Intel’s 4Q revenue miss and warnings about 2019 challenges could signal trouble ahead for tech industry and channel
Many technology and stock market watchers fully anticipated Intel would miss its fourth-quarter revenue target given that it had processor production and logistics shortcomings resulting in PC inventory shortages. What’s unexpected, though, is Intel’s lackluster and challenge-full forecast for 2019.
The Lowdown: Intel told investors it expects 2019 revenue to tally $71.5 billion. Investors and market watchers expected a forecast of $73 billion. While $1.5 billion doesn’t seem like a lot of money, the difference is a reflection of a number of global political and economic factors that have implications for the whole technology market and channel.
The Details: The challenges dampening Intel’s 2019 earnings include the ongoing trade war with China, uncertainty caused by the government shutdown and political instability in Washington, D.C., and
Ironically, the factor that contributed greatly to Intel’s fourth-quarter revenue miss — the shortfall on Core and Xeon processor inventories — is preventing the chipmaker’s forecast from being lower. Pent-up PC demand caused by the end of life of Microsoft’s Windows 7 will likely see Intel orders increase as processor inventories return to normal.
The Impact: For the past several years, Intel has repositioned itself as an enabler of mobile devices and IoT systems. If Intel anticipates lower-than-expected revenue for 2019, it could mean chip-dependent vendors and their partners also will see a slowdown in sales and revenue.
Background: For the fourth quarter of 2018, Intel posted revenue of $18.7 billion, an increase over the same period last year. However, total sales fell 2.8 percent and earnings fell 18 percent. The biggest culprit in the shift is an 11 percent decline in IoT sales. Sales in the PC and server units fell 4 percent and 1 percent, respectively, quarter over quarter. Another area of concern for Intel is sales of cloud systems, which saw a substantial decline as cloud providers maximize current capacity.
The Buzz: Despite the dour quarterly report and forecast, market analysts are relatively positive about Intel’s prospects for 2019. While demand is slowing in several technology segments, analysts say Intel is positioned better than its competitors and expectations are for sales and revenue to remain consistent.