Intel Profit Declines but Forecast Tops Views

Industries Dow Jones Newswires

Intel Corp. said its second-quarter profit fell 3.2%, the latest fallout from a personal-computer slump that is hurting much of the chip sector.

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But the company also projected far better revenue and margins than analysts had expected for the third quarter, sending shares up 7.8% to $32 in after-hours trading.

The big microprocessor maker, which said revenue declined 4.6% during the period ended in June, lowered its forecast for the year, saying it now sees revenue down about 1%. Intel had projected in April that 2015 revenue would be roughly flat with the prior year.

Intel said its gross profit margin, a closely watched metric that reflects factors like chip pricing and manufacturing productivity, was 62.5% in the second quarter. The company had previously projected that figure would be 62%, plus or minus a couple of percentage points.

The Santa Clara, Calif., company is known for manufacturing the silicon calculating engines used in the vast majority of computers. That business has suffered in recent years as consumer spending shifted to mobile devices that use competing chip technology.

PC sales strengthened somewhat in 2014. One reason is that companies bought PCs with new operating systems in response to Microsoft Corp.'s decision to phase out support for its aging Windows XP software.

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But that tailwind faded this year, a trend made clear in March when Intel slashed its first-quarter outlook. Intel later reported a 3% gain in profit for that period on flat revenue.

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Further negative signs about weakening PC demand include reports by two research firms last week. Gartner Inc. estimated that unit shipments declined 9.5% in the second quarter, while rival IDC said shipments fell 11.8%.

Advanced Micro Devices Inc., which sells microprocessors that are compatible with Intel's, on July 6 warned that it would report second-quarter revenue was 8% lower than it reported for the first period. AMD previously had projected a 3% sequential decline; the company is scheduled to report its full results Thursday.

Mr. Krzanich has moved to cut costs and revamp the company's senior management ranks. President Renee James, who took the position at the same time he was appointed, has said she plans to leave the company at the end of the year to take a CEO job elsewhere.

In all, Intel reported a profit of $2.71 billion, down from $2.8 billion a year earlier. Earnings were flat on a per-share basis. Revenue declined to $13.2 billion from $13.83 billion.

Analysts polled by Thomson Reuters had projected per-share earnings of 50 cents on revenue of $13.04 billion.

For the third quarter, Intel projected revenue of $14.3 billion and a gross profit margin of 63%, plus or minus a couple of percentage points. Analysts had estimated a 61.33% margin on revenue of $14.08 billion. according to Thomson Reuters.

(By Tess Stynes and Don Clark)

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