Intel's Earnings Put Investors to Sleep

Intel's  (NASDAQ: INTC  )  third-quarter earnings announcement was quite the snoozer. Revenue and net income were essentially flat on the year, leaving little for investors to get excited about.   

For the quarter, Intel brought in $13.5 billion in revenue, translating to $3 billion in net income, or $0.58 a share in earnings. This beat the analyst consensus, which expected Intel to bring home $13.45 billion in revenue and $0.54 a share. The company expects its fourth-quarter revenue midpoint will be $13.7 billion, plus or minus $500 million, falling short of the $14 billion consensus. 

The bright spots
Intel's data center group continues to remain the brightest segment of its operations, driven by robust demand across all of its lines, including cloud computing, storage, and high-performance computing.

Segment

Revenue (millions)

Change (YOY)

Operating Income (millions)

Change (YOY)

PC client group

$8,387

(3.5%)

$3,260

(2.6%)

Data center group

$2,912

12.2%

$1,393

15.8%

Other Intel architecture

$1,067

(9.4%)

($606)

157.9%

Software and services

$621

5.6%

($5)

(225%)

All others

$496

22.5%

($538)

12.8%

Source: Intel Q3 2013 earnings release.

The honorable mention goes to Intel's PC client group for only experiencing a decline of 3.5% year over year, faring much better than the 7.6% decline IDC pegged for worldwide PC shipments in the third quarter.

A small blip
During the conference call, CEO Brian Krzanich told investors that the production of Broadwell, Intel's upcoming 14-nanometer processor, has been delayed one quarter and will now begin production in the first quarter next year. In the grand scheme of things, a three-month delay isn't a huge deal, but when Intel has been so intent on making a bigger splash in mobile computing, this could certainly be frustrating for investors. If you fall into this camp, your best bet is probably to just continue standing by. You've already waited this long.

Getting in the holiday spirit
Inventory levels wouldn't suggest it, but Intel is expecting the holiday season to be filled with plenty of low-cost tablets, 2-in-1 devices, and laptops powered by Intel Bay Trail and Haswell. By the time Black Friday rolls around, potential buyers should be able to score Bay Trail tablets for as low as $99, 2-in-1s for $349, and Haswell-powered laptops for $299. Naturally, the billion-dollar question remains if consumers will flock to these devices.

A friendly reminder
Intel's earnings serve as a solid reminder that it remains deeply entrenched in the PC market, which as I'm sure you've heard by now, hasn't been faring so great. Coupled with the fact that Intel's mobile ambitions continue to get pushed out into the future, it becomes clear why the stock trades at a deep discount relative to the overall market.

Unfortunately, there's little here for investors to get excited about in the near term, despite its healthy dividend and consistent profitability. For these negative sentiments to change, PC sales will need to stabilize and eventually return to growth, and Intel needs to make some serious inroads in mobile.

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  • Report this Comment On October 18, 2013, at 9:04 AM, khaledmrd wrote:

    17 PC catalysts analysts should take into consideration

    1-what if they added Chromebooks & Android PCs

    2-not everyone buy branded PCs but many buy unknown brands from Asia

    3-What if they added Convertibles/2in1 to PC as these are PCs

    4-What if they added tablets like Microsoft Surface as PC as these are PCs

    5-What if they added Personal assembled PC by users, especially in emerging markets, many gaming or low end users assembled their PC

    6-Intel Bay trail and Windows 8.1 in small screen PC support (not supported in Windows 8 but was in Windows RT)

    7-Windows lower pricing license for small screen size

    8-MS office bundled in small screen PC

    9-Drop in PC due to the faded of NETBOOK Category in favor of Tablets as both are consumption devices, that will change as new Small mini Ultrabooks and new Netbooks supported with new intel processors and Windows 8.1 will put off tablets growth

    10-Lack of affordable attractive PC form factors with Windows 8 due to uncompleted of Windows 8 and Intel new processors like Haswell/Bay trail, that will start changing in 2nd H13 with lovely affordable Ultrabooks, 2in1, AIO, mini notebooks/ultrabooks, Slim PC, gaming PC, chromebooks, Mac, Android PC, tablet-PC.

    11-Windows XP end of support in April 2014

    12-Tablets and phablets maturing, so i believe soon people will buy it less frequent (many change it every year or two, that may change to three or four) also no attractive features to buy knew, most looks the same physically

    13-100s of millions of PC are aging and soon users will have to replace with the new nice affordable form factoes in the pipeline

    14-nothing like a PC with appealing & productive bigger screen

    15-nothing like a PC when it comes to productivity

    16-Global population is growing and with it the the computing users for home, gaming, business especially in emerging markets

    17-The negative stance about PC operating systems in last 12 months start to change to positive due to Microsoft listening to users by res-erecting Window by developing 8.1, Google further into Chromebooks

  • Report this Comment On October 18, 2013, at 2:01 PM, jpanspac wrote:

    The 14nm cloud may end up of having a silver lining. If Intel, the undisputed master of process technology is running into a glitch, just imagine the problems TSMC and GF will have when they (some day) try to get to 14nm.

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