Intel Corp <INTC.O> reported lower-than-expected quarterly revenue as strong sales of its microchips that power data centers failed to offset a prolonged slump in demand for PC chips.
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Shares of the world's largest chipmaker fell nearly 3 percent in after-hours trading.
Sales from Intel's traditional PC business, which also includes chips for mobile phones and tablets, declined 3 percent to $7.3 billion in the second quarter.
In contrast, global PC shipments fell less than expected in the quarter, according to research firm IDC.
Santa Clara, California-based Intel has been focusing on its higher-margin data center business as it looks to reduce its dependence on the slowing PC market that it once helped create.
Revenue from the company's data center business rose 5 percent to $4 billion from a year earlier and accounted for 30 percent of total revenue.
Intel, however, reported a better-than-expected profit as restructuring efforts begin to pay off. The company in April announced plans to cut 12,000 jobs, or 11 percent of its global workforce.
Intel's net income fell to $1.33 billion, or 27 cents per share, in the second quarter ended July 2, from $2.71 billion, or 55 cents per share, a year earlier. (http://bit.ly/29Utu1w)
Profit for the quarter was hit by a one-time charge of $1.41 billion related to its plan to cut 12,000 jobs.
Excluding one time items, Intel's profit was 59 cents per share, beating market expectations for a profit of 53 cents, according to Thomson Reuters I/B/E/S.
Net revenue rose 2.6 percent to $13.53 billion, narrowly missing the average analyst estimate of $13.54 billion.
(Reporting by Sai Sachin R in Bengaluru; Additional reporting by Narottam Medhora in Bengaluru; Editing by Saumyadeb Chakrabarty)