Intel Profit Down On Restructuring Charges

(RTTNews) - Intel Corp. (INTC), the world's biggest chipmaker, Wednesday reported a drop in profit for the second quarter, hurt largely by restructuring charges related to cost cutting efforts.

Santa Clara, California-based Intel's second-quarter profit dropped to $1.33 billion or $0.27 per share from $2.71 billion or $0.55 per share last year.

In April, Intel announced it will be laying off about 12,000 jobs or about 11% of its global workforce as part of its restructuring. Intel said it recorded $1.41 billion worth of restructuring and other charges during the quarter.

Adjusted earnings for the quarter were $0.59 per share. On average, 24 analysts polled by Thomson Reuters estimated earnings of $0.53 per share for the quarter.

Intel's revenues for the quarter rose to $13.53 billion from $13.20 billion last year. Analysts had a consensus revenue estimate of $13.54 billion for the quarter.

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

Meanwhile, Intel now focuses 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 mask negative effects from the PC segment.

Intel CEO Brian Krzanich said, "In addition, our restructuring initiative to accelerate Intel's transformation is solidly on-track. We're gaining momentum heading into the second half. While we remain cautious on the PC market, we're forecasting growth in 2016 built on strength in data center, the Internet of Things and programmable solutions."

Client computing group revenues were down 3 percent to $7.3 billion, while data center segment revenues grew 5 percent to $4.0 billion and Internet of Things unit rose 2 percent to $572 million.

Looking forward to the third quarter, Intel expects revenues of $14.9 billion, plus or minus $500 million. Analysts currently estimate revenues of $14.63 billion.

INTC closed Wednesday's trading at $35.69, up $0.54 or 1.54%, on the Nasdaq. The stock, however, slipped $0.99 or 2.77% in the after-hours trade.