Intel CEO says higher-than-expected prices helped drive Q1 profit growth

 Intel CEO says higher than expected prices helped drive Q1 profit growth

Intel CEO Brian Krzanich said during an earnings conference call that higher average selling prices for the first quarter drove the company’s financial results.

Earlier today, Intel reported earnings that beat analysts’ earnings for the first quarter ended March 31. Revenues for the quarter were $ 14.8 billion and non-GAAP earnings were $ 3.2 billion, or 66 cents a share.

“The first quarter marked a great start to the year,” said Krzanich. “Q1 was up 7 percent over the same period last year, a record quarter.”

Krzanich said that Intel is focused on growing 2017 revenue for the data center, Internet of Things, the core PC business, memory, and field programmable gate arrays. But there are still downward pressures on the PC market. Krzanich said the company expects a mid-single-digit-percentage decline in unit total available market for the PC in 2017.

The earnings come at an interesting time for the world’s largest chip maker, which faces competition from Qualcomm in mobile, artificial intelligence from Nvidia, and core PC microprocessors from Advanced Micro Devices, which just launched its speedy Ryzen desktop processors.

Krzanich said Intel has a responsibility to be “more focused as a company.” That was one reason why Intel spun out McAfee, its security division.

For the first quarter of 2017, Intel projected revenue of $ 14.3 billion to $ 15.3 billion, an improvement from $ 13.7 billion in the year-ago quarter. Analysts estimated Intel would report revenue of $ 14.8 billion, directly in the middle of its forecast range, and analysts expected adjusted earnings would come in at 65 cents a share.

“Intel had a record quarter and it was driven by acquired growth with Altera and organic growth in flash memory,” said Patrick Moorhead, analyst at Moor Insights & Strategy. “Some are concerned with data center group margins, but as Intel explained at their recent analyst day, that division is taking some of the early 10nm cost hit.”

The company also generated approximately $ 3.9 billion in cash from operations, paid dividends of $ 1.2 billion, and used $ 1.2 billion to repurchase 35 million shares of stock.

Intel’s stock is down 3.2 percent in after-hours trading, at about $ 36.25 a share. That might have to do with the second-quarter outlook, which is expected to be about $ 14.4 billion. Intel is targeted adjusted earnings per share of 68 cents, plus or minus 5 cents a share, for Q2.

Intel recently bet big on Mobileye, spending $ 15 billion to by the company with self-driving car technology. Intel now has an AI division that pools together all of its expertise in that segment.

The competition from AMD will be closely watched, as AMD is rolling out its Ryzen processors throughout the year, based on its advanced Zen processor architecture. Those processors are 52 percent faster on a per clock basis than the previous generation, and it’s not a simple matter for Intel to respond.

Intel, however, argues that its manufacturing technology remains a couple of years ahead of its rivals, giving Intel an advantage in production costs.

Intel’s Client Computing Group had Q1 revenue of $ 8.0 billion, up 6 percent. Data Center Group revenue was $ 4.2 billion, up 6 percent. Internet of Things Group revenue was $ 721 million, up 11 percent. And the Non-Volatile Memory Solutions Group revenue was $ 866 million, up 55 percent. That was record revenue for the memory group, Krzanich said.

Meanwhile, the Intel Security Group (which was spun out during the quarter) posted revenue of $ 534 million, down 1 percent. The Programmable Solutions Group revenue was $ 425 million, up 18 percent.

Overall, Intel’s numbers still look massive. The company is targeted $ 60 billion in revenue in 2017, $ 12 billion in capital spending, and $ 20.5 billion in research and development. Intel closed the quarter with 106,900 employees.

Intel will deliver a next-generation Skylake processor in the summer for data center solutions, Krzanich said.

“We’re off to a good start, and executing well against our priorities,” Krzanich said.

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