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Intel Posts Reduced Profit Amid Data Centre Slowdown

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

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Intel reports a better than expected profit, but hefty cost cutting impacts chipmaker’s bottom line

Intel has posted a mixed set of quarterly results, as shareholders took fright as the company struggled with the ongoing PC decline, slowing data centre demand, and a painful headcount reduction.

This prompted a 3 percent share price fall in after-hours trading, despite the firm reporting a modest growth in revenues, and a sizeable but smaller profit.

Mixed Results

krzanich_keynote01For the second quarter Intel posted a net profit down 51 percent to $1.3 billion (£986m) from $2.7 billion (£2bn) in the same year ago quarter. Intel was hit here by a one-time charge of $1.41 billion (£1.07bn) due to its cost-cutting drive.

Revenues meanwhile rose 3 percent to $13.5 billion (£10.2bn) from £13.2 billion (£10bn) a year earlier.

“Second-quarter revenue matched our outlook and profitability was better than we expected,” admitted CEO Brian Krzanich. “In addition, our restructuring initiative to accelerate Intel’s transformation is solidly on-track.”

“We’re gaining momentum heading into the second half,” said Krzanich. “While we remain cautious on the PC market, we’re forecasting growth in 2016 built on strength in data centre, the Internet of Things and programmable solutions.”

When the results are examined on a departmental basis, it seems that the Client Computing Group (which includes PCs) remains Intel’s main revenue driver despite its attempt to expand into IoT and the cloud, after this unit posted sales of $7.3 billion (£5.5bn), down 3 percent sequentially and down 3 percent year-over-year.

This was despite a better than expected performance in the overall PC industry after IDC said that global shipments had fallen less than previous expected.

The Data Centre Group has been Intel’s growth driver recently, but there are concerns about slowing growth here after it only posted a 1 percent sequential rise to $4bn (£3bn), which is still up 5 percent year-over-year.

The Internet of Things group meanwhile posted revenue of $572 million (£434m), down 12 percent sequentially and up 2 percent year-over-year; the Non-Volatile Memory Solutions group posted revenue of $554 million (£420m), down 1 percent sequentially and down 20 percent year-over-year; the Intel Security group posted revenue of $537 million (£407m), flat sequentially and up 10 percent year-over-year; and finally the Programmable Solutions group posted revenue of $465 million (£352m), up 30 percent sequentially.

Corporate Restructuring

Intel of course is in the midst of a painful restructuring process. In April it announced it would cut 12,000 jobs this year, an equivalent of 11 percent of the chipmaker’s entire workforce.

That came on top of other job cuts. In 2014 for example it trimmed 5,000 jobs, or five percent of its workforce and closed a number of factories around the world.

And it seems that Intel staff are not entirely onboard with Krzanich’s direction for the company after he previously admitted that some Intel staff were “pushing back” against management’s efforts to increase the diversity of its workforce.

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