Intel signals 2020 will be a turnaround year for chip industry leader

By Stephen Nellis and Munsif Vengattil (Reuters) - Intel Corp on Thursday cemented the market view that the chip industry is turning around after a prolonged slowdown, forecasting better 2020 revenue and profit than Wall Street anticipated, driven by cloud computing demand. The company's sales in its closely watched data centre business jumped 19%, helping it beat fourth-quarter profit and revenue estimates and sending its shares up 7% in extended trading

Reuters January 24, 2020 06:09:08 IST
Intel signals 2020 will be a turnaround year for chip industry leader

Intel signals 2020 will be a turnaround year for chip industry leader

By Stephen Nellis and Munsif Vengattil

(Reuters) - Intel Corp on Thursday cemented the market view that the chip industry is turning around after a prolonged slowdown, forecasting better 2020 revenue and profit than Wall Street anticipated, driven by cloud computing demand.

The company's sales in its closely watched data centre business jumped 19%, helping it beat fourth-quarter profit and revenue estimates and sending its shares up 7% in extended trading.

Chief Financial Officer George Davis said in an interview that sales to cloud computing providers were up 48% year-over-year in the fourth quarter, a trend expected to continue this year.

The Santa Clara, California-based chipmaker expects fiscal year 2020 revenue of about $73.5 billion (56 billion pounds), more than $1 billion ahead of the Wall Street consensus, according to IBES data from Refinitiv.

Davis did not name specific customers, but so-called "hyperscale" cloud providers such as Amazon Web Services and Microsoft Corp in the United States and Alibaba Group Holding and Baidu Inc all purchase Intel chips for data centres whose capacity they rent out to large businesses.

"What we're seeing is very strong demand from cloud players," Davis told Reuters. "I have to give credit to the hyperscalers for this quarter."

Intel said its transition to a newer generation of chipmaking technology was progressing better than it expected and that it would boost its capacity to make chips for personal computers, in a sign that the manufacturing woes that plagued the chipmakers over the past year were starting to ease.

"We think this is going to help us close the gap to customer demand that we've been experiencing. We think all of this is (going to be) resolved in 2020 and we'll actually be able to start building inventory at the end of the year, which we have not been able to do for two years," Davis told Reuters.

Intel's positive outlook follows an upbeat forecast from chipmaker Texas Instruments on Wednesday and prediction last week of sharply higher chip demand at Taiwan Semiconductor Manufacturing Co Ltd <5425.TWO>. Analysts view 2020 as a recovery year for semiconductors, driven by 5G spending for both smartphones and network upgrades.

However, Intel's Davis cautioned that the positive forecast was not directly attributable to the trade deal signed between U.S. and Chinese officials last week.

"It's a little fresh to really have a good understanding of how that specific trade deal is going to have an impact on (Intel's customers') thinking," Davis said. "But we like the demand signals we're getting."

After years of acquisitions outside its core area of processing chips under previous leaders, Intel Chief Executive Bob Swan has set a goal of becoming more disciplined about spending, slowing investments in areas like memory chips and shedding struggling businesses.

Intel has doubled down on its core markets such as personal computers and data centres, both of which beat analysts' fourth-quarter expectations.

Revenue from Intel's client computing business, which caters to PC makers and is still the biggest contributor to sales, rose 2% to $10 billion in the fourth quarter, beating FactSet estimates of $9.74 billion.

Shares in Advanced Micro Devices Inc , Intel's biggest rival in the processor market, rose about 0.8% after Intel's results.

"AMD (stock) is up because Intel saw flattish PC demand even as PC units were up, which implies AMD likely saw strong PC demand," Cascend Securities analyst Eric Ross told Reuters.

Net revenue rose 8.3% to $20.21 billion, beating estimate of $19.23 billion, according to IBES data from Refinitiv.

Excluding items, the company earned $1.52 per share, above estimates of $1.25.

(Reporting by Munsif Vengattil in Bengaluru and Stephen Nellis in San Francisco; Editing by Maju Samuel and Marguerita Choy)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

Find latest and upcoming tech gadgets online on Tech2 Gadgets. Get technology news, gadgets reviews & ratings. Popular gadgets including laptop, tablet and mobile specifications, features, prices, comparison.

also read

France cranks up COVID-19 vaccine rollout to deliver shots faster
World

France cranks up COVID-19 vaccine rollout to deliver shots faster

By Dominique Vidalon and Sudip Kar-Gupta PARIS (Reuters) - France is stepping up its COVID-19 vaccine rollout by widening the first target group to include more health workers and simplifying a cumbersome process to deliver shots more quickly, Health Minister Olivier Veran said on Tuesday. France's inoculation campaign got off to a slow start, hampered in part by red tape and President Emmanuel Macron's decision to tread warily in one of the world's most vaccine-sceptical countries. France has fallen behind neighbours such as Britain and Germany, and the president is now demanding the vaccination programme be expedited

Germany orders 62,000 poultry culled after bird flu found on farms
World

Germany orders 62,000 poultry culled after bird flu found on farms

HAMBURG (Reuters) - About 62,000 turkeys and ducks will be slaughtered after bird flu was found on more poultry farms in Germany, authorities said on Tuesday. Type H5N8 bird flu was confirmed in two farms in the Cloppenburg region in the northern state of Lower Saxony, the Cloppenburg local government authority said.

More than 20 at Mali wedding ceremony killed in air strike - health worker
World

More than 20 at Mali wedding ceremony killed in air strike - health worker

DAKAR (Reuters) - More than 20 people, including children, were killed in air strikes during a wedding ceremony in a remote desert area of central Mali on Sunday, a health worker with knowledge of the attack said on Tuesday. It was not immediately clear who carried out the attacks but a French army source told Reuters that French forces operating in Mali had carried out an air strike in the area on Sunday that killed "dozens of fighters" from Islamist groups in the area. The health worker, who spoke to Reuters on condition of anonymity, said the air strikes had targeted men on motorbikes in the villages of Bounty and Kikara believed to be Islamist militants.