Intel Q1 Profit Up, To Cut 12,000 Jobs

(RTTNews) - Intel Corp. (INTC), the world's biggest chipmaker, Tuesday reported an increase in profit for the first quarter, as revenues increased. Intel announced plans to cut its global workforce by 11 percent as it restructures itself.

Intel expects itself to transition away from being a computer-based company to a company that "powers the cloud and billions of connected computing devices."

Intel sees data center and Internet of Things (IoT) businesses as its primary growth engines, which contributed up to 40 percent of revenues and majority of operating profit, helping it offset the decline in the PC market segment.

Intel generates a chunk of its revenues by selling chips for computers, however, the company has been negatively impacted by slowing demand for PCs and notebooks as tablets and smartphones continue to gain popularity. The company has also invested heavily to diversify its portfolio to include chips for smartphones and tablets, however, its chips are not so popular among smartphone and tablet makers.

The company is now striving to transform its business portfolio, thereby growing its Data Center, Internet of Things or IoT, and NAND business.

"These actions drive long-term change to further establish Intel as the leader for the smart, connected world," said CEO Brian Krzanich. "I am confident that we'll emerge as a more productive company with broader reach and sharper execution."

Intel said it will notify the job cuts to affected employees over the next 60 days with some actions spanning in to 2017. Intel expects the program to deliver $750 million in savings this year and annual run rate savings of $1.4 billion by mid-2017. The company will record a one-time charge of about $1.2 billion in the second quarter.

Santa Clara, California-based Intel's first-quarter profit rose to $2.05 billion or $0.42 per share from $1.99 billion or $0.41 per share last year. On average, 29 analysts polled by Thomson Reuters estimated earnings of $0.47 per share for the quarter.

Client Computing Group revenues rose 2 percent to $7.5 billion, with volumes down 15 percent while average selling prices increased 19 percent. This segment caters to desktops, notebooks, tablets, smartphones, wireless and wired connectivity products as well as mobile communication components.

Data center segment revenues grew 9 percent to $4.0 billion as volumes increased 13 percent while average prices dropped 3 percent. Sales in the Internet of Things unit jumped 22 percent to $651 million.

Looking forward to the second quarter, Intel expects revenues of $13.5 billion, plus or minus $500 million. For the full year, Intel now expects revenues to be up mid-single digits, down from prior forecast of mid-to-high single digits.

INTC closed Tuesday's trading at $31.60, down $0.05 or 0.16%, on the Nasdaq. The stock, further, dropped $0.66 or 2.09% in the after-hours trade.