Intel announces up to $10 billion in cost reductions through 2025

Intel announces up to $10 billion in cost reductions through 2025

Intel CEO Pat Gelsinger speaks during Mobileye Global Inc.’s IPO at the Nasdaq MarketSite in New York on October 26, 2022. Mobileye Global Inc., the standalone technology company owned by Intel Corp. , priced one of the year’s largest U.S. initial public offerings above its marketed range to raise $861 million.

Michael Nagle | Bloomberg | Getty Images

Intel Shares rose as much as 7% in extended trading on Thursday after the chipmaker announced a lower-than-expected full-year profit forecast but said it would bring in up to $10 billion in cost reductions and efficiency improvements.

Here’s how the company did it:

  • Earnings: 59 cents per share, adjusted, versus 32 cents per share as expected by analysts, according to Refinitiv.
  • Revenue: $15.34 billion, versus $15.25 billion as forecast by analysts, according to Refinitiv.

Overall revenue was down 15% year over year in the quarter, which ended Oct. 1, according to a statement. In the previous quarter, sales were down 22%. The company’s net profit of $1.02 billion was down from $6.82 billion in the year-ago quarter.

“We expect economic uncertainty to persist through 2023,” CEO Pat Gelsinger said on a conference call with analysts. A global recession is possible, said Intel Chief Financial Officer David Zinsner.

Intel said it is targeting $3 billion in cost of sales and operating expense reductions in 2023, and annual savings will reach $8 billion to $10 billion by the end of 2025. Bloomberg reported. reported earlier this month that Intel plans to cut employees, possibly in the thousands, in a bid to cut costs. A few days later, The Oregonian reported that Gelsinger warned employees that the company would be implementing cost-cutting measures.

“Our efforts will include measures to optimize our workforce. These are tough decisions that affect our loyal Intel family,” Gelsinger said on Thursday’s call.

The company’s Client Computing group, which includes PC chips, generated $8.12 billion in revenue, down 17% but above the $7.58 billion consensus among analysts polled by StreetAccount. Tech industry researcher Gartner said PC shipments fell nearly 20% in the third quarter, after two years of consumers buying computers for work, study and gaming since. at home during the pandemic.

Intel said PC demand weakened in the quarter, mostly in the consumer and education markets, as device makers reduced inventory.

The company’s Datacenter and AI segment, including server chips, memory and field-programmable gate arrays, reported revenue of $4.21 billion, down 27% and lower to the StreetAccount consensus of $4.67 billion.

“The TAM data center is holding up better, although companies in China continued to show signs of weakness, as did some, but not all, cloud customers,” Gelsinger said. In the data center category, Intel has grown its market share more slowly than the rest of the market, he said.

The segment of the Network and Edge segment that offers networking products generated revenue of $2.27 billion, up 14% and less than the StreetAccount consensus of $2.40 billion.

During the quarter, Intel said MediaTek would rely on Intel Foundry Services for chip manufacturing, and the company inaugurated a production facility as part of a planned investment in Ohio exceeding $20 billion.

And on Wednesday, Intel-backed self-driving technology company Mobileye began trading on the Nasdaq. Intel bought it in 2017 and retains control of the company.

Management has reduced the full year forecast. The company now reports adjusted earnings per share of $1.95 and revenue of $63-64 billion, compared to $2.30 in adjusted earnings per share and $65 billion and $68 billion in revenue. three months ago. This implies a drop in revenue of nearly 20%. Analysts polled by Refinitiv had expected $2.15 in adjusted earnings per share and $65.26 billion in revenue.

Despite the after-hours move, Intel shares have fallen nearly 49% so far in 2022, while the S&P 500 index is down about 20% over the same period.

Executives will discuss the results with analysts on a conference call beginning at 5 p.m. ET.

This is breaking news. Please check for updates.

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