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Intel Q1 Results Beat Street Estimates, Barely

A slight beat with sales just a tad below consensus.


Chipmaker Intel just reported results for its first quarter that were every so slightly better than what analysts had expected, and the shares are rising after hours.

Intel reported earnings per share of 38 cents on sales for $12.76 billion. The results compare with a Street consensus of 37 cents on $12.8 billion.

Intel shares initially rose by more than three percent as the report was published, and then settled back down to $27 even, up 23 cents, or less than one percent, from the closing price of $26.77 during the regular session.

CFO Stacy Smith, speaking on CNBC moments ago, called it a “good start to the year.” He said the PC market is stabilizing with what he called “pockets of strength.” Specifically, corporate customers bought more PCs. He said Intel chips are inside five million tablets sold this quarter, and are on track to hit 40 million this year. Here’s the video from CNBC.

Sales of PCs have recovered somewhat in recent months as computers running Microsoft Windows XP have been swapped out at businesses for machines running newer operating systems. Last week, the market research firm IDC reported that global PC sales declined by 4.4 percent, amounting to a smaller decline than had been expected.

Patrick Moorhead, head of the boutique research firm Moor Insights and Strategy, characterized it as a quarter with mixed results. “There are two sides to this coin. On one side PC sales look like they are stabilizing, the Intel enterprise juggernaut is continuing and the industrial Internet of Things is a very large business,” he said. “But on the other, Intel’s current mobile business isn’t doing well.”

Intel has failed to win meaningful business in smartphones, as most phones use versions of chips designed by the British firm ARM Holdings and made by companies like Qualcomm. Intel said it ran a $929 million operating loss in its mobile business unit devoted to phones and tablets.

Moorhead said there is a potential for improvement in Intel’s mobile business. “Intel’s latest LTE modem looks solid and the next generation of its manufacturing technology on 14 nanometers plus a new mobile chip architecture could bring Intel its highest level of mobile competitiveness ever.”

Earnings fell five percent from the year-ago quarter, and sales fell eight percent year on year. Gross margin, a closely watched measure of profitability, was 62 percent.

For the second quarter, Intel says it expects sales of $13 billion plus or minus $500 million, and gross margins of 63 percent.

For the year, Intel says it expects sales to be flat with the $52.8 billion it reported in 2013, with a gross margin of 61 percent, plus or minus a point. It says it expects to spend about $11 billion in capital expenditures during the year.

Intel exited the quarter with about $19 billion in combined cash, short term investments and trading assets.

The PC client group, the business unit that sells chips into personal computers, recorded revenue of $7.9 billion, amounting to a drop of one percent. The Data Center Group, which sells chips into servers, had sales of $3.1 billion, up 11 percent from the year-ago quarter.

The Internet of Things, a new product segment using small low-power chips that are used in wearable devices and a range of consumer and industrial products, amounted to $482 million in revenue, up 32 percent. It was the first time Intel has reported the results of that business. If it remains consistent, it would appear to be on track to be a roughly $2 billion business this year.

Here’s the original press release. A conference call is set to begin shortly.

Intel Reports First-Quarter Revenue of $12.8 Billion
Operating Income of $2.5 Billion, Up 1 Percent Year-Over-Year

PC Client Group revenue of $7.9 billion, down 1 percent year-over-year
Data Center Group revenue of $3.1 billion, up 11 percent year-over-year
Net Income of $1.9 billion, down 5 percent year-over-year
EPS of 38 cents, down 5 percent year-over-year

SANTA CLARA, Calif., April 15, 2014 — Intel Corporation today reported first-quarter revenue of $12.8 billion, operating income of $2.5 billion, net income of $1.9 billion and EPS of 38 cents. The company generated approximately $3.5 billion in cash from operations, paid dividends of $1.1 billion, and used $545 million to repurchase 22 million shares of stock.

“In the first quarter we saw solid growth in the data center, signs of improvement in the PC business, and we shipped 5 million tablet processors, making strong progress on our goal of 40 million tablets for 2014,” said Intel CEO Brian Krzanich. “Additionally, we demonstrated our further commitment to grow in the enterprise with a strategic technology and business collaboration with Cloudera, we introduced our second-generation LTE platform with CAT6 and other advanced features, and we shipped our first Quark products for the Internet of Things.”

Q1 Key Business Unit Trends

PC Client Group revenue of $7.9 billion, down 8 percent sequentially and down 1 percent year-over-year.
Data Center Group revenue of $3.1 billion, down 5 percent sequentially and up 11 percent year-over-year.
Internet of Things Group revenue of $482 million, down 10 percent sequentially and up 32 percent year-over-year.

Mobile and Communications Group revenue of $156 million, down 52 percent sequentially and down 61 percent year-over-year.

Software and services operating segments revenue of $553 million, down 6 percent sequentially and up 6 percent year-over-year.

Business Outlook

Intel’s Business Outlook does not include the potential impact of any business combinations, asset acquisitions, divestitures, strategic investments and other significant transactions that may be completed after April 15.

Q2 2014
Revenue: $13.0 billion, plus or minus $500 million.
Gross margin percentage: 63 percent, plus or minus a couple of percentage points.

R&D plus MG&A spending: approximately $4.8 billion.

Restructuring and asset impairment charges: approximately $100 million.

Amortization of acquisition-related intangibles: approximately $75 million.

Impact of equity investments and interest and other: approximately $75 million.

Depreciation: approximately $1.9 billion.

Full-Year 2014
Revenue: approximately flat, unchanged from prior expectations.

Gross margin percentage: 61 percent, plus or minus a few percentage points, 1 percentage point higher than prior expectations.

R&D plus MG&A spending: $18.9 billion, plus or minus $200 million, higher than prior expectations of $18.6 billion.

Amortization of acquisition-related intangibles: approximately $300 million, unchanged from prior expectations.

Depreciation: approximately $7.4 billion, unchanged from prior expectations.
Tax rate: approximately 27 percent for each of the remaining quarters of the year.
Full-year capital spending: $11.0 billion, plus or minus $500 million, unchanged from prior expectations.

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