The new CEO of Intel rips the bandage



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Intel Corp.'s new chief executive, Bob Swan, on Thursday withdrew the secret aid to reveal some of the chip giant's problems. Investors must now hope that they can solve them and get on with a better path.

Intel

INTC, -1.89%

Thursday announced a profit and a turnover in the first quarter above some estimates, despite the marked decline in its important information processing center business. But this company and the price cuts in memory chips have led Swan – in its first earnings report since being appointed to the position of permanent general manager – to reduce Intel's revenue forecast for the rest of the year by 2 , $ 5 billion.

"The reduction in memory prices has intensified, data center inventory and capacity digestion described in January are more pronounced than expected, and the headwinds of China have increased, which has led to a more cautious IT spending environment, "said Swan about the company. with analysts, followed by a statement of confidence that demand will improve in the second half, based on customer conversations.

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Intel's shares fell about 7% after trading hours. So far this year, the stock has risen by around 25%, while the S & P 500 index

SPX, -0.04%

is up about 17% so far. This clearly announced decline follows Intel's big announcement last week that Intel would leave the 5G modem market, its main customer for its communication chips being Apple Inc.

AAPL, -0.91%

. Swan told the Wall Street Journal that Intel's decision was a direct result of the surprise settlement between Apple and Qualcomm Inc.

QCOM, -2.03%

, while a jury trial over their patent and royalty dispute began.

Swan continued Thursday to reduce Intel's ambitions, pointing out that Intel was trying to focus more on existing businesses that did not fit with its core, such as the closure of Safran, a platform of 39 Cognitive Computing acquired in 2015 by Swan. cancel the bad actions of the previous leaders, without naming names.

"Over the past two years, this priority has resulted in the disappearance of McAfee and the portable equipment business, the closure of Safran and the divestiture of Wind River. And our spending as a percentage of revenue has gone from about 36% to about 30% this quarter, "he said. "By doing fewer things, we will do the things that matter most."

The latest CEOs before Swan have indeed taken many steps to bring Intel into new directions – spending billions of dollars in mobile chip communications and acquisitions, and billions of dollars in seemingly inappropriate software investments – to diversify beyond- beyond its core business. But until now, he seems to have done his best with the acquisition of Mobileye, which develops vision-based advanced driving systems, and has recorded a record revenue growth of 38%.

See also: Chip records record six sessions, while Xilinx drops after wins

It is probably a good thing for Intel to drop the ambitions that cost too much without offering a return, but it remains for him to find a way to succeed with the activities he will keep. Another problem that has affected the company is that its PC business has been hampered by the fact that it was not able to meet all the demand for its chips because it had trouble making the transition to a new manufacturing node. "We are committed to never curbing the growth of our customers," said Swan. "We have increased our ability to improve our position in the second half, although the product line will remain a challenge in the third quarter, as our teams will align available supply with customer demand."

In the first quarter, Intel said its data-centric revenue was $ 7.5 billion, down 5 percent, while its data center group ended the quarter at $ 4.9 billion. dollars, down 6%. Intel said it expects its data-centric business – its most important growth activity – to continue to decline to less than 10 percent.

Investors will monitor to see if Swan's forecasts for a better second half, especially for the data center group, will be verified. Swan said that the first of a series of new chips based on its long-delayed production process of long-delayed generation should be integrated into consumer products "on the shelf for the holiday season", with server chips to follow in 2020.

The prices of memory and the persistent slowdown in data center construction are clouds that will continue to weigh on Intel and other chip manufacturers for months. At least Swan got rid of a few headaches while he was treating them.

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