Intel CEO Bob Swan said in an earnings conference call that the company lowered its revenue expectations for the full year due to “headwinds” among customers in China and elsewhere as buyers reduce their orders.
He said the company is in the midst of an ambitious transition to expand its market reach into everything from chips for automotive tech to high-performance supercomputer chips. But it has been a bumpy transition.
Swan talked about the company’s larger strategy on a conference call for first-quarter results. In that quarter, Intel’s revenue results came in slightly higher than expectations.
While PC chip sales were up, China headwinds increased, memory prices are down, and data-centric revenues were lower. So Intel reduced its revenue and earnings outlook for the full year. Intel’s stock is down 7% in after-hours trading at $53.17 a share.
Swan said the company is expanding its total available market (TAM) as it goes after more data-centric businesses. Recently, Intel launched more than 50 products targeting the data-centric world, with a heavy focus on artificial intelligence processing. It also launched a bunch of new mobile and desktop chips.
The company is also improving performance while evolving its culture. Swan said Intel is making 10-nanometer chips for launch in products that will debut over the holidays and expects to qualify its first Ice Lake 10-nanometer chips this quarter.
“When it became apparent that we don’t have a clear path to profitability in 5G, we acted,” Swan said, referring to the company’s decision to shutter its 5G modem business after Apple settled its litigation with Qualcomm.
But Intel is making field-programmable gate arrays and other chips for use in 5G base stations, Swan said. Intel has had a challenging start for 2019, as customers are becoming more cautious about buying, particularly in China.
“Intel had a solid Q1 with increases in PC and datacenter ASPs but revised its future guidance, which is taking its toll on the stock,” said Patrick Moorhead, an analyst at Moor Insights & Strategy. “The datacenter rebound the company was banking on for back-half DCG improvements doesn’t look like it’s going to happen and it appears has spread from CSPs to the enterprise driven by inventory build. China and the memory market is tough for everyone right now and Intel was impacted significantly. I am expecting other memory companies and tech companies highly indexed in China to feel the pain, too. With all that said, I expect Intel to be in a much better position in the second half with its Cascade Lake platforms.”
He added, “On the plus side, the PC group increased revenue 4% and increased ASPs driven by sales of higher margin products, likely at the expense of some unit share loss. Mobileye and the IoT group were up 38% and 8%, respectively. 10-nanometer manufacturing appears to be on track, as well, a concern for some based on leaked information on a review site.”