Intel Profit Drops, But Tops View

(RTTNews) - Intel Corp. (INTC), the world's biggest chipmaker, Tuesday reported a drop in profit for the third quarter, as personal computer sales continue to decline.

Intel generates a chunk of its revenues by selling chips for computers, however, the company has been negatively impacted by slowing demand for PCs and notebooks as tablets and smartphones continue to gain popularity. The company has also invested heavily to diversify its portfolio to include chips for smartphones and tablets, however, its chips are not so popular among smartphone and tablet makers.

Worldwide PC shipments dropped 7.7 percent to 73.7 million units in the third quarter, according to research firm Gartner Inc. (IT). Desktop PCs continued to show weakness with a high-single-digit decline.

The company is now striving to transform its business portfolio, thereby growing its Data Center, Internet of Things or IoT, and NAND business.

Santa Clara, California-based Intel's third-quarter profit dropped to $3.11 billion or $0.64 per share from $3.32 billion or $0.66 per share last year. On average, 41 analysts polled by Thomson Reuters estimated earnings of $0.59 per share for the quarter.

Intel's revenues for the quarter inched down to $14.47 billion from $14.55 billion last year. Analysts had a consensus revenue estimate of $14.22 billion for the quarter.

Commenting on the results, CEO Brian Krzanich said, "We executed well in the third quarter and delivered solid results in a challenging economic environment."

Client Computing Group revenues fell 7 percent to $8.5 billion, with volumes down 19 percent. This segment caters to desktops, notebooks, tablets, smartphones, wireless and wired connectivity products as well as mobile communication components.

Data center segment revenues grew 12 percent to $4.1 billion as volumes and average prices both increased 6 percent. Sales in the Internet of Things unit increased nearly 10 percent to $581 million.

Gross margins dropped to 63 percent from 65 percent last year.

Looking forward to the fourth quarter, Intel expects revenues of $14.8 billion, plus or minus $500 million. Analysts currently estimate revenues of $14.83 billion for the quarter.

INTC closed Tuesday's trading at $32.04, down $0.17 or 0.53%, on the Nasdaq. The stock further dropped $0.04 or 0.12% in the after-hours trade.