Bob Swan, then interim CEO and CFO of Intel Corp., reacts during the opening of the company’s research and development facility in Bengaluru, India, on November 15, 2018.
Samyukta Lakshmi | Bloomberg | Getty Images
Intel shares closed up 6.46% on Thursday after the chip maker reported earnings and revenues that exceeded investor expectations and its own forecasts, driven by strong PC sales.
Details of Intel’s earnings were available in financial threads minutes before the markets closed, however, after Intel gave up its earnings and shares fell more than 2% at one point.
The strong earnings report covering the quarter ended last December comes at a critical juncture for the chip giant, as Thursday’s report is the last with Bob Swan in the role of CEO. On February 15, Pat Gelsinger takes over.
Here’s how Intel did it:
- Earnings per share (EPS): $ 1.52, adjusted, vs $ 1.10 expected by Refinitiv’s consensus estimates.
- Recipe: US $ 20 billion, against US $ 17.49 billion expected by Refinitiv’s consensus estimates.
- Forecast: 2020 first quarter revenue of $ 18.6 billion and EPS of $ 1.03.
Intel also increased its cash dividend by 5% to $ 1.39 per share.
Intel said the strength in PC sales helped to exceed its own expectations. The company said 33% more PCs with Intel chips were sold than in the same period last year. PC sales were strong last year as people who work or attend school at home seek to upgrade their computers.
A leadership transition is not the only challenge that Intel faces. In December, hedge fund activist Third Point asked Intel’s board of directors to make several changes to the company, including the possibility of outsourcing chip production or divesting parts of the business, such as acquisitions.
Third Point CEO Dan Loeb also mentioned Intel’s biggest problem in his December letter, when he noted that Intel lagged behind in Asian chip foundries in terms of its ability to manufacture the most advanced processors.
Intel’s latest chips use a 14 nanometer process, as they have since 2013, while competing chips manufactured by TSMC are using a 5 nanometer process. A smaller process is better because more transistors can fit on the same chip, increasing power and efficiency.
Intel customers like Apple, Amazon and Microsoft have either developed their own processors or signaled that they intend to do so.
Gelsinger, who was recently the CEO of VMWare, has a technical background and is expected to propel Intel to become more competitive in terms of chip manufacturing. Intel said it started producing 10-nanometer chips during the quarter and will start manufacturing more this quarter.
Intel said Mobileye, its subsidiary that works with autonomous car technology, saw sales increase 39% during the quarter compared to the same period last year. But Mobileye is still a small part of Intel – in 2020, it posted $ 967 million in sales, compared to Intel’s PC group, which posted $ 40.1 billion in sales during the year.