Intel CEO says chipmaker sees low, single-digit sales growth

Bloomberg

Intel Corp. Chief Executive Officer Bob Swan gave new long-term forecasts that indicate the chipmaker’s growth will remain stalled. His comments, during his first investor event as CEO, sent shares down 2.5% at the close of trading in New York.
Intel last month said sales will decline in 2019 and it reduced forecasts for profit and revenue in the current quarter. Swan said the chipmaker let investors down when it cut
the guidance.
“I do just want to acknowledge the present,” Swan said at the company’s headquarters in Santa Clara, California.
“We let you down. We let ourselves down.”
While sales of the company’s data-centric products — a term coined to include server and other chips such as artificial intelligence processors — will expand at a percentage in the high-single digits, the unit’s growth won’t be enough to overcome the sluggish PC market, he said. Total revenue will increase by low, single-digit percentages over the next three years, Swan said.
PC sales declined 4.6% globally in the first quarter, after a similar decline in the fourth quarter of 2018, according to analyst Gartner Inc. Sales of Intel’s main PC processor business will decline or be unchanged during the next three years, Swan said.
Swan said that over the past three years, the company has increased revenue and profit at a stronger pace than its projections. The recent history, however, doesn’t excuse executives for failing to anticipate the slowdown in their key market for server computer processors, he said. Intel needs to improve its “execution rhythm” and will focus more on changing itself to respond to new markets, said the CEO, who took the role permanently in January after serving as interim leader for more than six months.
Intel’s leadership is facing a skeptical audience. While the company said a dimming outlook for earnings is due to weakening demand, analysts have pointed to increasing competition and the company’s manufacturing stumbles.
The stock is the worst performer on the Philadelphia Stock Exchange Semiconductor Index this year, having gained 4.9% to $49.24 at close.
A chunk of that slide came after the company, the world’s second-largest semiconductor maker, cut its second-quarter outlook on April 25 and said revenue will decline in 2019. The stock has lost ground in 8 of 9 trading sessions since then.
At the heart of the concerns are signs of competition for Intel’s lucrative server chip business and the company’s lack of progress in production technology.
Investors are concerned Swan can no longer rely on the server unit and technical leadership to continue a record run of earnings growth.
Intel’s data-center unit sales declined 6.3 percent in the first quarter from a year earlier. That undermined the company’s assertions that demand would increase as the year progresses. Intel has said that spending on servers “paused” while customers, who ordered at a frantic rate last year, work through their inventory stockpiles. Intel’s Xeon processors account for more than 95 percent of the market for chips that run servers, the machines that provide the backbone of the internet and corporate networks.