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Intel Win: New CEO does not get a honeymoon period



The new permanent CEO of Intel Corp. should present its first earnings report with a full deck of investor updates after a likely slow start to 2019.

Right after his last earnings report, Intel

INTC, + .56%

made Interim CEO Bob Swan permanent Chief Executive of the company, prompting George Davis of Qualcomm Inc. earlier this month to take over Swan's role as Chief Financial Officer , With earnings expected to close after the close on Thursday, investors will look for more details about Intel's recent decision to end the 5G smartphone modem market following a comparison between Apple Inc.

AAPL, + 0.33%

and Qualcomm

QCOM, + 2.60%

.

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8 that inevitably looks pretty bad in 2019

Instinet analyst David Wong, who has a purchase from Intel, said he sees the Intel's decision as proof that management is sticking to the strategy of focusing on high-growth and profitable products.

"We estimate that smartphone modem sales in 2018 were just over $ 2 billion," said Wong. "Intel called the lack of a clear path to profitability as a reason for the exit from the modem business. This implies that the manufacturing, research and development costs and other costs associated with the modem business were comparable or higher than the proceeds from the sale of the modem last year. "

Swan will also have to deal with the ongoing reports of CPU bottlenecks – potentially benefiting rival Advanced Micro Devices Inc.

AMD, + 1.81%

– along with a slowdown in cloud spending and ongoing production concerns.

What to Look For

Revenue: Intel is expected to deliver an adjusted earnings of 87 cents a share, according to a FactSet average of analyst forecasts, according to the Intel forecast. That's less than the $ 1.01 share expected at the beginning of the fourth quarter. Estimize, a software platform that uses crowdsourcing by hedge fund managers, brokerages, buy-side analysts and others, demands a profit of 91 cents a share.

Revenue: Wall Street expects Intel's analysts to average $ 16.03 billion in sales, compared to $ 16.07 billion in the same period last year, according to 29 analysts interviewed by FactSet. The current estimate has fallen from the $ 18.39 billion expected at the beginning of the quarter. Intel predicted a turnover of approximately 16 billion US dollar. Estimize expects sales of $ 16.21 billion.

According to FactSet, Data Center Group (DGC) sales are expected to decline 2.5% to $ 5.1 billion, while Intel's largest segment (client computing or traditional PC) is expected to increase 1 , 9% to $ 8.38 billion from the same period last year. Non-Volatile Storage Solutions revenue is expected to decline 9.4% to $ 942.1 billion compared to the same period last year. The Internet of Things or IoT expects sales to decline by 6% to $ 789.5 million.

Stock Performance: Intel shares have risen 18% since the chip maker's latest earnings report, up from 3.4% against the Dow Jones Industrial Average

DJIA, -0.18%

a 10% increase over the S & P 500 index

SPX, + 0.10%

up 13% over the tech-heavy Nasdaq Composite Index

COMP, + 0.22%

and a 24% increase over the PHLX Semiconductor Index

SOX, + 0.01%

.

What analysts say

Jefferies analyst Mark Lipacis, who has an underperformance valuation and a $ 40 price target for Intel, says the shortage of CPUs or CPUs is expected to continue in the third quarter of this year. and that gives AMD market share. Lipacis estimates AMD's share of the CPU market at just under 10%, compared to a 3% to 5% share in the first half of 2018.

"Intel's 10nm misconduct appears to create a need for diversity in the supply chain. Offer by increasing the market share of AMD, "said Lipacis.

See also: Intel CPU bottlenecks have helped AMD, PC shipments hurt in the first quarter, analysis compete

Intel was struggling to launch its new generation of chips using a 10-nanometer Manufacturing process is being rolled out in the wake of the launch of AMD's own 7nm process. In chip parlance, the number of nanometers refers to how small a chip maker can make the transistors on a computer chip, with the rule that smaller transistors are faster and more efficient in the use of power.

Cowen analyst Matthew Ramsay, who has an Intel market valuation and a target price of $ 50, said that after a smooth start to 2019, cloud investment is expected in the second half of the year. Ramsay expects a "lively debate" on the growth of data centers and advances on the 10nm front as well as the competition from AMD.

"Intel may be able to reach consensus total for 2019 given the PC chip bottleneck and the fact that the 10-meter ice-lake timing in the client is insufficient, we believe [the data-center group] in the second half In 1919, the results were significantly better and Intel's overall margins rose in the second half of 19, despite AMD gains for Rome, "Ramsay said.

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Srquiie Pajjuri, an analyst with Macquarie Research, has an outperformance rating and a price target of $ 62 said the server share concerns were "overblown."

"We model sales of [data-center group] by 1% in the first half of 19% as inventories thinn out and investment at Hyperscale customers eases," said Pajjuri. "However, underlying demand remains strong and Intel should benefit from intensifying competition between cloud providers and new streaming services."

Of the 38 analysts covering Intel, 16 have bought or overweighted, 15 have sold or underweighted ratings and seven valuations, with an average price target of $ 54.72.

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