Just a few weeks after reporting its fifth consecutive quarter of falling sales and the second consecutive quarter of losses which was also the largest loss in its history, Intel Corporation (NASDAQ: INTC) is the latest to announce a new round of job cuts, joining Meta Platforms (NASDAQ: META), Alphabet Inc (NASDAQ: GOOG)(GOOGL) and other tech giants who took a hit to their bottom lines and also opted to trim their workforce in response to poor macroeconomic conditions. But, Intel still believes it is on track to become worthy of getting back into the semiconductor game, and even competing with the big players, including Apple Inc (NASDAQ: AAPL) and Nvidia Corporation (NASDAQ: NVDA).
Without disclosing the exact number of job cuts, Intel only confirmed on May 9th it will be reducing its workforce across areas. Intel’s cost cutting strategy was said to be ‘working’ as the semiconductor giant expects to save about $3 billion this year and as much as $10 billion annually by 2025. As a sign of efficient cost controls and operations, Intel expects gross margin to expand to approximately 37.5% on a non-GAAP basis in the undergoing quarter.
Layoffs are no surprise after massive 36% YoY drop in overall revenue that amounted to $11.7 billion, but still topped Refinitiv’s consensus estimate of $11.04 billion.
Intel made a net loss of $2.8 billion during its latest reported quarter. This translates to a loss of 66 cents per share which is a dramatic difference to last year’s comparable quarter when Intel made a net profit of $8.1 billion, or $1.98 per share. When the impact of inventory restructuring, change to employee stock options and other acquisition-related charge is excluded, earnings per share dropped a staggering 133% YoY but the adjusted loss per share of 4 cents was still better than what analysts had expected, which was 15 cents according to Refinitiv’s consensus.
Intel’s strongest product line, chips that power desktop and laptop PCs, is struggling with the PC industry slump as it experienced a revenue drop of 38% on an annual basis.
The server chip division which belongs to the Data Center and AI segment suffered an even more severe decline, as it slumped 39% to $3.7 billion.
For the second quarter, Intel expects sales of $12 billion to result in a loss of 4 cents per share, while Refinitiv consensus stands at revenue of $11.75 billion and 1 cent in earnings per share.
All Hopes Are On The Upcoming iGPU
Digital Trends reported that laptops powered by Intel’s Meteor Lake chips may not even need a discrete graphics card as the power of the integrated iGPU will be at the level of rival Nvidia’s GTX 1650 and possibly even Apple M2 chip but in a different way. To achieve victory across the board, Intel-based laptops need to come close to the battery life of the Apple MacBook Pro powered by the M2 chip and graphics level of Nvidia GTX 1650 graphics. This is how Intel Meteor Lake chips could potentially empower Intel to compete with Apple and Nvidia. These promising chips are expected by end of the year, but only in laptops with the desktop range still remaining a concept.
Since CEO Patrick Gelsinger took charge three years ago, Intel has been pursuing a turnaround plan to open up the company’s factories to make chips for other companies. Intel still hopes that it can manufacture more complex chips like its Taiwan peer Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) that only manufactures chips for “fabless” chipmakers like Advance Micro Devices (NASDAQ: AMD), Qualcomm Incorporated (NASDAQ: QCOM) as well as Apple with which Intel also aims to compete for custom work, like the one of chips used in iPhones. Interestingly, TSMC and Intel were not competitors throughout the majority of their histories but that changed when TSMC won the process race by manufacturing smaller and more power-efficient chips over the past six years. Also, while TSMC is also hit by the worst PC market slump in three decades, unlike Intel, it is facing a much milder blow because TSMC counts on ‘big fish’ clients Apple, Nvidia and AMD while also having a more diversified business. However, Intel’s Gelsinger is confident of the company’s turnaround and ability to contribute to the evolvement of semiconductor chips that will undoubtedly power the future.
DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.
Don’t miss real-time alerts on your stocks – join Benzinga Pro for free! Try the tool that will help you invest smarter, faster, and better.
This article Despite An Another Bad Update, Intel Still Believes It Can Uplevel Its Chip Game originally appeared on Benzinga.com
© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.