Date
26 September 2018
Chief executive Brian Krzanich said Intel will start shipping chips later this year with “silicon-based changes” to protect against the Spectre and Meltdown security threats. Photo: Bloomberg
Chief executive Brian Krzanich said Intel will start shipping chips later this year with “silicon-based changes” to protect against the Spectre and Meltdown security threats. Photo: Bloomberg

Intel results beat estimates, sees potential chip flaw fallout

Intel Corp. gave a bullish forecast and blew past Wall Street profit and revenue expectations for the fourth quarter on the strength of data center sales, the business it sees as key to its transformation from a PC supplier, Reuters reports.

Intel stock rose 3.8 percent to US$47.06, boosted by a dividend hike and relief that recently disclosed security flaws in some of its widely used chips had little impact. But Intel did acknowledge, for the first time, that the fallout could hurt future results, a concern analysts brushed off.

The company also boosted its full-year forecast for 2018 above Wall Street expectations, saying it would boost dividends 10 percent to US$1.20 on a yearly basis despite taking a US$5.4 billion charge related to recent changes in US tax law.

Chief executive Brian Krzanich said Intel would start shipping chips later this year with “silicon-based changes” to protect against the so-called Spectre and Meltdown security threats.

Revenue from the company’s higher-margin data center business rose about 20 percent to US$5.58 billion, beating the average analyst estimate of US$5.13 billion, according to Thomson Reuters I/B/E/S. Revenue from Intel’s PC group hit US$9 billion for the quarter, a 2 percent decline from the year before, but ticked up 3 percent for the year to US$34 billion.

Intel predicted US$65 billion in revenue for 2018, well above expectations of a US$63.7 billion forecast.

In an interview ahead of Intel’s earnings call with investors, chief financial officer Bob Swan said the company sees no “meaningful impact” on corporate earnings as a result of the security vulnerabilities, reiterating an assessment the company made on Jan. 3.

The improved dividend and forecasts are important because they are the first signal of how much success Intel has had in containing fallout from the so-called Spectre and Meltdown security flaws that could allow hackers to steal data from computers. The flaws were disclosed after the close of the currently reported quarter.

The problems affect most modern computing chips but analysts believe that Intel, the No. 1 maker of microprocessors, is at greater risk because all the variants of the flaws affect its chips, which have a dominant market position in data centers.

Data center revenue growth was twice Wall Street expectations, coming at 20 percent from the year-ago quarter versus investor targets of 10 percent, said Kevin Cassidy, an analyst at Stifel.

Intel warned in its earnings release that fallout from the discovery of Spectre and Meltdown could hurt future results, as well as customer relationships and the company’s reputation.

It added that publicity over the two vulnerabilities could prompt outside parties to look for other security flaws, which could also harm the company’s business.

Still, GBH Insights analyst Daniel Ives said that Intel investors would heave a sigh of relief.

“The chip vulnerability situation was an overhang over Intel’s shares and this robust quarter, healthy guidance, and underlying business metrics should help investors sleep a bit easier at night.”

Due to the tax charge, the company posted a loss of US$687 million, or 15 cents per share, in the fourth quarter ended Dec. 30.

Excluding items, the chipmaker earned US$1.08 per share. Total revenue rose 4.1 percent to US$17.05 billion.

Analysts on average were expecting a profit of 86 cents per share on a revenue of US$16.34 billion, according to Thomson Reuters I/B/E/S.

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CG

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