Intel Corporation

Intel Corporation NASDAQ
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Oct 222021

Intel isn’t staying on top of the shortage

Intel tumbles in after-hours trading following the release of its third quarter earnings, which beat earnings estimates but are brought down by its struggling PC business in the face of a components shortage.

Intel reported earnings per share of $1.71, beating expectations of $1.11, but fell short on revenue after bringing in $18.1 billion compared to the $18.24 analysts had forecast. The real disappointment for investors came from a decline in revenue from its struggling PC-focused computing group, which saw revenue sink 2% from the same period last year to $9.7 billion on the back of the global chip shortage that continues to damage the tech industry. While the company saw strength in its desktop unit as well as higher sales prices, it wasn’t enough to offset concerns for the future of the business. Further worry mounted on the fact that Intel warned of a decline in its free cash flow and gross margins over the next three years as the company heavily invests in research and development into new chip factories. Analysts are already keeping an eye on gross margins in light of Intel’s $20 million capital expenditure this year, part of which was dedicated to a new semiconductor plant. Chief Executive Pat Gelsinger said:

We are repositioning Intel for growth to be a long-term growth company. Near-term, we could have chosen a more conservative route with modestly better financials, but instead the board, the management team — and this is why I came back to the company — choosing to invest to maximize the long-range business that we have.

Regarding the ongoing chip shortage, Gensler added:

We're in the worst of it now, every quarter next year we'll get incrementally better, but they're not going to have supply-demand balance until 2023.

Susquehanna analyst Christopher Rolland, who has a $60 price target and a Neutral rating out on the stock, warned people to hold fire on their judgements and see what the company has in store for them at its product event later in October:

Note that just a few days later on October 27, Intel will also host an event to showcase its latest technologies and perhaps launch new products. Therefore, investors should prepare for potential increased volatility around these dual announcements.

The company also announced that its CFO George David will be retiring in May of 2022. Shares fell just over 8% in after hours trading.
Sep 132021

Intel takes back control

In the midst of the global semiconductor shortage, Intel plans to get ahead of the game with an investment of up to $95 billion into its own production facilities.

Intel is bolstering its semiconductor production facilities as the global chip shortage continues to ravage the tech industry. The company is building two new factories in Europe that are valued at around $95 billion, with the potential to expand that investment over the next decade to feed increasingly high demand for the component.
Jonas Svidras / Unsplash
Aug 252021

Intel’s Pentagon win

Intel lands a chip manufacturing deal with the U.S. as the global shortage has emphasized the need for greater domestic chip-making prowess.

The world has battled the worsening global chip shortage for months now, which has badly impacted sectors like the automobile, technology and defense industry. The Defense Department is taking steps to create a chip manufacturing ecosystem in the U.S. to avoid obstacles like this in the future – Biden’s 2022 budget includes a $2.3 billion investment into microelectronics, which are critical to national security – and Intel has won a contract from the Pentagon to partner on the project. Intel’s Foundry Services, which was launched earlier this year as an individual division to combat the exact same problem, will help with the first phase of a larger Defense Department plan, joining companies like IBM (IBM) and Synopsys (SNPS)in building a domestic chip design and production system.

The move will be a great testament to Intel’s chip-making power when it comes to competing against growing Chinese rivals in the space like Qualcomm and Samsung.

Prices lifted 2.35% on Monday in response.
Apr 222021

Intel down despite strong results

Intel releases its first earnings with new CEO Pat Gelsinger at the helm, and prices are down despite earnings that beat expectations and a raised annual forecast.

Intel posted $18.57 billion in adjusted revenue, flat from the same period last yea, and adjusted earnings per share of $1.39, compared to expectations of $17.9 billion in adjusted revenue and earnings per share of $1.39. Both numbers beat estimates, but prices still fell by almost 2% thanks to a large dip in data-center sales and the ongoing (and growing) concerns around a global chip shortage. Intel’s data-center group revenue saw a decline of more than 20% in the face of strong competition from the likes of Nvidia and Advanced Micro Devices.

Luckily, CEO Pat Gelsinger has a plan. Gelsinger – who moved over from VMware to take over as Intel CEO in February 2021 – announced in March that the company would invest $20 billion in new microchip manufacturing plants. Intel is building two new chip factories (fabs) in Arizona in an effort to combat the global semiconductor chip shortage that’s filling the tech and automobile industries with fear right now.

This is a pivotal year for Intel. We are setting our strategic foundation and investing to accelerate our trajectory and capitalize on the explosive growth in semiconductors that power our increasingly digital world

said Pat Gelsinger, who believes the chip shortage could stretch another two years at least.

Intel said last month that it was expecting earnings per share of $4 and $72 billion in revenue for the full year 2021, and in its earnings release raised that guidance to $4.60 per share and a sales guidance of $72.5 billion. The earnings come on the back of another win for Intel, who earlier in the day dodged a $3.1 billion patent trial. VLSI, which is a unit of hedge fund Fortress Investment Group, sued Intel in 2019 for infringing on patents with its “Speed Shift” tech, and sought a whopping $3.1 billion in damages. Which it didn’t get. That should help with those 2021 forecasts.
Mar 232021

Gelsinger gets Intel back in the game

As a part of its ambitious turnaround strategy (hello old logo, we’ve missed you), Intel is shelling out $20 billion to build two new factories in Arizona, as well as allowing other companies to use its chips, in a new bid to compete with rivals Samsung and Taiwan Semiconductor. Prices sink 3.28% on the news, but it’s a strong move for new CEO Pat Gelsinger.

The newly-appointed CEO is committed to getting the company’s mojo back - Intel used to be one of the 10 most valuable companies in the world, but the stock price is currently lower than it was at its peak in 2000. Gelsinger is looking to rectify that, with an all-singing, all-dancing turnaround plan that includes a commitment to building the majority of its own chips.

Intel is back. The old Intel is the new Intel,

Gelsinger said in a March 23 virtual presentation.

We're going to be leaders in the market and we're going to satisfy the new foundry customers, because the world needs more semiconductors and we're going to step into that gap in a powerful and meaningful way.

After the big semiconductor chip shortage earlier this year, which saw remote working eat up all the available chips for PlayStations and Chromebooks (no seriously – Ford had to literally shut down a plant because of a lack of chips), the increased ability to manufacture chips and compete with other companies is key to changing up Intel’s failing fortunes.

The pandemic has also pushed the firm into ramping up outsourcing, and it’s even talking with Samsung about making some of its chips while focusing its new production capabilities. Going forward, Intel wants to be more open to “co-opetition” (as they call it), finding other ways to partner with, and outsource to, traditional rivals. Intel will also produce chips for other companies to use with Intel Foundry Services – kind of a surprise coming from a business that has always differentiated itself by being both the designer and the manufacturer.

The news comes just a day after Intel stock rose 2.93% following the announcement of the latest 3rd Gen Intel Xeon Scalable processors.
Cody Glenn / ©SPORTSFILE / Flickr