Intel profit beats but data center business growth slows

The growth rate in the fourth quarter was particularly underwhelming at just 5% year-over-year. That’s why I like to tune into the company’s quarterly earnings calls to get a better sense of the health and long-term trajectory of the business.

As the data center, IoT, and memory grow within Intel, the company will depend less and less on the PC, and suffer less if and when the market continues to decline.

Intel (Santa Clara, Calif.) reported fourth quarter sales of $14.9 billion, on the higher side of the company’s estimate of $14.3 billion to $15.3 billion. The bottom-line figure was up 16 percent on a sequential basis and flat year-over-year.

Proficio Capital Partners bought a new stake in shares of Intel Co.

The company’s net income fell to US$3.61 billion from US$3.66 billion in the fourth quarter. Still, its net income slid by 1 percent from a year earlier to Dollars 3.6 billion.

The Internet of Things division saw 6% year-over-year sales growth, stopping at $625 million.

Besides the data center segment, Intel’s performance this quarter was a mixed bag. The higher unit costs, due to the ramp of 14 nm production, was offset by an increase in ASPs, driven by strong results in the data center business and a richer mix in the Client Computing business. Community Bank & Trust of Waco, Texas acquired a new stake in Intel during the fourth quarter valued at about $5,063,000.

The company has faced increasing investor concerns since the first earnings call in 2015, as more and more customers shifted from PCs to smartphones, crippling end-market demand in the PC market.

That’s because the PC market isn’t the money-spinner it once was for the chip maker. The acquisition of Altera, which closed on December 28, will boost revenue in fiscal 2016, Intel officials said. Intel accounts for 2.2% of Mitchell Sinkler & Starr’s portfolio, making the stock its 13th largest position. During his keynote address, Krzanich showed drones, wearable devices, robots, and other connected devices, all running on Intel chips.

The products will be multi-chip modules, in which Intel’s server chips and Altera FPGAs will be separate processing units.

Intel’s latest results come as its sixth generation Core PC processors, codenamed Skylake, start hitting the market in volume, providing power users, at least, with a stronger reason to upgrade than Windows 10.

Analysts on average had expected a profit of 63 cents per share and revenue of US$14.80bil (RM64.80bil), according to Thomson Reuters I/B/E/S.

Looking at the main area of interest for HEXUS readers, PCs, Intel’s revenue from this segment fell 1 percent from a year earlier, to $8.76 billion.

In October 2015, Intel revised down the growth forecast for its datacentre business, blaming the weakening macroeconomic environment. Mr. Danely raised caution over Intel’s conservative 2016 guidance, and over uncertainty in weak Chinese markets. This was a good quarter by any reasonable metric, in spite of continued weakness across the crucial PC market.

According to analysts at Northland Securities, the stock’s decline today could be a great opportunity to buy in. Nomura set a $42.00 price objective on Intel and gave the company a “buy” rating in a research note on Wednesday.