Intel Corp.
is feeling the effects from a triple-whammy of a broad industry downturn, stiff competition, and a costly turnaround plan, sending shares sharply lower in Friday trading.
The chip maker said after the bell on Thursday it expects to post a loss for the current quarter after swinging to a quarterly net loss of $664 million in the last three-months of 2022 as sales fell by nearly a third to $14 billion. It is the first time Intel will lose money in sequential quarters in at least three decades, according to data from S&P Market Intelligence.
The outlook is causing Wall Street to reset its expectations around Intel. More than a dozen analysts cut their price targets for the stock.
“Intel has a difficult road ahead as the company begins a multiyear transition phase which involves high capital intensity and an ambitious design road map,” Stifel analyst Ruben Roy said in a research note.
Intel shares fell more than 7% to $27.76 Friday putting the stock on pace for its largest decline since October 2021.
Chief Executive
Pat Gelsinger,
who took the top job two years ago, has said Intel would be on a multiyear journey to regain its competitive edge, calling his task “a five year assignment” to restore the company to being the chip-industry leader.
But getting the job done has become more complicated in recent months.
Intel has continued to lose market share to rivals such as
and companies that have embraced semiconductors based on technology from British chip-design specialist Arm Ltd. Reversing those losses could be a challenge given a record of execution missteps, JP Morgan analysts said Friday. Intel said its new processors’ development is on plan.
The personal-computer market is suffering a steep downturn, with device shipments falling 28.5% in the final quarter of 2022. Semiconductor companies are now sitting on a surplus of chips following a pandemic-driven shortage that was fueled by both supply chain constraints and high demand for digital products.
Intel also is feeling the pain from broader corporate belt tightening, weighing on sales in its lucrative server business. Revenue from data center clients was down by a third in the fourth quarter. Management Thursday said that the softness is expected to continue through the first half of the year before a slight rebound in the second half as China’s enterprise market recovers faster than the cloud computing industry.
“To various degrees, all our markets are being impacted by macro uncertainty, rising interest rates, geopolitical tensions in Europe, and Covid impacts in Asia, especially in China,” Mr. Gelsinger said on an earnings call Thursday.
Given market uncertainties, Intel didn’t issue a full-year outlook.
Intel, still America’s largest semiconductor company by revenue, isn’t alone to feel the pinch from the market downturn.
Texas Instruments Inc.
this week projected its biggest sales slowdown in three years.
Amid all that, Mr. Gelsinger has put Intel on an ambitious plan to regain its chip-production edge ceded in recent years to Asian rivals through a multibillion-dollar plant investment spree. The company’s capital expenses surged last year to a record $24.8 billion, up 33% from the previous year.
Mr. Gelsinger has said Intel would move swiftly to cut costs, adding Thursday those efforts are being accelerated. The company is cutting jobs as part of an effort to trim $3 billion in costs this year and as much as $10 billion of annual cost reductions and efficiency gains by the end of 2025.
Intel also warned investors its adjusted free cash flow in the first half of the year will fall short of expectations provided last year.
Analysts at Bank of America and Credit Suisse both flagged potential risks to Intel’s dividend payments at some point if the cash situation doesn’t recover. Intel has said it is committed to its dividend.
Write to Dean Seal at dean.seal@wsj.com
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