- Company raises quarterly dividend by 2 cents a share
- Chips for servers, memory helping to fuel Intel's sales
Intel Corp., the world’s largest semiconductor maker, said 2016 sales will climb in the "mid single-digit" percent range, making the case that it doesn’t need a buoyant personal-computer market to achieve growth.
“Our growth is not dependent on this business,” Chief Executive Officer Brian Krzanich said at an investor event on Thursday at the company’s headquarters in Santa Clara, California.
Analysts on average are projecting sales growth of about 4 percent to $57.5 billion next year, according to data complied by Bloomberg. While Intel is facing a weaker PC market and is losing money as it struggles to get into mobile phones and tablets, revenue has been bolstered by demand for high-powered processors that run servers, the building blocks of cloud-computing centers. Additionally, orders for memory chips and processors used in new markets for Intel -- such as automotive and factory automation -- are helping to boost sales, the CEO said.
Intel predicted gross margin, or the percentage of sales remaining after deducting the cost of production, of about 62 percent for 2016. It’s budgeting about $10 billion for spending on new plants and equipment and raised its quarterly dividend payout by 2 cents a share, the company said in a filing today. The higher payout is in line with Bloomberg’s dividend forecast for Intel.
The shares of Intel climbed 3.4 percent to $34.30 at the close in New York. The stock is down 5.5 percent this year after surging 26 percent in 2013 and 40 percent last year. By comparison, the Philadelphia Stock Exchange Semiconductor Index is down 3.4 percent in 2015.
PC shipments are on course to shrink 4.9 percent to below 300 million units this year, after peaking at 364 million in 2011, according to IDC Corp. Even if the PC market shrinks 10 percent, Intel expects to be able to grow in the low-single digit percentage range, said Stacy Smith, Intel’s chief financial officer. If the market is flat, Intel will grow in the high-single digit percentage range, he said.
While Intel got more than twice as much revenue from selling PC chips as it did from its data-center group in the recent period, the two units brought in almost the same amount of operating profit. That change has been driven by Intel’s 99 percent market share in server chips and surging demand for the machines from operators of data centers, such as Amazon.com Inc. and Google, which are building up their capacity to provide computing power, storage and services via the Internet.
Intel is still able to reduce the cost of transistors, the tiny components of semiconductors at a rate which makes it worth investing in new production techniques. The company is maintaining its lead over Taiwan Semiconductor Manufacturing Co. And Samsung Electronics Co., according to Bill Holt, Intel’s head of manufacturing .
Intel is also on track to cut losses by its mobile chip division and expects a reduction of about a $1 billion this year, Smith said. In 2016 it’s aiming to get another $800 million closer to profitability in that business, he said.