Intel can’t get out of the bumps: In the fourth quarter of 2022, the company made a net loss of $664 million with sales of a good $14 billion. Even this result is embellished by tax benefits and investment deals. The actual operation brings in a minus of 1.1 billion dollars – negative record in Intel’s company history.
Compared to the same quarter of the previous year, sales collapsed by a third, accompanied by a drop in the gross margin from 53.6 to 39.2 percent. Calculated over the full year, according to the financial data published Thursday evening, Intel had sales of $63.1 billion (-20%), $2.3 billion in operating profit (-88%) and $8 billion in net profit (-60%) – 2021 was operating – and net profit still close to $20 billion.
Core business continues to decline
Intel’s core divisions were catastrophic: The Client Computing Group (CCG) for all desktop and notebook processors only made $6.6 billion in sales in the fourth quarter of 2022, 36 percent less than a year earlier. The operating margin collapsed from 37 to just eleven percent, the operating profit fell analogously from about 3.8 billion to 700 million dollars.
The Data Center and AI (DCAI) group with all Xeon server CPUs made an operating profit of around $400 million at the end of 2022 with an operating margin of nine percent. In the third quarter of 2022, DCAI was still a zero-sum game.
The two divisions Accelerated Computing Systems and Graphics Group (AXG, everything related to discrete GPUs) and Intel Foundry Services (IFS, chip-to-order manufacturing) made a little more money but continued to be a losing proposition – notably AXG with an operating loss of $441 million ( IFS: -31 million).
The automotive division Mobileye was doing great with a growth of 59 percent, but $565 million in sales and $210 million in operating profit is just a drop in the bucket compared to Intel’s core business.
Without going into great detail, CFO David Zinsner reports on steps to downsize Intel. The company wants to save three billion dollars in 2023 and even 8-10 billion by the end of 2025. Hundreds of people are said to have been laid off at several locations in the USA; Intel doesn’t seem to have swung the big club yet.
In addition, the first construction projects are struggling: According to The Register, Intel canceled the construction of a $700 million research and development facility in Hillsboro, Oregon. According to Globes, in Haifa, Israel, instead of a $200 million development center, a parking lot is being built. In Europe, Intel is currently negotiating higher funding amounts for the Megafab in Magdeburg and a packaging plant in Italy.
Even more minuses
In the current first quarter of 2023, Intel’s loss is likely to increase further: The company expects sales of $10.5-11.5 billion, at least 38 percent less than at the beginning of 2022. Loss per share is expected to rise to 80 cents – the end In 2022 it was “only” 15 cents per share. The gross margin is expected to fall to 34.1 percent.
The numbers reflect predictions by analytics firm Bernstein Research that Intel is currently intentionally flooding the PC market with processors. As a result, the prices for their own CPUs are falling, but this is intended to keep their own market share high against AMD’s Ryzen processors. Intel’s stock fell 10 percent in after-hours trading.
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