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Intel Caps Off Difficult Year With Record Sales -- 3rd Update

01/21/2021 | 05:03pm EST

By Asa Fitch

Intel Corp. posted record annual revenue but held off on providing a full-year forecast for this year ahead of the arrival of a new chief executive at a time the semiconductor giant looks to fend off competitive pressures and rebuild its technological leadership.

The company Thursday posted sales of $77.9 billion for 2020, up from $72 billion the year prior and ahead of the $75.4 billion Wall Street expected. While Intel has benefited from a boom in demand for PCs in the work-from-home economy, much of the added buying has focused on lower-cost laptops that aren't as profitable. Net income for 2020 came in at $20.9 billion, down from $21.1 billion the year-prior period.

Intel shares rose more than 6% late Thursday after it also boosted its cash dividend.

The earnings mark the end of a challenging yet lucrative year for the semiconductor giant that saw it surpassed in market valuation by rival Nvidia Corp., dropped by Apple Inc. as a supplier for Mac chips, suffer market-share losses and face activist investor Third Point LLC pushing for strategic changes.

Departing CEO Bob Swan said, "Intel is in a strong strategic and financial position as we make this leadership transition and take Intel to the next level."

Intel's longer-term strategy around the outsourcing of chip production is in flux ahead of the arrival of Pat Gelsinger as CEO. Mr. Swan said last year that a decision was forthcoming by early this year on whether to have the company's advanced chips made by a third party after Intel fell behind Asian rivals in the development of the next generation of superfast semiconductors.

The company is considering outsourcing production of some of its most prized chips to those Asian rivals, and particularly to Taiwan Semiconductor Manufacturing Co., the largest and most advanced contract chip maker in the world, according to people familiar with the matter.

Intel already has decided to send out production of coming graphics-processing chips to TSMC, and the companies have been in talks about deepening their relationship further. Mr. Swan visited TSMC to discuss potential options in December, according to a person familiar with the trip.

TSMC last year announced plans to build a chip factory in Arizona, its second in the U.S. And the company last week said it planned record capital expenditures of as much as $28 billion this year, a huge increase from last year and an indication, in some analysts' eyes, that new business from Intel is on the way.

Given the importance of that decision to Intel's long-term future, a final verdict on outsourcing plans could be deferred until Mr. Gelsinger takes over in mid-February, analysts say. The selection of Mr. Gelsinger, the chief executive of VMware Inc., who spent three decades at Intel earlier in his career, was widely hailed. Intel's stock is up 10% since his naming last week. But analysts expect the turnaround in an industry where product-development cycles are measured in years, not months, to take time.

"It's a good thing to bring in someone new, and particularly someone who has worked at Intel and has a tech background, but whatever path they follow, it will take time to implement," Wedbush Securities analyst Matthew Bryson said ahead of earnings

Third Point, the activist hedge fund led by Daniel Loeb, took a position of about $1 billion in Intel's shares and advocated in a December letter for the company to consider an even more foundational change: splitting up its chip-design and manufacturing operations. Such a move would end Intel's decadeslong run as the leading U.S. integrated chip manufacturer. On Twitter, Mr. Loeb praised Mr. Swan for stepping aside for Mr. Gelsinger.

Intel is facing other pressures, including from competitors such as Nvidia and Advanced Micro Devices Inc. Amid Intel's manufacturing setbacks, AMD has gained market share quickly in central processors for PCs and servers.

Intel said its fourth-quarter sales, while down 1% from a year earlier, topped its expectations on strong demand for laptops and chips used in data centers. Its Mobileye unit, which makes technology for autonomous vehicles, also logged a jump in sales.

Sales for the company's data-center business fell 16% from a year earlier, but the result was matched against one of the strongest periods in the unit's history, Intel finance chief George Davis said. The company, he added, had boosted manufacturing capacity to resolve a shortage of PC chips that had contributed to market-share losses.

Intel said it expects sales in the first quarter of $18.6 billion, down from the year prior but ahead of the $16.1 billion analysts foresaw.

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Write to Asa Fitch at asa.fitch@wsj.com

(END) Dow Jones Newswires

01-21-21 1703ET

Stocks mentioned in the article
ChangeLast1st jan.
ADVANCED MICRO DEVICES, INC. 0.87% 85.6 Delayed Quote.-6.91%
APPLE INC. -1.46% 124.0793 Delayed Quote.-5.04%
INTEL CORPORATION 1.09% 61.82 Delayed Quote.26.48%
NVIDIA CORPORATION 0.25% 568.2 Delayed Quote.9.96%
TAIWAN SEMICONDUCTOR CO., LTD. -1.52% 58.5 End-of-day quote.-5.95%
VMWARE, INC. 0.34% 144.8 Delayed Quote.2.79%
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More news
Financials (USD)
Sales 2021 72 927 M - -
Net income 2021 18 334 M - -
Net Debt 2021 8 994 M - -
P/E ratio 2021 13,6x
Yield 2021 2,26%
Capitalization 248 B 248 B -
EV / Sales 2021 3,53x
EV / Sales 2022 3,47x
Nbr of Employees 110 600
Free-Float 99,9%
Duration : Period :
Intel Corporation Technical Analysis Chart | INTC | US4581401001 | MarketScreener
Technical analysis trends INTEL CORPORATION
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus HOLD
Number of Analysts 43
Average target price 63,61 $
Last Close Price 61,12 $
Spread / Highest target 47,3%
Spread / Average Target 4,08%
Spread / Lowest Target -34,6%
EPS Revisions
Managers and Directors
Patrick P. Gelsinger Chief Executive Officer & Director
George S. Davis Chief Financial Officer & Executive Vice President
Omar S. Ishrak Independent Chairman
Daniel J. McKeon Vice President-Information Technology Group
Ann B. Kelleher Senior Vice President & GM-Technology Development
Sector and Competitors
1st jan.Capitalization (M$)
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