Intel posts strong earnings, but forecast disappoints

— 5:04 PM on January 15, 2015

The bean counters at Intel have reported the chipmaker's earnings for the last quarter of 2014—and for the year as a whole. The numbers look like cause for celebration: they show sizeable increases in revenue, gross margin, and net income compared to 2013. However, as Reuters reports, Wall Street analysts are less thrilled with Intel's forecast for the ongoing quarter. That disappointment has sent the company's share price down a couple of points.

Here are the Q4 2014 numbers:

  Q4 2014 Q4 2013 Change
Revenue $14.7 billion $13.8 billion up 6%
Net income $3.7 billion $2.6 billion up 39%
Gross margin 65.4% 62.0% up 3.4 pts

Net income saw the biggest increase from last year—a whopping 39%. I'm sure AMD's CFO would kill for numbers like these.

  2014 2013 Change
Revenue $55.9 billion $52.7 billion up 6%
Net income $11.7 billion $9.6 billion up 22%
Gross margin 63.7% 59.8% up 3.9 pts

The full-year results are almost as impressive. A breakdown of results for the company's various business units does show areas of weakness, though:

  Quarterly Yearly
  Q4 2014 vs. Q4 2013 2014 vs. 2013
PC Client Group $8.9 billion down 3% $34.7 billion up 4%
Data Center Group $4.1 billion up 25% $14.4 billion up 18%
Internet of Things Group $591 million up 10% $2.1 billion up 19%
Mobile and Communications Group -$6 million down 104% $202 million down 85%
Software and services $557 million down 6% $2.2 billion up 1%

Revenue for the Mobile and Communications Group was negative in Q4 2014, although Intel says the figure is "in line with expectations." I guess this is what happens when you pursue market share at all costs—something Intel has become notorious for doing in this segment.

Intel's PC Client Group revenue also shrank last quarter. Market research firm IDC says PC shipments were down 2.4% in the quarter, so I guess that shouldn't come as much of a surprise. In any case, the PC Client Group remains Intel's biggest cash cow by far, with more than twice the revenue of the Data Center group.

Here's Intel CEO Brian Krzanich's take on the data:

The fourth quarter was a strong finish to a record year. . . . We met or exceeded several important goals: reinvigorated the PC business, grew the Data Center business, established a footprint in tablets, and drove growth and innovation in new areas. There is more to do in 2015. We'll improve our profitability in mobile, and keep Intel focused on the next wave of computing.

Intel's forecast calls for revenue of $13.7 billion (plus or minus $500 million) and a gross margin of 60% (plus or minus 2 pts) in the first quarter of 2015. To put things in perspective, the chipmaker's posted $12.8 billion revenue and a 59.7% gross margin in Q1 of 2014.

Finally, for 2015 as a whole, Intel says it expects growth "in the mid-single digit percentage points." Gross margin will be 62%, give or take two points, the firm says.

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