The shares of Intel Corp. (INTC – Get Report) continue to retreat in pre-market trading on Thursday after announcing that switching from personal computer chips to more competitive markets in terms of logic, memory and data centers would weigh in on profit margins for the next three years.
Yesterday, Intel told analysts at a presentation in San Francisco that gross profit margins would decrease from 57% to 60% as it would move from its traditional 10-nanometer chips to smaller and larger offerings 7-nanometer dynamics that challenge competitors such as Advanced Micro Devices (AMD – Get a Report). The group's revenue, Intel said, will increase over the next three years to reach a range of $ 76 to $ 78 billion by 2021, due to the stagnation of the personal computer market and the growth of data center markets.
Intel's market share, however, is expected to be no more than 28 percent over the next three years, enabling it to achieve $ 85 billion in revenue in the fastest-growing segments of the global chip market , far from his almost total domination. once ordered on the global PC market.
"We believe in a broader market opportunity, we can play a bigger role in the success of our customers," Chief Executive Bob Swan told analysts. "We focus on improving execution, accelerating innovation and the evolution of our strong culture, while making disciplined investments in the pursuit of profitable growth. "
Intel's shares fell by 2.42% in pre-market trading on Thursday after a 2.5% drop last night on Wall Street, indicating a closing price of $ 48.01 each reduce the share price to around 2.3%.
Last month, Intel's shares were muddled after lowering their sales forecasts for the year and their earnings forecasts, even as first-quarter profits far exceeded Street's forecast.
"Our conversations with customers and partners in our PC and data-centric businesses over the last two months have clearly highlighted several trends: the decline in memory pricing has intensified," said Swan at the time. "The data center inventory and capacity digestion capacity described in January is more pronounced than expected, and the headwinds in China have increased, leading to a more conservative IT spending environment. "
Intel's transition to data-centric markets will, however, be fraught with difficult challenges from AMD, which has maintained its forecast of annual results last month as demand begins to return. in global chip markets as data centers and servers around the world renew their purchases. and the group is launching new 7-nanometer Ryzen, Radeon and EPYC processors.
"AMD has an impact on the industry and has just started to market its server products, it's likely to have a bigger impact than expected, and we've got an idea of Intel's margin structure – and probably that which Intel also thought, "said BMO Capital Markets analyst Ambrish Srivastava, who lowered his price target price to $ 50 per share, along with a" Market Perform "rating.
"Intel seems to react with a combination of powerful product launches and an aggressive pricing strategy to counter the AMD threat," he added.