Intel stock drops nearly 10% after earnings miss

[StraightEdge]

Intel stock drops nearly 10% after earnings miss, execs predict quarterly loss as data-center market shrinks​

CEO Gelsinger predicts server-market declines in first half of 2023 before growth will resume​

Intel Corp. reported fourth-quarter earnings on Thursday.​

Intel Corp. shares dropped more than 9% in the extended session Thursday after the chip maker reported a big miss for the fourth quarter, forecast a loss for the first quarter, said the data-center market was contracting and that inventory digestion will gnaw at margins.
Intel INTC, -6.76% executives forecast an adjusted loss of 15 cents a share on revenue of about $10.5 billion to $11.5 billion and adjusted gross margins of about 39% for the current quarter. Analysts surveyed by FactSet had estimated adjusted first-quarter earnings of 25 cents a share on revenue of $13.93 billion.
Chief Executive Pat Gelsinger told analysts on a conference call he would not provide a 2023 forecast. Gelsinger restricted the outlook to the current quarter, citing macro uncertainties, a digestion of PC inventory that was “difficult” to forecast and a contracting data-center market. In the fourth quarter, AI group sales dropped 33% to $4.3 billion, while the Street expected revenue of $4.08 billion.
“We expect Q1 server consumption [total addressable market] to decline both sequentially and year-over-year at an accelerated rate, with first-half 2023 server consumption TAM down year-on-year before returning to growth in the second half,” Gelsinger said.
Chief Financial Officer David Zinsner told analysts that the company will institute an accounting change in the first quarter, where Intel will extend the useful life of their machinery to eight years from a current five years. Gelsinger said that Intel was going to “squeeze” its effective capacity.
While Zinsner would not give a full-year outlook, he did say that continued inventory digestion should be weighted to the first half of the year.
Pressed on how Intel could get back to the 51% to 53% margins range he promised a year ago, Zinsner said a “significant inventory burn” on PC inventory would hit gross margins by 400 basis points in the first quarter. Gross margins for the fourth quarter dropped to 43.8% from 55.8% a year ago, and from 45.9% in the third quarter.
Intel reported a fourth-quarter loss of $664 million, or 16 cents a share, versus net income of $4.62 billion, or $1.13 a share, in the year-ago period. After adjusting for restructuring charges and other items, Intel reported earnings of 10 cents a share, compared with $1.13 a share from a year ago.
Revenue declined to $14.04 billion from $20.52 billion in the year-ago quarter, for a 10th straight quarter of year-over-year declines.
Analysts surveyed by FactSet estimated earnings of 21 cents a share on revenue of $14.49 billion, based on Intel’s forecast of 20 cents a share on about $14 billion to $15 billion.

Intel shares fell as much as 9.8% in after-hours trading during the call with analysts, after closing the regular session up 1.3% at $30.09. Other chip stocks, the one’s most affected by a data-center market contraction, also declined, including top rival Advanced Micro Devices Inc. AMD, 1.46%, which saw shares drop more than 3% in after-hours trading, and Nvidia Corp. NVDA, 3.56%, which declined 2%.
Breaking down divisions: Client-computing sales fell 36% to $6.6 billion from a year ago; “network and edge” sales slipped 1% to $2.1 billion; and foundry services revenue rose 30% to $319 million.
Analysts surveyed by FactSet expected revenue from client computing to come in at $7.36 billion; “network and edge” revenue of $2.23 billion; and foundry services revenue of $199.1 million.
Over the past 12 months, Intel stock has fallen 43%. Over the same period, the Dow Jones Industrial Average DJIA, 0.46% — which counts Intel as a component — has slipped 1%, the PHLX Semiconductor Index SOX, -0.12% has dropped 13%, the S&P 500 index SPX, 0.65% has declined 7%, and the tech-heavy Nasdaq Composite Index COMP, 7.93% has dropped 15%.

 

[Hamartia Antidote]

Even with that it is still up 8% for the last month.

PC sales fell hard in 2022

Fears of a recession, global inflation, and higher interest rates all contributed to a precipitous drop in desktop and laptop sales in 2022, with the largest decline coming in the last quarter of the year.

www.computerworld.com

PC sales fell hard in 2022​

PC sales dropped by more than 25% year-over-year in the last quarter of 2022, as did the prices for the hardware that did sell, according to several reports from industry research groups.

Every major PC vendor saw the heavy declines in PC sales, with Dell Technologies hardest hit in the fourth quarter; it experienced as much as a 37% drop in sales. Apple was the least affected, with as little as a 2.1% decline.

The sales declines didn’t reshuffle the top three worldwide PC vendors with Lenovo maintaining its top spot, followed by HP and Dell.

While Lenovo retained 24% of the market share, it also endured its steepest decline since research firm Gartner started tracking the PC market. Lenovo’s shipments fell in all regions except Japan, declining by more than 30% in Europe, Middle East and Africa (EMEA) and Latin America.

HP and Dell also saw historically steep declines. HP was hit hardest in the EMEA market, where shipments fell 44% year-over-year. For Dell, weak demand in the large business market affected shipments in the second half of 2022.

The EMEA PC market suffered a historic decline of 37.2% year-over-year due to the intersection of political unrest, inflationary pressures, interest rate increases, and recession fears, according to Gartner.

The Asia Pacific market (excluding Japan) declined 29.4% year-over-year, mainly due to the market in China. While the fourth quarter has traditionally a been peak season for China’s business PC market, budget cuts by the Chinese government and uncertainty around COVID policies led to a significant drop in overall PC demand, Gartner said.

For all of 2022, laptop and desktop sales were down about 16% compared to 2021, according to all the three reports. Last year's decline was somewhat cushioned by a nearly historic year in PC sales in 2021, where year-over-year growth was around 15%.



IDC

Mikako Kitagawa, a director analyst at Gartner, said 2022's precipitous drop can be attributed to the global inflation, higher interest rates, and the anticipation of a global recession, which has yet to materialize.

“The enterprise PC market is also being impacted by a slowing economy,” Kitagawa said in a statement. “PC demand among enterprises began declining in the third quarter of 2022, but the market has now shifted from softness to deterioration. Enterprise buyers are extending PC lifecycles and delaying purchases, meaning the business market will likely not return to growth until 2024.”

Ryan Reith, group vice president with IDC's Worldwide Mobility and Consumer Device Trackers, said consecutive quarter-over-quarter declines in 2022 does paint a “gloomy picture of the PC market,” but it’s really about perception.

“There’s no question when we look back at this time that the rise and fall of the PC market will be one for the record books, but plenty of opportunity still lies ahead.," he said. "We firmly believe the market has the potential to recover in 2024 and we also see pockets of opportunity throughout the remainder of 2023."