SAN FRANCISCO (Reuters) - Intel Corp’s first-quarter net profit fell, but beat Wall Street’s estimates as the chipmaker wrestles with shrinking demand for personal computers.
With personal computer shipments falling for eight straight quarters through March, some analysts believe the industry’s decline is close to hitting bottom, potentially giving Intel breathing room as it struggles to develop better processors for mobile and wearable devices.
In its report on Tuesday, Intel said revenue from its PC client group in the first quarter was $7.9 billion, down 1 percent from the year before.
The company also expects a full-year gross margin of 61 percent, plus or minus a few percentage points. That is 1 percentage point higher than Intel’s previous forecast.
Intel’s stock was up more than 1 percent in after hours trading.
“The margin guidance is what’s pushing the stock up. The PC client group was roughly in line with seasonal,” said Bernstein analyst Stacy Rasgon.
Tuesday’s results included a new financial reporting structure to better reflect its focus on two small key areas: mobile and the growing field of linking up electronic devices, known as Internet of Things. The report also included retrospective results under the updated business segments.
Intel said its mobile and communications group had revenue of $156 million in the first quarter, down 61 percent from the year-ago quarter.
The chipmaker reported first-quarter net earnings of $1.947 billion, or 38 cents a share, compared with $2.045 billion, or 40 cents a share, in the year-ago quarter. Analysts on average expected 37 cents a share, according to Thomson Reuters I/B/E/S.
First-quarter revenue was $12.76 billion, compared with $12.58 billion in the year-ago quarter, Intel said in a statement on Tuesday. Analysts had expected $12.814 billion.
After underestimating the impact of smartphones and tablets, Intel is keen to make sure it is part of an emerging trend toward wearable computing devices such as smart watches. In March, it bought Basis Science, the maker of a wearable health tracker, as part of that push. But industry watchers believe smart clothing is not ready to make a major splash with consumers any time soon. Analysts are skeptical that chips for wearables will be able to make up for much of the business that Intel has lost because of the shrinking PC industry.
Intel CEO Brian Krzanich has laid out a goal to ship 40 million tablet chips this year, up from 10 million in 2013. To reach that goal, Intel is offering to aggressively subsidize manufacturers’ costs to include Intel’s chips in future tablets.
Intel’s data center group, a big contributor to the company’s overall profits, had revenue of $3.1 billion, up 11 percent year over year.
Intel forecast revenue of $13 billion, plus or minus $500 million, for the second quarter, which ends in June. Analysts had expected $12.957 billion on average.
Intel shares rose 1.6 percent in extended trading after closing up 0.80 percent at $26.77 on Nasdaq.
Reporting by Noel Randewich. Editing by Andre Grenon