Intel will not emerge from the crisis. The American semiconductor group reported the biggest loss in its history and a dramatic drop in sales on Thursday after the market closed. The company is also cautious about the coming quarter. “We are not satisfied with our results,” CFO David Zinsner said in a conference call. After all, Intel did a little better with its numbers than analysts had feared. The share price was initially slightly up in after-hours trading, but then slipped into the red.
The weak numbers again raise questions about the multi-billion dollar investments that Intel has announced on both sides of the Atlantic. Two chip factories are to be built in Magdeburg, which are said to cost 17 billion euros, with Intel relying on extensive state subsidies. New chip plants are also being built on the American home market. So far, Intel CEO Pat Gelsinger has said he wants to stick to such strategic investments despite the difficult financial situation.
In the first quarter, Intel’s sales fell 36 percent year-on-year to $11.7 billion. That was even worse than the development in the final quarter of 2022, when there was a minus of 32 percent. Intel posted a net loss of $2.8 billion, up from a profit a year ago. CFO David Zinsner said gross margins were “well below acceptable levels.”
Intel suffered revenue declines of more than 35 percent in both of its major divisions. With chips for personal computers, the group is feeling the weakening of the market. After rapid growth amid the pandemic, far fewer PCs are now being sold. The market for semiconductors for network computers (servers) has also weakened. However, Intel is also suffering from increased competition from its competitor Advanced Micro Devices (AMD) and made mistakes in the development of new products, which led to delays. Gelsinger now said he sees signs of stabilization in the PC market. However, the bottom has not yet been reached in the server business.
For the second quarter, Intel predicts sales of $11.5 billion to $12.5 billion. That would correspond to a minus of up to 25 percent. The target from the previous year is not too high, even then there was a drop in sales of 22 percent.
Intel has announced an austerity program that is expected to cut costs by $3 billion this year, and savings of up to $10 billion by 2025 are targeted. Layoffs should also contribute to this, although Intel has not specified the number. The group also cut its dividend significantly.
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