Intel , the technology giant and the largest employer in the Israeli high-tech industry, published reports this evening and surpassed analysts’ forecasts but lowered its annual forecast for the second time. The stock reacts with a jump of 7% in late trading on Wall Street.
The company reported quarterly revenue of $15.34 billion, when analysts’ forecasts were that its revenue would be $15.25 billion. This is a 15% decrease compared to last year, after a 22% decrease in revenues last quarter. Adjusted earnings per share amounted to 59 cents per share when forecasts were for a profit of 32 cents per share. Total net profit was $1.02 billion, a significant decrease compared to $6.82 billion in the corresponding quarter.
The sharpest decrease was recorded in the servers and artificial intelligence division – 27% less than in the corresponding quarter to the level of 4.2 billion dollars. Intel’s core business – personal computing – fell 17% to $8.1 billion in revenue in the quarter. The field of networks and smart computing at the edge (Edge) grew by 14% to 2.3 billion dollars.
Mobileye once again proves to be the fastest growing division in Intel, with annual growth of 38% to 450 million dollars in the third quarter, an annual revenue rate of about 2 billion dollars.
The company announced that one of its overarching goals focuses on a production strategy for external customers (foundry) and therefore it can be concluded that it will conduct efforts to complete a purchase transaction Tower .
As for the annual forecast, the company expects an adjusted profit of $1.95 per share and revenues of $63 to $64 billion, compared to an adjusted profit of $2.30 per share and revenues of $65-68 billion in the forecast from three months ago. This will reflect a nearly 20% drop in revenue. Analysts were expecting adjusted earnings of $2.15 per share and revenue of $65.26 billion.
Intel has announced a massive streamlining program and said it aims to cut costs by $3 billion by 2023, and the number will even reach $8 billion to $10 billion by the end of 2025.
Inflationary pressures alongside technological and business failures
The company has lost about 51% of its share price since the beginning of the year, making it the most disappointing stock in the Dow Jones index.
The reports are published after Intel also issued a profit warning for its annual forecast in July, moving from a profit to a net loss of $454 million, and missing the revenue forecast by $2.7 billion compared to expectations. The company admitted that not only the economic climate had an effect, but also the delay in the launch of a graphics processor that should allow it to compete with Nvidia and develop new products.
Intel, as well as other competitors in the chip industry – Nvidia, AMD and Qualcomm – experienced a great boom during the Corona years, and at the same time a decline with the decrease in demand for personal computers, the tension between China and the US and the inflationary pressures in the world. Intel was damaged by one of the immediate macroeconomic phenomena, and also by years of technological and business failures that caused it to lose huge customers such as Apple and Amazon and to lag technologically behind younger players such as TSMC, ARM and Nvidia.
Nevertheless, the company derives encouragement from the fact that it was able to get the American government to grant it tax benefits and grants for the establishment of factories in Ohio in 2026, and to make a move for a total investment of 280 billion dollars in American chip companies – of which Intel is expected to be the biggest beneficiary. This, as part of the American attempt to return to the country control of the value chain of chip production after years of transferring the activity to Taiwan, Korea, Malaysia and Japan. Intel also states that the company is receiving high demand for the new gaming chips, Raptor Lake.
Intel is expected to start a round of layoffs tonight (Thursday) or next week at the latest. According to the reports, these may harm thousands of workers, and to some extent also affect Intel’s development and production centers in Israel.
The company reported that as of October 1 this year, 131,500 people worked for it, a 12.2% increase in the number of employees within a year, from 117,200 at the end of September last year. In Israel, Intel employs 14,000 people – a number that has not changed in the last three years. According to the estimate, the layoffs at Intel Israel should encompass several hundred employees, some of whom may benefit from early retirement or voluntary departure programs. The Oregonian news site quoted a person who saw company CEO Pat Gelsinger as justifying the wave of layoffs because “our costs are too high and our profit margins are too low.”
The payment of the dividend to Intel will not affect the results
Mobileye Continues to increase its value in the stock market a day after the issue. Originally, it planned to go public for 50 billion dollars, then compromised on 30 and finally went public yesterday (Wednesday) on the New York Stock Exchange at a value of 16.7 billion dollars. As of this writing, it is already worth 23.4 billion, making Mobileye the most valuable Israeli company – after overtaking Check Point and Solaredge.
Despite this, Intel does not intend to give up Mobileye so quickly – in fact, it is one of the most profitable divisions in all of Intel to date. After the IPO, Intel owns 94% of Mobileye’s shares, although according to Mobileye’s founder and CEO Prof. Amnon Shashua, Intel will continue to exercise shares in the company. The heavy $3.5 billion dividend that Mobileye is expected to transfer to Intel will not be transferred to it before 2025, so this is not expected to contribute to Intel’s bottom line in the near future.
At the same time, the employees of Mobileye and Mobit won just before Intel’s bad reports to receive a growing stock – instead of a declining stock – and apparently managed to get out of layoffs since no layoffs are planned at Mobileye and Mobit.