Intel second quarter profits up 45 percent

Intel second quarter profits rose by 45% to $2.8 billion, driven mainly by greater-than-expected PC sales to corporate customers. Q2 2014 reversed prior quarter PC sale trends, and increased by 6%. The company improved its outlook for Q3 and the whole year.

In the second quarter, Intel posted revenue of $13.8 billion, operating income of $3.8 billion and earnings per share of $0.55. It generated about $5.5 billion in cash from operations, paid out $1.1 billion in dividends, and repurchased 74 shares of stock for $2.1 billion.

Brian Krzanich, Intel’s CEO, said:

“Our second-quarter results showed the strength of our strategy to extend the reach of Intel technology from the data center to PCs to the Internet of Things. With the ramp of our Baytrail SoC family, we have expanded into new segments such as Chrome-based systems, and we are on track to meet our 40 million unit tablet goal.”

“In addition, we hit an important qualification milestone for our upcoming 14nm Broadwell product, and expect the first systems to be on shelves during the holidays.”

Returning more cash to shareholders

Intel says it plans to return more money to stockholders by reducing its cash balance further through more share repurchases. The Board authorized a $20 billion increase to its share repurchase program. The semiconductor chip maker giant forecasts share repurchases of about $4 billion in Q3 2014, and further repurchases in Q4.

Over the last ten years, Intel has returned nearly $90 billion to stockholders through dividends and share repurchases, the company informed.

Intel’s CFO and Executive Vice President, Stacy J. Smith, said:

“This change in our capital structure is the continuation of a multi-year focus on creating value and returning cash to our shareholders, and reinforces our confidence in the business.”

Below are some highlighted data published by Intel today:

  • PC Client Group: revenue increased 9% quarter-on-quarter and 6% year-on-year to $8.7 billion,
  • Data Center Groups: revenue rose 14% quarter-on-quarter and 19% year-on-year to $3.5 billion,
  • Internet of Things Group: revenue grew by 12% quarter-on-quarter and 24% year-on-year to $539 million,
  • Mobile and Communications Group: revenue climbed by 67% quarter-on-quarter and 83% year-on-year to $51 million,
  • Software and services operating segments: revenue declined by 1% quarter-on-quarter but rose 3% year-on-year to $548 million.

Intel Financials Q2 2014

(Data source: Intel Corporation)

Intel business outlook Q3 and full year 2014

Intel believes the PC market will continue to expand in the corporate client sector. It sees growing profits and revenues for the rest of this year. In June, the company reported accelerated demand for PCs from corporate customers.

A sizable percentage of companies have come to realize that smartphones and tablets do not meet staff requirements for a wide range of tasks. With Microsoft retiring its Windows XP operating system, many companies have opted for new PC’s rather than moving completely into tablets or smartphones.

Mr. Krzanich said there are approximately 600 million corporate PCs globally that are more than four years old. A large market for upgrades.

Below is a breakdown of Intel’s outlook for the next quarter and the whole year:

  • Revenue: Q3 $14.4 billion (+/- $500m).
    2014 growth of about 5%, slightly more than the previous forecast.
  • Gross margin percentage: Q3 66% (+/- 2 percentage points).
    2014 63% (+/- a few percentage points), the same as previous expectations.
  • R&D + MG&A spending: Q3 c. $4.9 billion.
    2014 $19.3 billion (+/- $200 million), more than previous expectations.
  • Restructuring charges: Q3 c. $20 million.
  • Amortization of acquisition-related intangibles: Q2 $65 million.
    2014 c. $300 million, about the same as the previous forecast.
  • Impact of investments and interest and other: about zero,
  • Depreciation: Q2 $1.9 billion.
    2014 c. $7.4 billion, unchanged from previous expectations.
  • Tax rate: c. 28%.
    2014 c. 28%.
  • Full year capital spending: $11 billion (+/- $500 million).