fell 8% after hours.
Two of Intel’s most important markets are showing signs of weakness after two years of strong growth as remote work booms during the pandemic. Now, the PC industry is struggling with a glut of chips after demand for consumer electronics plummeted and recession-wary enterprise customers are slowing spending on data centers.
Intel Chief Executive Pat Gelsinger told Reuters: “We expect some of the largest inventory adjustments we’ve seen in the industry to occur, which will affect the guidance for the first quarter in a meaningful way.”
“Everything depends on the recovery of the PC market. AMD is not immune,” said CCS Insight analyst Wayne Lam of Intel rival Advanced Micro Devices Inc (AMD.O). “Don’t think we’ve seen the bottom of INTC…they’re not running a sustainable business model.”
Intel expects profit margins to decline further after falling from 58.4% in the fourth quarter of 2020 to 39.2% in the fourth quarter of 2022. “It’s safe to say that a return to 60% margins is far off in the future,” said CFRA Research analyst Angelo Zino.
Shares of other microchip companies also fell, with Advanced Micro Devices down 2.6 percent and Nvidia Corp (NVDA.O ) down 2 percent.
PC shipments will drop 16.5% to 292.3 million units in 2022, according to research firm IDC, forcing chipmakers to cut production and lower revenue forecasts.
Shrinking demand for PCs also weighed on Microsoft Corp’s (MSFT.O ) more personal computing unit, which includes Windows, devices and search revenue, leading to a 19 percent decline in the unit in the second quarter.
Meanwhile, double-digit growth in the data center market has slowed as companies cut costs to ride out the economic slowdown.
Intel has been focused on regaining its leadership in chipmaking technology since Gelsinger returned to the company nearly two years ago. Outsourcing the chipmaking process has helped rivals like AMD make smaller, faster chips and outperform Intel’s technology.
The company expects first-quarter revenue in the range of $10.5 billion to $11.5 billion. Analysts on average expected total revenue of $13.93 billion, according to Refinitiv data.
The company expected an adjusted loss of 15 cents per share, compared with expected profit of 24 cents per share.
Revenue fell 32% to $14 billion in the fourth quarter. Analysts on average expected revenue of $14.46 billion.
Reporting by Chavi Mehta in Bengaluru; Editing by Sriraj Kalluvila and David Gregorio
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