Intel (INTC 46.54, -3.22, -6.47%) is on track to begin lower after the
company's mixed report and cautious revenue guidance added to fears about a
cyclical slowdown in the semiconductor industry.
The chipmaking giant reported above-consensus fourth quarter earnings of $1.28 per share on a 9.4% yr/yr increase in revenue to $18.66 bln, which was shy of estimates.
Even with the shortfall relative to fourth quarter expectations, Intel's full-year revenue hit a record of $70.80 bln. However, the company's cautious revenue guidance contributes to worries that the cyclical peak may have passed.
The company expects a soft first quarter, priming the market for below-consensus earnings of $0.87 on revenue of about $16.00 bln, which is also shy of market expectations. Intel also issued below-consensus revenue guidance for the fiscal year, expecting sales of $71.50 bln. However, the company's guidance for fiscal 2019 earnings of $4.60 is a bit ahead of estimates. Operating margin for the fiscal year is expected to weaken to 34.0% from 35.0%.
Intel acknowledged that uncertainty about trade policy and intensifying macroeconomic concerns were responsible for the cautious guidance. The company expects that cloud service providers will be absorbing capacity and that NAND prices will continue declining, indicating sluggish demand.
Returning to fourth quarter results, gross margin weakened by 320 basis points to 61.7%. Research & Development spending decreased 2.0% to $5.00 bln.
The company saw sequential declines in Notebook platform volumes (-10.0%) and Desktop platform volumes (-7.0%), but Notebook platform average selling prices increased 3.0% and Desktop platform average selling prices grew 5.0%. In the Data Center Group, unit volumes declined 3.0% while average selling prices increased 2.0%. On a yr/yr basis, Notebook platform volumes increased 1.0% while Notebook platform average selling prices increased 6.0%. Desktop platform volumes decreased 8.0% yr/yr while Desktop platform average selling prices grew 13.0%.
Intel is continuing its search for a permanent CEO.
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