Intel said today that first-quarter earnings had met its reduced expectations. The world’s biggest chip maker saw weak PC and mobile device revenues, as well as a drop in its data center revenue, during the quarter compared to a year ago.
The Santa Clara, Calif.-based Intel is a bellwether for the PC industry and all things electronic. The results are a test of the leadership and business skills of Brian Krzanich, who took over as Intel's CEO and hasn't had tough times with Wall Street.
The company reported that earnings per share were 41 cents, or $2 billion, up 8 percent from a year ago. Revenues were $12.8 billion, flat compared to a year ago. But Client Group revenues -- which include PC and mobile communications sales -- were $7.4 billion, down 8 percent versus a year ago. Data center revenues were $3.7 billion, up 19 percent from a year ago. Internet of Things (IoT) revenue was $533 million, up 11 percent. Software revenue was $534 million, down 3 percent.
Intel's stock price rose after the announcement at the end of trading hours. After hours, Intel's stock was up 3 percent to $32.48 a share.
"Year over year revenues were flat, with double-digit revenue growth in the data center, IoT, and memory businesses offsetting lower than expected demand for business desktop PCs," said Krzanich in a statement. "These results reinforce the importance of continuing to execute our growth strategy. "
On March 12, Intel had previously warned that first-quarter revenue would be $12.8 billion, plus or minus $300 million, compared to the previous expectation of $13.7 billion, plus or minus $500 million. After that warning, analysts estimated that Intel would report earnings per share of 40 cents on revenue of $12.82 billion.
In its forecast for the second quarter of 2015, Intel predicted revenue of $13.2 billion, up 3 percent from the first quarter. This forecast is in line with the average seasonal increase for the second quarter, the company said.
Intel said gross margin will be about 62 percent in the second quarter, or 1.5 points increase from the first quarter. For the full year, Intel expects flat revenue compared to 2014 and gross margins for the year of 61 percent, down 2.7 points from 2014.
Intel said previously that the change in outlook had been the result of weaker than expected demand for business desktop PCs and lower than expected inventory levels across the PC supply chain. Intel said it believes the “changes to demand and inventory patterns are caused by lower than expected Windows XP refresh in small and medium business and increasingly challenging macroeconomic and currency conditions, particularly in Europe.”
Intel said that its unit volumes were down 17 percent from the previous fourth quarter, but average selling prices were up 2 percent.
Intel recently announced that it would no longer report its mobile communications results separately, as it had previously said it would combine that unit with the PC client group. That means Intel will no longer have to say that it is losing a billion dollars a quarter in its attempt to break into mobile chips. Intel said it made the change so that it could approach customers using a single client-facing division.
The Wall Street Journal recently reported that Intel was considering a $10 billion purchase of Altera as part of a move to get into programmable gate array chips. But the company declined to comment, and it has made no announcements toward that deal.
Intel said that its capital spending for 2015 is expected to be $8.7 billion, plus or minus $500 million, down $1.3 billion from the previous expectation of $10.0 billion. The reduction is driven by increased reuse of capital on 14 nanometer manufacturing equipment and the alignment of capacity with demand, Intel said.