Intel crashes after forecast suggests comeback may be a long way off

Intel Corp. slipped in late trade after giving a gloomy forecast for the current period, impacted by falling demand from PC customers and fierce competition in the lucrative server hardware market.

First-quarter revenue will be $10.5 billion to $11.5 billion, the chipmaker said in a statement Thursday. That compares to an average analyst estimate of $14 billion. Intel expects it to lose 15 cents in the quarter excluding a few points. Analysts had forecast a profit of 25 cents.

At the lower end of the guidance range, Intel’s revenue would be its smallest quarterly revenue since 2010.

The outlook reflects the myriad challenges facing Intel, which attempted a comeback before the personal computer chip market, its main source of revenue, took a hit.

To get back on track, the company needs computer manufacturers to quickly work through inventory and return to ordering components. That would give Intel a revenue boost needed to shore up its finances, already strained by ambitious plans to regain technological leadership in the chip industry.

Intel shares fell more than 7 percent in late trade following the announcement. Previously they closed at $30.09. The stock was up 14 percent this year, part of a rally for chip stocks.

The chipmaker has also cut costs to deal with the slowdown. Three months ago, Intel said that downsizing, slower spending on new plants and other austerity measures will result in savings of $3 billion this year. That number will swell to as much as $10 billion annually by the end of 2025, the company said.

In the fourth quarter, Intel reported a net loss of $664 million, or 16 cents a share, compared to a profit for the same period last year. Revenue fell 32 percent to $14 billion, the lowest since 2016.

Excluding certain items, earnings were 10 cents a share. Wall Street was aiming for a profit of 19 cents on sales of $14.5 billion.

The dismal results show Intel falling further behind its peers. Total sales in 2022 were lower than those of Taiwan Semiconductor Manufacturing Co., a chipmaker that supplies many of the US company’s competitors and allows some customers to design their own components. The once dominant Intel had already fallen behind Samsung Electronics Co. in terms of sales.

The computer industry is experiencing a huge reset after a sales surge fueled by the work-from-home trend. According to an estimate by Northland Securities analyst Gus Richard, PC shipments fell 16 percent in 2022 and will fall back to just 260 million this year. That’s down from almost 350 million in 2021.

Intel still dominates the market for processors used in servers, with a share of more than 70 percent. But its grip on this lucrative market has slipped. The company has been slow to introduce new products in recent years, and competitors like Advanced Micro Devices Inc. have made profits. Some customers are also developing their own chips to replace Intel processors.

It all spelled a painful downfall for Intel, which once controlled 99 percent of the market.