Intel Lowers Forecast Amidst Weak China Data Center Sales

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Last Thursday, Intel Corp, the chipmaker, lowered its full-year revenue forecast and missed the estimates of analysts for first-quarter sales for the data centre business that has driven its growth as PC sales fell in recent years, sending its shares slumping by as much as 7.5 percent.

Intel said that the economy of China was consuming fewer microchips as compared to what it had expected, thus adding to the concerns that an industrywide slowdown could persist until the end of the year. The outlook of Intel comes after a similar warning that was released earlier this week from Texas Instruments Inc, a chipmaker whose broad lineup of products makes it a proxy for the industry chip industry.

Intel marginally surpassed Wall Street targets for both revenue and profit in the fiscal first quarter, however, the sales in the data centre group unit dropped by 6.3 percent to $4.9 billion (3.8 billion pounds) as it was affected by weakness in China as the customers worked through stockpiles of chips that were purchased in 2018. According to FactSet, a financial and data analytics firm, analysts had anticipated revenue to hit $5.1 billion,

Moor Insights & Strategy’s Patrick Moorhead stated: “The data centre rebound the company was banking on for back-half (of 2019) improvements doesn’t look like it’s going to happen.”

In an interview, Bob Swan, the chief executive of Intel, said that customers in China had “absolutely” purchased extra data centre chips in 2018 because of fears of a tariff or supply constraints owing to the trade dispute between China and the United States of America.

Swan stated: “The belief at the time was that they were ordering well ahead of what their real needs were, but the expectation was that they would consume that over the course of Q4 and Q1.

“But today we think … it’s not being consumed quite at that level; there’s going to be another quarter.”

While Intel emphasises problems experienced in China, an analyst with Susquehanna Financial Group, Christopher Rolland, said that “there was weakness, in terms of orders, across almost every single end-market for them.”

He added: “It’s really across the board.”

The chipmaker lowered its revenue forecast for the year to $69 billion, from the $71.5 billion that it told investors to expect when it last reported its earnings last January.