Intel's blockbuster results lift shares to dotcom peak, fire up sector

[steven36]

(Reuters) - Intel Corp’s shares hit their highest in nearly two decades on Friday after cloud computing demand fired up the chipmaker’s data center business and allayed concerns of market share loss to rival AMD, lifting stocks across the sector.

 

 

At least 15 brokerages raised their price targets on Intel’s stock, with J.P.Morgan making the most aggressive move by boosting its target by $12 to $80, well above the median price target of $65.

Revenue at Intel’s data center business jumped 19% and sales to cloud computing providers surged 48% year-over-year in the fourth quarter.

 

“We think Intel is benefiting from an improving macro economic climate versus company specific improvements at this time,” RBC Capital Markets analyst Mitch Steves said, adding that he expects strong results from data center rivals AMD and Nvidia .

 

Shares of AMD, which will report earnings next week, rose 1% to a record high. Nvidia shares were also up 1%. European chipmakers ASML Holding NV  and STMicroelectricals NV rose almost 2%.

 

Intel's stock was up 8.6% at $68.75, a level it has not seen since the peak of the dotcom boom in 2000, propelling the broader Nasdaq .IXIC and the Philadelphia SE Semiconductor Index .SOX to record highs.

 

Other major chipmakers such as Taiwan Semiconductor Manufacturing Co Ltd and Texas Instruments have also given upbeat forecasts this month, cementing hopes of a rebound in the market that fell nearly 12% in 2019, according to research firm Gartner.

 

However, Intel has struggled with delays in its 10nm chip technology, losing its lead to rival TSMC in the race to supply to the “new data economy”, which includes 5G, autonomous vehicles and artificial intelligence.

 

AMD has partnered with TSMC to launch several new products based on the smaller 7nm design. Intel said on Thursday it would release nine 10nm products this year and launch its lead 7nm product next year.

 

“We continue to expect competitive headwinds to impact Intel’s server and PC CPU strongholds over the next few quarters, as AMD continues its onslaught on Intel’s hegemony,” Morningstar analysts said.

 

Intel has also been facing a shortage of PC chips, and the company said it would boost its capacity to make such chips, in a sign that the manufacturing woes that plagued chipmakers over the past year were starting to ease.

 

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[steven36]

 10nm woes, CPU supply shortages, competition from AMD... What? Sorry? Intel can't hear you over the cash register going bonkers

 

Just don't mention the FPGAs

 

 

Intel on Thursday reported $20.2bn revenue for the fourth quarter of 2019, a gain of eight per cent year-on-year, and $72bn for the full-year, a two per cent increase.

 

Analysts had been expecting something less, around $19.23bn and $70.98bn on average, and the results lifted the chip giants stock in after-hours trading.

 

CEO Bob Swan, in a canned statement, said more or less that things had gone well, without providing any specifics: "In 2019, we gained share in an expanded addressable market that demands more performance to process, move and store data,” he said. "One year into our long-term financial plan, we have outperformed our revenue and EPS expectations."

Not the sort of stuff that gets one booked for a commencement address.

 

Chipzilla's numbers said as much, though more succinctly. Its earnings per share came to $1.58 for the quarter and $4.71 for the year. Its gross margin for the quarter was 58.8 per cent, down 60.2 per cent in Q4 2018; for the year, its gross margin was 58.6 per cent, down from 61.7 per cent in 2018.

 

Intel's fourth quarter operating margin came in at 36 per cent, up half a percentage point from the same period a year ago.

 

Operating income was $6.8bn for Q4 and $22bn for 2019; net income was $6.9bn and $21bn respectively. In fact so much money has been rolling in that Chipzilla increased its per-share annual dividend to $1.32, an increase of five per cent.

 

Intel generated $33.1bn in cash from its operations in 2019 and $16.9bn in free cash flow while routing about $19.2bn back to shareholders. In Q4 2019, Chipzilla's cash machine created $9.9bn and dispensed $1.4bn in dividends, with another $3.5bn going to buy back Intel shares to support the share price.

 

The chip maker's revenue is split more or less evenly between its data-center business (DCG) and its PC-centric trade (CCG). However, its data-center, sorry, -centric business is expected to grow faster than its counterpart.

 

 

PSG is the programmable systems group (think FPGAs, etc), NSG is the non-volatile memory group, and IOTG is the Internet-of-Things wing. Mobileye does AI technology for self-driving cars.

 

Faced with questions from analysts on Intel's earnings call about the company's long-delayed 10nm chips, Swan offered reassurance. "We're ramping 10nm the second half of the year and we're investing in 7nm," he said, claiming Intel will have nine new products this year based on 10nm technology.

 

Broken down by segment, Intel's results were as follows:

 

The much-delayed 10nm chips won't represent a large portion of the company's overall volume until 2021, he said, adding that yields have been better than expected, though neglected to say what was expected.

 

Swan also emphasized how AI-tuned systems have contributed to Intel's results, noting that in 2019, the company realized $3.8bn in AI-based revenue.

 

A longstanding issue for Intel has been its inability to meet market demand for its chips. Swan said Intel plans to add 25 per cent more wafer capacity this year. "Overall, we really plan to be out of the supply-constrained environment in 2020," he said, allowing that Q2 might still be a bit tight.

 

“Intel had a great Q4 in spite of increased competition and supply challenges," said analyst Patrick Moorhead of Moor Insights and Strategy, in an email to The Register.

 

"The 'data-centric' businesses carried the day with each business driving double digit growth, except for FPGAs. Even PCs were up, which was a big surprise for me. The biggest things Intel needs to do to keep this going is to get out its next generation 10nm designs out and in-market."

 

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