Intel Drops on Server Demand Slowdown

Intel Corp dropped in early morning trading after announcing a slowdown in demand by corporations has threatened to curb its sales in the division of server chips, one of the few remaining bright spots for the business beset by the slump in personal computers.

The largest chipmaker in the world reported results for the third quarter, which reflected a poor PC market and forecasted revenue for the fourth quarter in line with estimates of analysts.

Sales for the ongoing period will be $14.8 billion approximately with a window of plus or minus $500 million, said Intel on Tuesday.

Wall Street analysts were projecting $14.8 billion.

Intel executives during a conference call lowered their growth target in the server group, a division that it relied on for sales as well as profit growth in the past few years due to a contraction of the PC market.

Corporations, in China especially, are scaling back purchases of servers as they have outsourced more of technology needs and have delayed updating in house equipment.

CEO Brian Krzanich is confident that over a period of time, the unit will return to its growth cycle again of 15%, from a percentage currently in the low double digits.

Shares of Intel, which are lower by 12% in 2015, were lower by 2.7% in early trading after the forecast was released for the data center group.

They initially were up by 3.2% in extended Tuesday trading after the earnings report had been announced.

Net income at Intel was down to $3.1 billion equal to 64 cents per share compared to last year during the same quarter of $3.32 billion equal to 66 cents.

Revenue was changed little ending the quarter near $14.5 billion. Analysts had expected earnings to reach 59 cents with sales topping $14.2 billion.

Sales during the third quarter in the client computing segment, which include chips for mobile and PC dropped by 7.5% from the same quarter one year ago to $8.51 billion.

Revenue at the data center was up 12% to end the quarter at $4.14 billion.

 

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