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Intel Q4 Beats Street on PC Resurgence, but Guidance Weak

Strong PC and server sales win the quarter, but guidance for the current quarter appears to shake investors.

Asa Mathat

Chipmaker Intel beat the forecasts of analysts with a fourth-quarter profit of 74 cents on revenue of $14.72 billion, but issued guidance for the current quarter that was below expectations.

Intel shares fell two percent to $35.39 in after-hours trading after the results were reported.

For the quarter ending in March, Intel said it expects revenue of $13.7 billion, plus or minus about $500 million. The midpoint was lower than the $13.8 billion analysts had called for.

Reflecting sales of personal computers that rebounded last year on the heels of the industry’s worst year ever, as well as a surge in sales of servers, Intel beat the 66-cent consensus of analysts by eight cents. Revenue at $14.72 billion rose 6 percent versus the same period a year, and came in slightly above the consensus.

“The fourth quarter was a strong finish to a record year,” CEO Brian Krzanich said in a statement. “There is more to do in 2015. We’ll improve our profitability in mobile, and keep Intel focused on the next wave of computing.”

Here are a few other highlights from the quarter: Revenue in the Client Group, Intel’s name for the business that caters to personal computer manufacturers, rose 3 percent from the year-ago quarter. Revenue in the Data Center Group, which deals with servers, rose 25 percent year on year.

Intel’s gross margin, a closely-watched metric indicating profitability, was 65.4 percent, up slightly from the prior quarter and 1 percent better than what Intel said it expected.

Mobile revenue, long a business where Intel has faced challenges, posted revenue of $202 million, down 85 percent from the year-ago period. Intel hit its goal of placing its chips inside 46 million tablets, though it lost money on them because it pays tablet makers to use its older generation of mobile chips.

Internet of Things, a business unit devoted to wearables and other small devices, rose 19 percent to about $2 billion.

For the full year, Intel finished the year with $56 billion in sales, up 6 percent, with earnings per share of $2.31, up 22 percent from 2013. It exited the quarter with $14 billion in cash and investments on the balance sheet, and bought back $4 billion worth of shares during the quarter.

“The data center unit drove double-digit growth buoyed by increases in the cloud server market as well as networking where it is gaining market share,” said Patrick Moorhead, an analyst with research firm Moor Insights and Strategy. “Intel had already warned at its last financial analyst day, mobility numbers would be brutal, but it did exceed the 40 million tablet goal by 6 million units. Still the mobile losses will continue, but that’s the price of admission of being late to the market.”

On a conference call with analysts, Krzanich sounded an upbeat note on the prospects for the PC market in 2015. “The innovation and the options in the PC market have never been better, so I’m comfortable about where we are with the PC market,” he said. He said a new variety of products ranging from low-priced Chromebooks running Google’s Chrome OS and up to new higher-priced products like Hewlett-Packard’s Sprout will spur healthy sales.

This article originally appeared on Recode.net.