Intel revenue misses estimates as data centre growth slows

By Narottam Medhora

(Reuters) - Intel Corp reported lower-than-expected quarterly revenue due to an unexpected slowdown in growth at its data centre business, on which the world's largest chipmaker is banking to reduce its reliance on the personal computer market.

The company's shares fell about 4 percent to $35.95 in trading after the bell on Thursday.

Revenue from Intel's higher-margin data centre business rose 6 percent to $4.2 billion in the first quarter. But the growth was less than the 9 percent jump in the year-ago quarter and slower than the 8 percent increase in the fourth quarter.

I think the Street was looking for slightly better than that," Stifel analyst Kevin Cassidy said.

 

Analysts on average were expecting growth in the data centre business to increase 10 percent to about $4.4 billion, according to research firm FactSet StreetAccount.

Intel said platform average selling prices in the business fell 3 percent sequentially, which, Cassidy said, may cause some concern.

The business is crucial to Intel's plan to switch focus from the PC market towards making chips for data centres and Internet connected devices.

The slowdown in the business's revenue growth comes after Intel warned in February that margins could be hit by higher costs, including those to update its manufacturing process.

PROFIT EDGES ESTIMATES

To further reduce its dependence on the PC market, Intel said last month it would buy autonomous vehicle technology firm Mobileye NV , thrusting itself into the forefront of the fast-growing market to develop driverless systems.

But, Intel still gets most of its revenue from selling PC chips, a business that returned to growth in 2016 due to stabilizing global demand in the second half of the year. Demand also unexpectedly edged up in the first quarter.

That helped revenue from client computing, as Intel calls the business, increase 6 percent to $8 billion, matching analysts' estimates.

Intel's total revenue rose 8 percent to $14.80 billion, but was just short of analysts' estimate of $14.81 billion, according to Thomson Reuters I/B/E/S.

Net income jumped 45 percent to $2.96 billion. Excluding items, Intel earned 66 cents per share, one cent more than analysts estimates.

Intel also increased its share buyback programme by $10 billion to about $15 billion. (http://bit.ly/2pr8dBB)

The company also gave a current-quarter revenue forecast range whose midpoint was in line with estimates. But Intel raised its full-year revenue forecast to about $60 billion and its adjusted profit forecast to $2.85 per share, plus or minus 5 percent.

(Reporting by Narottam Medhora in Bengaluru; Editing by Savio D'Souza)