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Intel Shares Fall As Data Centre Growth Fails To Impress

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

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You can’t please everyone. Intel posts solid fiscal results, yet Wall Street remains unimpressed by its data centre growth

Intel has posted solid annual financials, thanks in part to its strong performance in the data centre market where sales of its server chips drove strong growth.

These results were achieved despite Intel continuing to grapple with the gloomy state of the PC industry. Analysts earlier this week revealed that the holiday season had done little to slow the decline in global PC shipments.

Solid Financials

On paper Intel’s results looked very solid indeed. For the fourth quarter the chip giant posted net income of $3.6 billion (£2.5bn), down one percent from $3.7 billion (£2.6bn) in the same year ago period. Revenue was up 1 percent at $14.9 billion (£10.4bn) from $14.7 billion (£10.3bn) a year earlier.

The annual results also revealed a strong year with the company posting only very modest declines in profits and sales. Intel reported an annual net profit of $11.4 billion (£8bn), down only 2 percent from $11.7 billion (£8.2bn) in 2014. There was a 1 percent decline in revenues to $55.4 billion (£38.7bn) from $55.9 billion (£39bn) in 2014.

The results were better than Wall Street had expected, but investors are a fickle bunch, and shares in the company fell roughly 5 percent in after-hours trading. This was blamed on concern at the growth of Intel’s data centre revenues, as the chip giant seeks to lessen its dependence on the PC market.

Intel posted fourth quarter data centre revenue of $4.31 billion (£3bn), which missed forecasts of $4.42 billion (£3.1bn). Sales had risen 5 percent, but investors had been hoping that the 12 percent double digital revenue rise in the third quarter would have been mirrored in the fourth quarter as well.

Yet it is clear Intel is on the right track. Revenues from the sales of PC chips only declined 1 percent, which was a strong performance considering the current state of the PC market, where global PC shipments fell by as much as 10.6 percent in the fourth quarter.

krzanich_keynote01“Our results for the fourth quarter marked a strong finish to the year and were consistent with expectations,” said Brian Krzanich, Intel CEO. “Our 2015 results demonstrate that Intel is evolving and our strategy is working. This year, we’ll continue to drive growth by powering the infrastructure for an increasingly smart and connected world.”

Other Sectors

Intel has been expanding beyond its traditional PC base for a while now. Besides the data centre and server side, the company is also looking to the Internet of Things (IoT), as well as more obscure sectors such as drone technology.

Earlier this month it acquired German drone maker Ascending Technologies, which makes auto-pilot software that could prove increasingly popular as governments clamp down on drone safety.

The company has also acquired wearable device makers Basis and Recon Instruments and, in August, invested $60 million (£41m) in Chinese drone maker Yuneec. Yet perhaps one of its most significant acquisitions of late has been the costly purchase of chip rival Altera for $16.7 billion (£11bn).

That deal closed recently and gives Intel access to programmable chips, vital for emerging industries such as IoT.

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