PC Systems Lifted Intel Corp.'s Fourth-Quarter Profits

By Anders Bylund Markets Fool.com

After the closing bell on Thursday, Intel (NASDAQ: INTC) reported results for the fourth quarter and full fiscal year of 2016. Here's what you need to know.

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Intel's fourth-quarter results: The raw numbers

Metric

Q4 2016

Q4 2015

Year-Over-Year Change

Revenue

$16.4 billion

$14.9 billion

10%

Net income

$3.6 billion

$3.6 billion

Flat

GAAP EPS

$0.73

$0.74

(1%)

Data source: Intel (PDF).

What happened with Intel this quarter?

The fourth quarter continued the business trends Intel established in the last few reports, with data center and Internet of Things products rising in prominence.

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  • The lumpy non-volatile memory segment led the way in the fourth quarter with a 25% year-over-year sales increase. For the full year, the memory division's sales actually declined by 1%.
  • Among the more predictable business segments, the Internet of Things group saw sales rising 16% in the fourth quarter, while data-center revenues increased by 8%. Client-computing sales grew 4% in the fourth quarter and 2% in fiscal year 2016.
  • Within the data-center and client-computing segments, unit volumes fell year over year, but increasing average sale prices more than made up for that trend. Desktop volumes are declining faster than notebooks, and Intel is selling fewer products designed for x86 tablets these days.
  • The client-computing group also boosted its operating income by 30%, accounting for 62% of Intel's total segment profits. That ratio stood at 53% in the year-ago quarter.

Intel's management provided detailed guidance for the first quarter and full fiscal year of 2017, as follows:

  • In the first quarter, revenues are seen rising 7% year over year, to $14.8 billion. GAAP (generally accepted accounting principles) earnings should stop at $0.56 per share
  • For the full year, total sales should hold steady at roughly $59.4 billion. GAAP earnings are expected to rise 19%, landing near $2.53 per share. Capital expenses should approach $12 billion, up from $9.6 billion in 2016.

Image source: Intel.

What management had to say

Intel CEO Brian Krzanich saw 2016 playing out as a period of transformation, integrating the $16.7 billion Altera acquisition and investing to exploit future growth opportunities.

"The fourth quarter was a terrific finish to a record-setting and transformative year for Intel," Krzanich said in a prepared statement. "I'm pleasedwith our 2016 performance and confident in our future."

Looking ahead

Intel will flesh out its current strategy in more detail on February 9 when the company holds its annual investor conference. As an Intel shareholder, I can't wait to hear more about that drastic increase in capital spending, and in what direction this investment will move Intel.

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Anders Bylund owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.