Daily Management Review

Intel's profit is increasing but the future is "cloudy"


10/19/2016


Intel's net profit in the III quarter has grown by 9% to $ 3.4 billion. Revenue increased by 9% to $ 15.8 billion, the company’s report said. Analysts polled by FactSet were expecting revenue of $ 15.6 billion.



Jiahui Huang via flickr
Jiahui Huang via flickr
Adjustments in the one-off articles, Intel’s net profit in the last quarter numbered $ 3.9 billion. Intel's gross margin increased by 0.3 percentage points to 63.3%. The tax rate decreased by 5.1 percentage points to 21.8%.

In after-hours trading, shares of Intel fell 3.63% to $ 36.38.

Intel’s indicators are growing due to good results in the personal computer market. However, future development of the company heavily depends on the cloud business, according to The Wall Street Journal. Research company IDC calculated in a Study that global PC shipments amounted to about 68 million units in the third quarter of 2016. This is an actual decrease of 3.9%, yet it is still 3 percentage points less than analysts expected.

Gradual recovery in demand for PCs should be reflected on Intel’s earnings. The company expects revenue of $ 15.7 billion in the IV quarter (more or less $ 500 million), which is 8% higher than a year earlier. Analysts expect that net income per share will amount to $ 0.72, 13% more than the year before.

As for the next quarter, Intel expects that gross margin will reach 61% (+/- 1-2 percentage points), the tax rate - 22%. At the end of 2016, the chipmaker expects has planned reorganization and other additional costs in amount of $ 2 billion, and investments - $ 9.5 billion.

The computer business still brings more than half of revenue to Intel, yet the sector continues to decline. Trying to counteract this decay, the company is focusing on chips for devices with higher margins, such as ultra books. However, experts agree that future growth of the semiconductor manufacturer will depend on the cloud business.

Nowadays, cloud infrastructure is one of the few IT areas that managed to avoid stagnation. Research firm Gartner predicts that in 2016 growth rate of public sector of cloud services will be 27.5 times higher than development of the entire information technology market. Now, the US takes a leading position as a cloud services provider.

Cloud service is a virtual platform for storing and processing information. Access to the Internet is the only condition to work effectively, the user’s location and capacity of devices used by him are irrelevant. The provider offers his own servers, communication channels and technical support.

The technology is an effective step to save a company’s budget. According to Gartner’s estimates, transition to a cloud service helps an organizations reduce costs by 14%. Thus, it is not a big surprise that the technology is enjoying great demand. According to survey of large cloud services provider RightScale, 93% of corporations somehow used cloud services in 2015. Gartner’s analysts expect that revenue of public cloud services market will grow by 17.2% in 2016 yoy to reach $ 208.6 billion.

source: wsj.com






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