 "Intel beats Q4 results estimates but warns of future security flaw fallout")
Intel Corp on Thursday gave a bullish forecast and blew past Wall Street profit and revenue expectations for the fourth quarter on the strength of data centre sales, the business it sees as key to its transformation from a PC supplier.
Intel stock rose 3.8 per cent to $47.06, boosted by a dividend hike and relief that recently disclosed security flaws in some of its widely used chips had little impact. But Intel did acknowledge, for the first time, that the fallout could hurt future results, a concern analysts brushed off.
Intel also boosted its full-year forecast for 2018 above Wall Street expectations, saying it would boost dividends 10 per cent to $1.20 on a yearly basis despite taking a $5.4 billion charge related to recent changes in US tax law.
Intel Chief Executive Brian Krzanich said the company would start shipping chips later this year with "silicon-based changes" to protect against the so-called Spectre and Meltdown security threats.
Revenue from the company's higher-margin data centre business rose about 20 per cent to $5.58 billion, beating the average analyst estimate of $5.13 billion, according to Thomson Reuters I/B/E/S. Revenue from Intel's PC group hit $9 billion for the quarter, a 2 per cent decline from the year before, but ticked up 3 per cent for the year to $34 billion.
Intel predicted $65 billion in revenue for 2018, well above expectations of a $63.7 billion forecast.
In an interview ahead of Intel's earnings call with investors, Chief Financial Officer Bob Swan said the company sees no "meaningful impact" on corporate earnings as a result of the security vulnerabilities, reiterating an assessment the company made on January 3.
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The improved dividend and forecasts are important because they are the first signal of how much success Intel has had in containing fallout from the so-called Spectre and Meltdown security flaws that could allow hackers to steal data from computers. The flaws were disclosed after the close of the currently reported quarter.
The problems affect most modern computing chips but analysts believe that Intel, the No.1 maker of microprocessors, is at greater risk because all the variants of the flaws affect its chips, which have a dominant market position in data centres.
Data centre revenue growth was twice Wall Street expectations, coming at 20 per cent from the year-ago quarter versus investor targets of 10 per cent, said Kevin Cassidy, an analyst at Stifel.
Intel warned in its earnings release that fallout from the discovery of Spectre and Meltdown could hurt future results, as well as customer relationships and the company's reputation.
It added that publicity over the two vulnerabilities could prompt outside parties to look for other security flaws, which could also harm the company's business.
Still, GBH Insights analyst Daniel Ives said that Intel investors would heave a sigh of relief.
"The chip vulnerability situation was an overhang over Intel's shares and this robust quarter, healthy guidance, and underlying business metrics should help investors sleep a bit easier at night."
Due to the tax charge, the company posted a loss of $687 million, or 15 cents per share, in the fourth quarter ended December 30.
Excluding items, the chipmaker earned $1.08 per share. Total revenue rose 4.1 per cent to $17.05 billion.
Analysts on average were expecting a profit of 86 cents per share on a revenue of $16.34 billion, according to Thomson Reuters I/B/E/S.