Intel’s 3rd Quarter Revenue and Earnings Beat; Guidance Disappoints

INTC  The world’s largest chipmaker, Intel Corp. (NASDAQ: INTC – $37.75) reported a 9.1% rise in quarterly revenue, helped by improving PC demand and growth in its data center and cloud businesses. Net income rose to $3.38 billion in the third quarter from $3.11 billion a year earlier. Adjusted earnings per share came it at $0.80, eight cents above analysts’ estimates. The company’s net revenue rose to $15.78 billion from $14.47 billion. The company reported that revenue for its client computing group – composed largely of PC chips – increased to $8.89 billion from $8.51 billion a year ago. In the company’s data center group, whose products are priced higher and command wider profit margins than PC chips, third-quarter revenue rose to $4.54 billion from $4.14 billion, but shy of Street forecasts.  Intel also reported a 6.1% revenue increase in its security group. The company in September announced a plan to sell a 51% in that business to the private-equity firm TPG. The company this year began selling reprogrammable chips called FPGAs, for field programmable gate arrays, as a result of buying Altera Corp. in a deal that closed in December. That new business contributed $425 million in additional revenues to the latest quarter.

       Shares of the chip giant slid 5.5% to $35.67 in after-hours trading, as the company provided a lackluster revenue outlook for the current quarter. For the fourth quarter, Intel projected revenue between $15.2 billion and $16.2 billion. Analysts, on average, had projected revenue of $15.9 billion. For the current quarter, Intel also guided an adjusted gross margin of 63% vs. analysts’ projections of 62.3%. Intel’s long-term fortunes depend on its ability to diversify from PC chips. If successful, I feel high-quality Intel stock offers decent long-term risk-adjusted total return prospects. A well-covered and growing dividend, yielding 2.8%, adds to its appeal.

intc

 

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