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$8 Billion Wiped Off From Market Value Of Intel In A 'Historic Collapse'

$8 Billion Wiped Off From Market Value Of Intel In A 'Historic Collapse'
The much worse than expected results and dismal earnings projections compared to expectations of Wall Street resulted in the stocks of the semiconductor chip giant Intel being routed as the company lost about $8 billion from its market value on Friday. The results reported by Intel resulted in growing concerns about the slowdown of demand in the personal-computer industry.
The firm projected an unexpected loss for the first quarter, and forcast revenue earnings that was $3 billion lower than expected, even as the company also reported slowing down of growth of demand for chips from data centers.
Intel shares were down 6.4% at the close, while rival Advanced Micro Devices and Nvidia were up 0.3% and 2.8%, respectively. KLA Corp, an Intel supplier, fell 6.9% after issuing a bleak 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 bleak outlook highlighted the difficulties that Chief Executive Pat Gelsinger faces as he attempts to reestablish Intel's dominance in the sector by expanding contract manufacturing and constructing new factories in the United States and Europe.
The company has steadily lost market share to rivals such as AMD, which has used contract chipmakers such as Taiwan-based TSMC to produce chips that outperform Intel's technology.
"AMD's Genoa and Bergamo (data center) chips have a strong price-performance advantage compared to Intel's Sapphire Rapids processors, which should drive further AMD share gains," said Matt Wegner, analyst at YipitData.
Analysts believe Intel will be at a disadvantage even when the data center market bottoms out, which is expected in the second half of 2022, because the company will have lost even more market 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."
According to previous reports, Intel has plans for cutting down about $3 billion in expenses in the current year, while also reporting cash generation of $7.7 billion in from its operations and paid $1.5 billion in dividends in the fourth quarter.
Analysts believe the firm should also contemplate reducing its dividend since the company expects to incur capital expenditures of about $20 billion in 2023.

Christopher J. Mitchell

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