Intel’s ‘historic collapse’ erases $8bn from market value
Brokerage Bernstein says deterioration is stunning and company plans are ‘fantasy’
29 January 2023 - 17:56
byAditya Soni and Nivedita Balu
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Intel’s market value was slashed by $8bn on Friday after the US chipmaker shocked Wall Street with dismal earnings projections, fanning fear of a slump in the personal-computer market.
The company predicted a loss for the first quarter. Its revenue forecast was $3bn below estimates as it also struggled with slowing growth in the data centre business.
Intel share price was 6.4% lower at the close while rival Advanced Micro Devices (AMD) and graphics card company Nvidia ended the session up 0.3% and 2.8%, respectively. Intel supplier KLA Corp settled 6.9% lower after its dismal forecast.
“No words can portray or explain the historic collapse of Intel,” said Rosenblatt Securities’ Hans Mosesmann, who was among the 21 analysts to cut their price targets on the stock.
The poor outlook underscored the challenges facing CEO Pat Gelsinger as he tries to re-establish Intel’s dominance of the sector by expanding contract manufacturing and building new factories in the US and Europe.
The company has been losing market share steadily to rivals such as AMD, which has used contract chipmakers such as Taiwan-based TSMC to make chips that outpace Intel’s technology.
“AMD’s Genoa and Bergamo (data centre) chips have a strong price-performance advantage compared to Intel’s Sapphire Rapids processors, which should drive further AMD share gains,” said Matt Wegner, an analyst at YipitData.
Analysts said that puts Intel at a disadvantage even when the data centre market bottoms out, expected in the second half of 2022, as the company would have lost even more share by then.
“It is now clear why Intel needs to cut so much cost as the company’s original plans prove to be fantasy,” brokerage Bernstein said.
“The magnitude of the deterioration is stunning, and brings potential concern to the company’s cash position over time.”
Intel, which plans to cut $3bn in costs this year, generated $7.7bn in cash from operations in the fourth quarter and paid dividends of $1.5bn.
With capital expenditure estimated at about $20bn in 2023, analysts said the company should consider cutting its dividend.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Intel’s ‘historic collapse’ erases $8bn from market value
Brokerage Bernstein says deterioration is stunning and company plans are ‘fantasy’
Intel’s market value was slashed by $8bn on Friday after the US chipmaker shocked Wall Street with dismal earnings projections, fanning fear of a slump in the personal-computer market.
The company predicted a loss for the first quarter. Its revenue forecast was $3bn below estimates as it also struggled with slowing growth in the data centre business.
Intel share price was 6.4% lower at the close while rival Advanced Micro Devices (AMD) and graphics card company Nvidia ended the session up 0.3% and 2.8%, respectively. Intel supplier KLA Corp settled 6.9% lower after its dismal forecast.
“No words can portray or explain the historic collapse of Intel,” said Rosenblatt Securities’ Hans Mosesmann, who was among the 21 analysts to cut their price targets on the stock.
The poor outlook underscored the challenges facing CEO Pat Gelsinger as he tries to re-establish Intel’s dominance of the sector by expanding contract manufacturing and building new factories in the US and Europe.
The company has been losing market share steadily to rivals such as AMD, which has used contract chipmakers such as Taiwan-based TSMC to make chips that outpace Intel’s technology.
“AMD’s Genoa and Bergamo (data centre) chips have a strong price-performance advantage compared to Intel’s Sapphire Rapids processors, which should drive further AMD share gains,” said Matt Wegner, an analyst at YipitData.
Analysts said that puts Intel at a disadvantage even when the data centre market bottoms out, expected in the second half of 2022, as the company would have lost even more share by then.
“It is now clear why Intel needs to cut so much cost as the company’s original plans prove to be fantasy,” brokerage Bernstein said.
“The magnitude of the deterioration is stunning, and brings potential concern to the company’s cash position over time.”
Intel, which plans to cut $3bn in costs this year, generated $7.7bn in cash from operations in the fourth quarter and paid dividends of $1.5bn.
With capital expenditure estimated at about $20bn in 2023, analysts said the company should consider cutting its dividend.
Reuters
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