Intel Hits the Reset Button
NEW YORK (TheStreet) -- For Intel
Intel's second-quarter earnings report was largely in line, as the world's largest chipmaker reported earnings of 39 cents a share on $12.81 billion in revenue. Gross margins came in at 58%, up 2% sequentially, but down 5% year-over-year. Analysts surveyed by Thomson Reuters expected Intel to earn 39 cents a share on $12.896 billion in revenue.
However, for the third-quarter, new CEO Brian Krzanich reset market expectations. Intel said it expects revenue of $13.5 billion, plus or minus $500 million. Gross margins will be approximately 61%, plus or minus a couple of percentage points.
Deutsche Bank analyst Ross Seymore notes that Intel's new leadership team is resetting the company's growth trajectory, but also is also showing spending restraint, something Wall Street may like down the line. The company also lowered its full-year capital spending plan. It now expects to spend $11 billion, plus or minus $500 million, down from a previous view of $12 billion.
Krzanich and CFO Stacy Smith made it a point in both the earnings release and on the conference call to talk about how Intel is adapting to new markets, particularly mobile and the foundry business. Krzanich said the foundry business, where Intel builds chips for other companies, is "moving from crawl space to walk space." For shareholders, this transition requires patience, with a 12 to 18-month lag between when a customer is signed and revenue flowing from the foundry.