Intel says data center business to grow less than expected

Tue Oct 13, 2015 6:49pm EDT
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By Anya George Tharakan and Arathy S Nair

(Reuters) - Intel Corp INTC.O cut revenue growth forecast for its highly profitable business of making chips for data centers as businesses reduce spending due to weak macroeconomic growth.

The world's biggest chipmaker's shares reversed course to trade down as much as 3.8 percent after the bell on Tuesday following the forecast.

Intel has been counting on the data center business to help offset declining demand for its chips used in personal computers, its biggest revenue generator.

The company agreed in June to acquire Altera Corp ALTR.O for $16.7 billion to expand its line-up of the higher-margin chips used in data centers.

Intel said on Tuesday it expected the data center business to grow in "low double digits" in 2015, compared with its earlier forecast of about 15 percent growth.

The business, the company's second biggest, had grown 19.2 percent in the first quarter, 9.7 percent in the second and 12 percent in the latest quarter.

The company was not "rethinking the long-term growth" of the business, Chief Executive Brian Krzanich said on a post-earnings conference call.

"It's a combination of two things — data center weakness and units — it looks like their units are still pretty weak, they are seeing upside from pricing," analyst Stacy Rasgon of Bernstein said.   Continued...

The sign hanging outside the Intel booth is seen at the International Consumer Electronics show (CES) in Las Vegas, Nevada January 6, 2015.   REUTERS/Rick Wilking