Slowing data center revenue growth dims Intel's profit beat

Thu Jan 14, 2016 6:43pm EST
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By Anya George Tharakan and Arathy S Nair

(Reuters) - Intel Corp's (INTC.O: Quote) strong quarterly profit beat was overshadowed by concerns about slowing revenue growth in its highly profitable data center business, sending its shares down about 5.6 percent in after-market trading.

Chief Executive Brian Krzanich has looked to weather a slump in demand for chips used in personal computers by focusing on the business of supplying chips for high-end servers.

The world's largest chipmaker reported data center revenue of $4.31 billion in the fourth quarter ended Dec. 26, missing consensus estimate of $4.42 billion, according to Jefferies & Co.

Revenue in the business rose only 4 percent from the preceding quarter, compared with the 8 percent growth in the third quarter.

"I think companies are probably not upgrading their own data center as they know they are eventually going to convert to the cloud," said Kevin Cassidy, an analyst with Stifel Nicolaus and Co Inc.

"So they are going to put Band-Aids on their current servers and not upgrade them," Cassidy said.

In October, Intel had cut its 2015 revenue growth forecast for the data center business, as companies slash spending due to weak macroeconomic growth.

Excluding items, Intel forecast revenue of $14.1 billion, plus or minus $500 million for the first quarter ending March.   Continued...

Shadows are cast near the Intel logo at the 2015 Computex exhibition in Taipei, Taiwan, June 3, 2015.  REUTERS/Pichi Chuang