Intel's two biggest business units were hit hard during the last three months of 2022:
Poor sales of PC and server chips caused Intel's revenue for the fourth quarter of 2022 to dive 32% year on year, leading to a $664 million net loss for the quarter.
The outlook for Q1 of 2023 is not an optimistic one either, with CEO Pat Gelsinger telling analysts in a call, "Our results and our Q1 guidance are below what we expect of ourselves."
However, he said that Intel is "working diligently to address the challenges brought on by current demand trends" and the company continues to have confidence in its long-term plans and trajectory.
Intel took the biggest hits across its two largest business units, with the chip maker's Client Computing Group (CCG) and Data Center and AI group (DCAI) posting year-on-year revenue drops of 36% and 33%, respectively.
The CCG business unit, which makes desktop and laptop CPUs, posted $6.6 billion in revenue, down from $10.3 billion a year earlier. This freefall can largely be attributed to a significant and ongoing slump in the PC market. A report from IDC found that sales of PCs had fallen by 28.1% during the same period, findings that were echoed by research firms Canalys and Gartner, whose estimates showed a 29% and 28.5% drop, respectively. Gartner reported that this was the steepest decline since it started tracking the PC market in the mid-1990s.
This trend is likely to carry on into the first quarter of 2023, Gelsinger said on the call with analysts.
[...] Intel's DCAI unit, which makes server chips, memory and field-programmable gate arrays (used to accelerate specific functions such as cryptography or signal processing), saw its revenue for the quarter fall to $4.3 billion from $6.4 billion a year earlier. Intel CFO David Zinsner told analysts this decline was largely driven by lower demand and cheaper competition.
Newer chip designs could save the company, though. Intel is already seeing significant customer demand for its newly launched 4th-generation Xeon scalable processors, Sapphire Rapids, Gelsinger said, adding that he expected that to ramp up further throughout the year.
Intel also plans to roll out its 5th-generation Xeon server processors, Emerald Rapids, during 2023 and follow that up in 2024 with the Granite Rapids and Sierra Forest server chips, its first to feature a mix of high-performance and high-efficiency cores.
Intel's Network and Edge unit, which makes chips for networking products, brought in $2.06 billion in revenue for the quarter, down 1% year on year. By comparison, Intel's Accelerated Computing Systems and Graphics (AXG) division reported a 1% increase in revenue, to $247 million.
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Intel Cuts Pay to Cut Costs
New intel from Intel says that some employees at the company will be taking a pay cut—even the CEO.
Layoffs are ravaging the tech industry due to the wildly abstract threat posed by "the economy," but Intel is taking a different approach. Instead of laying off thousands of its workforce, the company has seemingly decided to make sweeping pay cuts from 5% to 25%.
Dylan Patel first reported on the pay cuts in his newsletter SemiAnalysis yesterday. Patel says that multiple employees have relayed to him that Intel is looking to cut costs to meet its quarterly dividend, and some employees are the ones footing the bill. According to a source within Intel, employees below and including Principal Engineer will be receiving a 5% pay cut with the exception of hourly and junior-level employees, who will not be affected by the cuts. Glassdoor and a Google Jobs posting reveal that Principal Engineers can make upwards of $170,000 at a minimum.
Likewise, VPs are taking a 10% hit, the executive leadership team is taking a 15% cut, and CEO Pat Geslinger will cut his salary by 25%. In addition to the pay cuts, there will be no quarterly or annual bonuses for now, merit-based raises are paused, and 401k match is is being reduced from 5% to 2.5%. Intel is still reportedly planning to lay off several hundred employees in California according to local media, which is still drastically less than other tech companies.
And it isn't only pay that is being cut...
(Score: 0, Troll) by Anonymous Coward on Monday January 30 2023, @05:58PM
Sounds like some workers are going to get bounced around again. Somebody's got to pay the price, right?
(Score: 4, Interesting) by Snotnose on Monday January 30 2023, @06:00PM (5 children)
AMD outperforms them for less money and power, they have nothing to compete in the ARM market, their process is 1-2 generations behind the competition.
