Intel announced a massive $18.7 billion (€17.2 billion) set of restructuring and asset impairment charges on Thursday in an attempt to clear the decks and accelerate its effort to rebuild its competitiveness.
A less-drastic revenue decline in the chipmaker’s latest quarter than investors had feared drove a 10 per cent rebound in its battered shares in after-market trading on Thursday.
Its forecast of $13.3 billion to $14.3 billion in revenue for the current quarter and pro forma earnings per share of 12 cents came in ahead of Wall Street estimates of $13.6 billion in revenue and 8 cents in earnings.
The charges included $2.8 billion of restructuring expenses, tied to a previously announced reorganisation and cost-cutting programme that is designed to cut spending by $10 billion a year. Intel also took $15.9 billion of impairment charges on equipment and goodwill write-downs.
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Most of the costs were excluded from the non-GAAP measure of earnings that analysts use to judge the company’s underlying performance. However, $3.1 billion of the charges, related mainly to a write-down of equipment that had been acquired to make chips on the Intel 7 manufacturing node, were taken against non-GAAP profits.
As a result, the chipmaker reported a non-GAAP loss of 46 cents a share for the quarter, compared to Wall Street expectations of a loss of 2 cents.
The $3.1 billion charge reflected Intel’s excessive optimism during the pandemic about the level of future demand for its chips, leading it to buy more equipment than it needed, David Zinsner, chief financial officer, told the Financial Times.
“A lot of it never got unpacked, it was sitting on the sidelines waiting to be used,” he said.
Had it not been for that charge, Intel would have reported non-GAAP earnings of 17 cents a share for the quarter. Its revenue for the quarter fell 6 per cent to $13.3 billion, but still topped expectations of about $13 billion.
Mr Zinsner said the quarterly performance showed the company was on track with the launch of important new chips that Wall Street sees as critical to its competitiveness, including a new chip for artificial intelligence PCs codenamed Lunar Lake and a server chip known as Granite Rapids.
The relief rally in its shares marked a respite after a slump that had wiped 55 per cent from its stock price this year, including a 26 per cent decline the day after its last earnings report. – Copyright The Financial Times Limited 2024
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