Things are looking up for Intel Corp. after it delivered strong second-quarter results today that comfortably topped expectations as personal computer makers bought more to ensure adequate chip supplies during trade tensions with China.
The company also raised its full-year guidance up a notch. Not least, it confirmed the widely expected sale of most of its smartphone modem business to Apple Inc.
Intel reported earnings before certain costs such as stock compensation of $1.06 per share, with revenue coming in at $16.5 billion. That was easily enough to beat Wall Streetâ€™s expectations of earnings of 89 cents per share on revenue of $15.7 billion.
The chipmaker also reported operating income of $4.6 billion, down 12% from a year ago. Net income came to $4.2 billion, down 17% from the same period a year ago.
Even better, though, was the companyâ€™s guidance for the third quarter. Intel executives forecast earnings of $1.24 per share on revenue of $18 billion for the next three month period. Wall Street had estimated earnings per share of just $1.16 on revenue of $17.72 billion.
The better-than-expected guidance was enough to stir up some excitement among investors, who bid up Intelâ€™s share price more than 5% in after-hours trading.
Investors were no doubt also pleased to see the company pocket $1 billion in cash from AppleÂ after Intel agreed to sell the majority of its smartphone modem business to the iPhone maker. That deal will see about 2,200 Intel employees join Apple, which also gains an array of related patents. Intel said it would retain rights to continue making modems for self-driving cars and PCs, however.
â€œWhen you beat expectations, itâ€™s all good,â€ said Charles King, an analyst with Pund-IT Inc. â€œAdding in a $1 billion windfall from selling a failing business to Apple is just the icing on the cake. Itâ€™s no surprise that investors were ready with forks and spoons.â€
The results of Intelâ€™s individual business units were a bit mixed. The companyâ€™s biggest business unit is its client computing business, which includes sales of computer chips for PCs. It saw revenue grow by 1% year-over-year, to $8.8 billion. Officials cited a combination of the success of its higher-performance products and customers buying up inventory before any potential impact by tariffs that may or may not result from the U.S.-China trade war.
On the downside, Intelâ€™s data-centric business unit saw revenue fall 7% from a year ago. The Data Center Group, which sells chips for data center operators, saw revenue jump 3%, though the cloud segment declined 1%.
Moor Insights & Strategy analyst Patrick Moorhead told SiliconANGLE that Intelâ€™s main businesses had performed very well in what is a competitive and challenging environment for both the PC and the data center industries.
â€œIntel had a very good second quarter,â€ Moorhead said. â€œCloud service providers are still chewing through earlier builds, but I expect this to turn around.â€
Intel can also look forward to a fresh profit stream from its upcoming 10th generation of computer processors, known as Ice Lake, which are based on the companyâ€™s new 10-nanometer process. In a conference call, Intel Chief Executive Bob Swan (pictured)Â told investors the company already has two factories producing those chips, and that the first products will go on sale later this year.
â€œI am looking forward to seeing how Intelâ€™s upcoming 10nm notebook products perform, as well its machine learning training and inference accelerators and discrete graphics processing units, which are three untapped markets,â€ Moorhead said.
Another bright spot was Intelâ€™s Internet of Things group, which pulled in record quarterly revenue of $986 million, up 12% from a year ago. Mobileye, Intelâ€™s autonomous driving unit, pulled in another $201 million in revenue, up 16% year over year.
â€œItâ€™s nice to see this large future market growing so well, but Iâ€™m a bit surprised MobilEye growth wasnâ€™t larger,â€ Moorhead added.
Swan said during the call that Intel was raising its full-year guidance following its â€œoutperformanceâ€ during the current quarter. He said the company now expects 2019 revenue to top $69.5 billion, up from an earlier forecast of $69 billion.
â€œIt never hurts to beat expectations, and when you then raise the full-year guidance on top of that, investors are usually delighted,â€ said Holger Mueller, an analyst with Constellation Research Inc.
But Mueller warned that Intel still needs to come up with new ideas to sustain its growth in the years to come.
â€œIn the long term Intel still needs to find new growth paths,â€ he said. â€œIts management needs to get going on something we all know since a decade ago, that its core businesses are not going to sustain growth for much longer. So what are the new growth plays?â€
Photo: 360 El Salvador/Flickr
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