Looks like they didn't do any stock buybacks in 2022, but I'm seeing $2.4 billion for 2021. That would have bought a lot of R&D, albeit at the expense of CXX suite bonuses.
When the dust settled America realized it was saved by a porn star.
(Score: 2) by crafoo on Monday January 30 2023, @06:10PM (4 children)
aren't you going to complain about dividends too?
(Score: 5, Interesting) by Snotnose on Monday January 30 2023, @06:59PM
I don't have a problem with dividends, as long as the company can afford them.
I do have a problem with stock buybacks. Their only purpose is to let the Cxx folks manipulate the stock price short term to increase their bonuses. Instead of giving employees raises or spend on R&D, both of which are good in the long term.
IMHO stock buybacks should be illegal.
When the dust settled America realized it was saved by a porn star.
(Score: 3, Informative) by DannyB on Monday January 30 2023, @07:13PM
You cannot have fun on the weak days, but you can on the weakened.
The lower I set my standards the more accomplishments I have.
(Score: 4, Insightful) by richtopia on Tuesday January 31 2023, @12:10AM (1 child)
I would argue that all companies need dividends. It enables you to have forecastable income from your investment. With modern growth stocks, everyone attempts to buy then sell the stock at a higher price to some poor sucker. Similar to a Ponzi scheme.
If you didn't have dividends or buybacks, why would anyone own stocks? Maybe you could own enough stocks to influence the company, but as a regular pleb with a retirement account, I need some return on investment.
As a final comment: in college I was taught how to evaluate stocks that pay a dividend. Effectively, you treat it as a payment into perpetuity, and based on the time value of money and the size of the dividend you can calculate the equivalent value in today's dollars. The professor didn't even try to cover stocks without dividends - muttering something about graduate level and black magic.
(Score: 1) by shrewdsheep on Tuesday January 31 2023, @12:58PM
Well, buybacks are just a different form of shareholder compensation. For buybacks, you indeed have to sell shares to get your "dividend" but year-over-year you see similar gains for both types (assuming re-investment of dividends). For some individuals, income tax might be converted to capital-gains tax which might be relevant for investors when there is a difference between the two (usually capital-gains is quite a bit lower (15-30%) as compared to income tax (25-50%)).
Conceptually, I do not see a big difference but I agree that buybacks make the company less accountable as buybacks can be "skipped" thereby masking bad performance. Dividends can be compared much better year-over-year.
(Score: 5, Funny) by DannyB on Monday January 30 2023, @07:14PM
Maybe this is some cosmic payback for introducing those segment registers so many decades ago.
The lower I set my standards the more accomplishments I have.
(Score: 2, Insightful) by zzarko on Monday January 30 2023, @08:24PM
There is an episode of South Park about music piracy. There is a scene where they show the kids Lars at his home by the pool and he's crying because he couldn’t afford to have a gold-plated shark-tank bar installed because people were downloading his music illegally and all the kids felt awful for him.
Kind of looks like feeling sorry for Intel not earning 20 billion but 10-15...
C64 BASIC: 1 a=rnd(-52028):fori=1to8:a=rnd(1):next:fori=1to5:?chr$(rnd(1)*26+65);:next
(Score: 2) by turgid on Monday January 30 2023, @09:03PM
It's going to take over the world, and intel will rule the waves.
I refuse to engage in a battle of wits with an unarmed opponent [wikipedia.org].
(Score: 2, Interesting) by Anonymous Coward on Tuesday January 31 2023, @02:02AM
Is it a decline because 2021 was an exceptionally great year for them or they did some exceptional spending (bought/invested in some companies) or they actually lost money in 2022?
Seems like exceptionally more new computers were bought during the pandemic (wfh etc): https://www.macrotrends.net/stocks/charts/INTC/intel/revenue [macrotrends.net]
https://www.intc.com/news-events/press-releases/detail/1522/intel-reports-fourth-quarter-and-full-year-2021-financial [intc.com]
And now surprise-surprise after that people didn't buy as many new computers. "OMG slump in the PC market, PCs are going out of fashion"
I don't get a new PC every year. And I doubt most employees of most companies get a new computer every year (that would be stupid).
So seems more like people trying to sell a story from a non-story.