Intel shares fall on concerns about slowing growth

Intel reported a quarterly profit that beat analysts’ estimates on Thursday but shares fell on concerns about slowing growth in its highly profitable data center business.

The world’s largest chipmaker’s shares fell by 8.8 per cent to $29.87 in early Friday trade.

Intel, which gets more than 80 per cent of its sales outside the US, is “cautious on the level of economic growth” in China and the rest of Asia, chief financial officer Stacy Smith told investors.

Intel has weathered a four-year slide in PC sales by depending on demand for server processors, the main component in powerful machines that run data centres. Concern about the economy has consumers and companies in some parts of the world holding off on computer purchases, Intel said.

As the first major US technology to report earnings this quarter, Intel’s forecasts are a blow to hopes that corporate results would bolster investor confidence in the robustness of the global economy, said Daniel Morgan, a fund manager for Synovus Securities.

“It’s very discouraging,” said Morgan, whose firm holds Intel shares.

“This is the first heavyweight tech company to come out and I was hopeful we could get a little lift.”

Intel’s outlook also highlights the company’s inability to wean itself from its reliance on the shrinking PC market, which still provides about 60 per cent of revenue.

Data-centre sales

Data-centre sales slowed to an increase of 5.3 per cent in the fourth quarter, limiting the unit’s 2015 growth to 11 per cent.

The business had surged 18 per cent in 2014. Intel shares fell as much as 5.6 per cent in extended trading following the announcement on Thursday.

They had gained 2.6 per cent to $32.75 at the close in New York. The stock lost 5.1 per cent of its value last year.

Revenue in the current period will be $14 billion, plus or minus $500 million, the California-based company said in a statement.

Intel also said fourth-quarter net income slipped to $3.6 billion, or 74 cents a share, from $3.7 billion, or 74 cents, a year earlier.

Revenue climbed to $14.9 billion. Gross margin, the only measure of profitabilitythat Intel forecasts, was 64 per cent in the fourth quarter and will contract to 58 percent in the current period.

Fourth-quarter revenue in Intel’s PC-chip division fell 1.2 per cent to $8.76 billion, or 59 per cent of total sales.

The data centre group posted sales of $4.31 billion. Intel’s results and outlook include contributions from Altera for the first time, after the company’s $16.7 billion acquisition closed last month. The first-quarter forecast also includes an extra week over the standard three- month period.

Agencies