Intel's fourth quarter results were a mixed bag relative to expectations, but the chip giant saw strength in the data center, held PC revenue flat and said it saw back-half growth in tablets.
The company reported fourth quarter earnings of $2.6 billion, or 51 cents a share, on revenue of $13.8 billion, up 3 percent from a year ago. Wall Street was expecting Intel to report fourth quarter earnings of 52 cents a share on revenue of $13.72 billion. Intel's earnings estimates crept up ahead of the company's results and the Thomson Reuters estimate was technical 51.6 cents a share. Analysts were expecting strong data center results.
For 2013, Intel reported earnings of $9.6 billion, or $1.89 a share, on revenue of $52.7 billion, down 1 percent from 2012. Intel sees more of the same for 2014 and projected flat revenue for the year ahead.
As for the first quarter outlook, Intel projected revenue of $12.8 billion, give or take $500 million, with gross margins in the 59 percent range. Wall Street was looking for earnings of 42 cents a share on revenue of $12.78 billion for the first quarter.
In prepared remarks, Intel CFO Stacy Smith said:
While the PC market was down on the year, we saw the market stabilize in the back half of the year with fourth quarter PC units up from a year ago. Additionally we saw strong tablet growth in the back half of the year, and inclusive of PC and tablets, our unit growth in the fourth quarter was up almost 10% from a year ago. Our Data Center Group continued to benefit from the build out of the cloud.
Regarding the data center, Smith said on a conference call:
If you look at the trends in the fourth quarter, I think the trends actually reinforce the growth rate among cloud, high performance computing, networking, storage. They all came in consistent with what we thought. As we entered Q4, we saw that we had more inventory out in the world than we knew when we started the quarter so that had to be burned off. And then secondly, we saw a tapering off in order patterns across certain customers. We think that was driven by the government shutdown and the uncertainty around the debt ceiling. Because when you look at the customers and the segments it's pretty clearly in those segments. We had a range around growth rates for 2014 and the investor meeting we said 10 to 15%. Based on a slower growth in enterprise in Q4 and maybe a slower recovery in enterprise over the course of 2014, I'd say we're now at the lower end of that range. So we're more at the 10% range than the 15% part.
Intel CEO Brian Krzanich said the company is reaching more platforms and at CES Intel "demonstrated multiple devices that weren't on our roadmap six months ago."
Nevertheless, Intel's PC revenue was flat in the fourth quarter compared to a year ago. Data center sales were up 8 percent from a year ago. And other Intel architecture---Atom---had fourth quarter revenue that was up 9 percent from a year ago.
Among the key takeaways:
- Intel said desktop volume was up 7 percent with average selling prices up 5 percent in the fourth quarter.
- Data center average selling prices were up 7 percent from a year ago.
- Software and services revenue was up 7 percent from a year ago.
- Intel ended the year with $20.1 billion in cash with $8.8 billion held in the U.S. and the rest offshore.
- The company ended the year with 108,000 employees.
- Research and development spending will be about $10.5 billion in 2014, flat with 2013.