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New Intel chief rips off the band aid



Intel Corp.'s new chief executive officer, Bob Swan, withdrew the band aid to announce some chip giant issues on Thursday, and now investors need to hope they can solve them and find a better way can.

Intel

INTC, -1.89%

reported Thursday's earnings and earnings on Thursday surpassing some estimates, even as the key data center business steepened. However, this business and the drop in memory chip sales meant that Swan's first earnings report since being named permanent CEO lowered Intel's revenue forecast by a whopping $ 2.5 billion for the remainder of the year.

"The decline in storage prices has increased, data center inventory and digestion capacity, which we described in January, is more pronounced than we expected, and the Chinese headwind has increased, resulting in a more cautious IT spending environment "said Swan on the company's call with analysts, followed by a vote of confidence that demand will improve in the second half, based on customer discussions.

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Intel shares fell around 7% after the close of trading. The stock has risen by about 25% this year, while the S & P 500 Index

SPX, -0.04%

has grown by 1

7% to date. His much lower forecast follows Intel's big announcement last week to end the 5G modem business, where Apple Inc. was the biggest customer for its communication chips.

AAPL, -0.91%

. Swan told The Wall Street Journal that Intel's decision was a direct result of Apple's surprise agreement with Qualcomm Inc.

QCOM, -2.03%

began as a lawsuit for patent and licensing disputes.

Swan continued Intel's Intel ambitions on Thursday, noting that Intel strives to become more focused on emerging companies that did not fit into their core, such as closing Saffron, a cognitive computing Platform that Intel had acquired in 2015. Swan seemed to reverse the bad steps of past leaders without naming names.

"Over the past few years, this focus has resulted in McAfee and the wearables business being abandoned, Saffron closed, and Wind River being divested. And our spending as a percentage of sales has increased from about 36% to about 30% this quarter, "he said." By doing less, we can do the things that matter most. "

The last few CEOs before Swan have indeed taken many steps to lead Intel in new directions – investing billions in communications and acquiring mobile chips billions more to seemingly unsuitable software developments – diversifying beyond its core business PC with the acquisition of Mobileye however, it seems to be doing the best it can and achieving record growth of 38%

See also: Chip stocks snatch six-session record run as Xilinx drops after winning

It's probably a good thing for Intel to give up on ambitions that cost too much without offering a return, but it does Find out how to succeed with the companies that will keep it. Another problem that harms the company is the disruption of the PC business, as it was unable to meet all of the demand for its chips as it had difficulty moving to a new manufacturing node. "We have never again committed ourselves to hindering our customers' growth," Swan said. "We have increased capacity to improve our position in the second half of the year, although the product mix will continue to be challenging in the third quarter as our teams align our available supply to customer demand."

First Quarter Intel Explained Turnover-driven revenue declined 7.5% to $ 7.5 billion, while the data center group reported fourth-quarter revenue of $ 4.9 billion, down 6% Percent finished. Intel expects sales in its data-driven business – its most important growth business – to continue to decline in the high single-digit range.

Investors will see if Swan's forecasts for a better second half, especially for the euro area, will be available to data center group will remain true. Swan said the company's first in a series of new chips based on the long-delayed, next-generation manufacturing process is expected to be in consumer staples "on Christmas shelf". Chips for servers should follow in 2020. [19659002] Storage prices and a continued slowdown in data center expansion are clouds that are hanging over Intel and other chip makers for months. At least Swan has some other headaches going on than he can handle.

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