Intel Slips As Sales From Key Data Center Segment Fall, Margins Erode By Investing.com

By Dhirendra Tripathi

Investing.com – Intel (NASDAQ:INTC) shares were down 2% in premarket Friday on concerns the company may be losing market share to rivals in the business of supplying chips to Coud service providers.

Guidance that was an improvement from last time and a booming market for personal computers weren’t enough to offset concern at the drop in sales at its data center business.

Revenue from data centers that run-based services for companies and individuals dropped 20% on the year to $5.6 billion in the three months through March.

The unit is Intel’s most profitable business. As such, its diminished contribution eroded group profit margins by 540 basis points to 55.2%. One basis point is one hundredth of a percentage point.

Intel blamed it on “digestion” — customers pausing orders while they work through unused stockpiles of chips.

Intel expects 2021 adjusted revenue and profits of $72.5 billion and $4.60 per share, above analyst estimates of $72.32 billion and $4.58 per share, according to Refinitiv data.

One silver lining was the growth in the PC business where Intel still rules the consumer mindspace. Revenue in that segment grew 8% year-on-year to $10.6 billion as working-from-home led people to spend more on PCs, laptops and other accessories.

Analysts are concerned by the increasing competition in its various businesses with many rivals, American and Asian, now also planning to design their own chips. One of those potential rivals is Amazon (NASDAQ:AMZN) – the world’s biggest operator of datacenters – which at the end of last year unveiled a new chip for machine-learning processes.