Intel's most important business is slowing down, stock drops
Intel just reported its second quarter earnings after the bell on Wednesday afternoon.
It's a beat on earnings and a match on revenues. But it reported another slow down in its data center group, which has been the company's biggest growth driver, and the stock is down 3% in after hours.
Here are the most important numbers:
- EPS (non-GAAP): $0.59 per share vs. $0.53 per share estimated
- Revenue: $13.53 billion vs. $13.54 billion estimated (up 3% year-over-year)
Intel's data center group, which has been the driving force behind the company's growth, decelerated again this quarter, growing only 5% year-over-year for $4 billion in revenue. That's another slow down quarter, as the data center group grew 11% in the fourth quarter of 2015 and 9% in the first quarter of 2016, respectively.
Intel expects its data center group to grow 15% for the full year.
"I think that investors are a little spooked by the data center numbers. Intel's sticking to double-digit growth for the year, but it only showed 5% growth this quarter," Patrick Moorhead, principal analyst of Moorhead Insights & Strategy, told Business Insider.
Intel's client computing group, comprised of its PC and mobile units, and historically its largest revenue-driver, had $7.3 billion in sales, down 3% from last year.
Intel gave revenue guidance of $14.9 billion next quarter, slightly higher than the $14.6 billion street estimates.
Intel went through a number of big changes in the second quarter.
It rolled out one of its biggest layoff plans in history, which will cut 12,000 jobs, or 11% of the total workforce, by mid-2017. Intel said the restructuring is "solidly on-track," but cost $1.3 billion in restructuring charges, causing the company's operating income to drop 54% from last year.
It also canceled its upcoming Atom chips for smartphones and tablets, essentially taking a big step away from the mobile chip business, a segment that cost the company billions of dollars in losses over the past few years.
Not everyone's happy about the changes taking place at the company. According to about a dozen current and former employees we spoke to, Intel's targeting old timers in its latest round of layoffs in order to bring in younger, fresher talent to the company.
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