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Intel beats expectations, but data center sales slow

Molly Wood Jan 15, 2016
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Data center business show slight growth, while PC market shrinks
Justin Sullivan/Getty Images

Intel reported fourth quarter earnings after the market closed Thursday, that showed a continuing decline in its PC chip sales and only a slight growth in its data center business.

The Santa Clara, Calif.-based chip maker reported that it’s net income in the fourth quarter fell 1 percent to $3.6 billion, or 74 cents earnings per share, compared to $3.7 billion, or 74 cents earnings per share, in the quarter a year earlier. The company posted revenue of $14.9 billion, up 1 percent from the previous year.

Wall Street analysts polled by Thomson Reuters had expected earnings of 63 cents per share on $14.8 billion in revenue.

Full year revenue was $55.4 billion, down 1 percent. Net income was $11.4 billion, down 2 percent. 

Despite the earnings beat, shares fell 4.61 percent in the after-hours period to $31.22, after trading up 2.6 percent to $32.74 in Thursday’s session.

Intel’s PC chip revenues declined 1 percent, as PC sales continue to fall.

Revenues from data center business, only rose 5 percent to $4.3 billion, compared to 12 percent growth in the third quarter and double-digit growth in the first two quarters of 2015. The business, which sells Intel chips for servers that power data centers and cloud computing, accounted for almost 50 percent of Intel’s operating income.    

Anand Srinivasan, senior technologist analyst with Bloomberg Intelligence, said Intel had a “decent quarter.”

“One of the important things to note with Intel is that the data center group that makes chips for servers that power cloud computing services such as Google, Facebook, and Amazon has become a bigger, bigger piece of the pie both on sales as well as on operating income,” he said. “So one of the important metrics is — despite PC’s being weak — will the data center group that makes these chips, will it be able to offset that? And in the fourth quarter it certainly did.”

He said one of the problems with the data center business is the unpredictability of orders.

“With the exposure to these cloud computing powerhouses comes inconsistency of revenues. As the PC market has dwindled you become a lot more dependent on the cloud services providers, but they tend to be inconsistent in their buying patterns,” Srinivasan said.  

Additional production by Praveen Sathianathan.

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