While the company's fourth-quarter per-share earnings and gross margins topped analysts' expectations, Intel's financial results across the board still came in below the year-earlier numbers. And the Santa Clara, Calif., company, which provides processors for the majority of the world's PCs and servers, also projected first-quarter and 2013 results that were a little weaker than anticipated.
As if that wasn't enough, Intel also disclosed it's going to spend a pretty hefty chunk of change -- $13 billion, which is up $2 billion from 2012 -- to construct new buildings and buy new equipment. Chief Financial Officer Stacy Smith said in his quarterly commentary that the increase is primarily owing to the start of construction on a development factory for the newest size of wafers, 450mm.
"The slightly weak outlook is not a surprise, and gross margin a little higher than people thought is a positive thing," Bernstein analyst Stacy Rasgon said. "But capex [capital expenditures] is going to be concerning. It seems awfully high."
All of the factors caused Intel's shares to slide 3.7 percent, to $21.85, in after-hours trading. The company's earnings release leaked via e-mail about five minutes before market close, giving a slight boost to the stock, which closed up 2.6 percent at $22.68. Shares also initially gained in after-hours trading before turning lower.
It really shouldn't come as a big surprise that PCs are still weak. Computer vendors had been counting on Microsoft's newest Windows release to help boost demand, but the operating system so far has failed to lift the market. Research firms Gartner and IDC said earlier this month that computer sales in the fourth quarter were worse than anticipated, down about 5 percent to 6 percent.
Intel not only is dealing with soft demand in its core market but also has to face some uncertainty about its future leadership. Chief Executive Paul Otellini shocked the market last November when he said he would retire in May, and Intel has been in the process of selecting his replacement. The company has said it would consider both external and internal candidates, though the odds are high that the new CEO will come from within Intel.
Intel's core PC business saw revenue slide 6 percent from the previous year to $8.5 billion.
For the fourth quarter, the company reported net income of $2.47 billion, or 48 cents a share, down from $3.36 billion, or 64 cents a share in the year-ago period. Excluding certain items, per-share earnings totaled 51 cents, down from 67 cents. Analysts polled by Thomson Reuters had expected earnings of 45 cents.
Revenue slid 3 percent to $13.48 billion. Intel in October projected fourth-quarter revenue of $13.6 billion, plus or minus $500 million. That was below analysts' expectations at the time for $13.7 billion, according to Thomson Reuters. As of today, analysts were anticipating revenue of $13.5 billion.
Gross margin slid to 58 percent from 64.5 percent, slightly better than the 57.3 percent expected by analysts. For some time, Intel's margins hovered around 65 percent. However, there have been worries of late that margins will never reach that level again as it becomes more costly to build new factories and move to more advanced processor technology (hence the high capital spending plans).
As for its outlook going forward, Intel said it expects revenue to rise in the low single-digits on a percentage basis in 2013. Gross margin should be 60 percent, plus or minus a few percentage points, and capital spending should total $13 billion, plus or minus $500 million.
Analysts expected revenue of $54.3 billion this year, which is up 1.95 percent from 2012's level of $53.3 billion. They also projected margins of 59.1 percent.
For the first quarter, Intel expects revenue of $12.7 billion, plus or minus $500 million. Analysts were expecting $12.91 billion. For the full year, Intel said it expects revenue to rise in the low single-digits on a percentage basis. Analysts projected 2013 revenue of $53.34 billion, which is up 1.95 percent from 2012's level of $53.3 billion.