Intel shares jumped to the highest level in almost 14 years after the world’s largest chipmaker gave an optimistic forecast for 2015 sales as it pushes into markets outside personal computers.
Revenue next year will increase by a percentage in the “mid-single digits,” and gross margin will be about 62 percent, the Santa Clara-based company said in a statement. Analysts were projecting sales growth of 3 percent. Intel, which held its investor meeting Thursday, also said it will raise its annual dividend by 6.7 percent to 96 cents a share.
Under Chief Executive Officer Brian Krzanich, Intel has benefited from steady corporate PC demand as well as growing sales of chips for servers — machines that crunch corporate data and supply information to the Internet — where it dominates with 98 percent of the market. That means it’s filling almost all the orders for server processors from cloud data- center operators such as Amazon.com and Google.
“After two years of decline, we’re growing again,” Chief Financial Officer Stacy Smith said at Thursday meeting at the company’s headquarters. “2014 is turning out to be a better year than we thought.”
Analysts on average estimate revenue this year will rise 6 percent, after sales slipped the past two years. For 2015, analysts had projected Intel would post sales of $57.8 billion for 2015, a gain of 3 percent, with gross margin of 62.5 percent, according to data compiled by Bloomberg. Gross margin, the percentage of sales remaining after deducting the costs of production, is the only measure of profit that Intel forecasts.
Intel shares rose 4.7 percent to $35.95, the highest closing price since February 2001, in New York. The stock has gained 39 percent this year.
While corporate replacement of aging office equipment has helped slow the decline of the PC market, unit sales are still on course to shrink for a third consecutive year, as consumers increasingly turn to smartphones and away from laptops, according to IDC.
The boost that corporate PC purchases contributed to processor demand in 2014 will tail off next year, Smith said Thursday. The company expects unit sales next year to be unchanged from 2014 and revenue in the PC-chip division to decline slightly, he said.
The head of the company’s PC-processor division, Kirk Skaugen, said he disagrees with that assessment and thinks that the market can grow in 2015 as consumers are attracted to new portable-computer designs.
“We do believe we’ve arrested some of that erosion that was going to 10-inch tablets,” Skaugen said.
Intel is also still struggling to replicate its strength in computer chips in the market for phones and other mobile devices. While the company today said it’s on course to meet its goal of shipping more than 40 million tablet processors this year, that target has come at a cost.
The chipmaker has been paying device makers subsidies to use parts that are too expensive for mainstream tablets. Those payments resulted in an operating loss in the mobile unit of $1.04 billion in the third quarter, following a loss of more than a billion dollars in the previous period.
Revenue in the mobile and communications group dropped to $1 million in the third quarter from $353 million a year earlier.
“It’s a very large loss,” Smith said. “It’s not something that makes us proud.”
Intel has taken market share from competitors using ARM Holdings technology in tablets, he said. In addition, lower- end laptops have taken market share from ARM-based tablets, based on the performance benefits of Intel’s chips, Smith said.
Worldwide PC shipments fell 1.7 percent in the third quarter, IDC said last month, a smaller decline than the 4.1 percent drop that the market researcher had predicted. Sales in the U.S. climbed 4.3 percent as companies continued to replace machines that were running on Microsoft’s Windows XP software, an operating system that the company no longer supports.
