Intel on Wednesday reported second-quarter earnings that fell from a year ago but were better than expected as the semiconductor giant continued to see benefits from its new emphasis on products for data centers and the internet of things.
Declines in the market for personal computers, which for years were Intel's main growth engine, have led Chief Executive Brian Krzanich to push Intel into the market for more backroom, business-related computing technologies.
Intel said that for the quarter ended July 2, it earned $1.3 billion, or 27 cents a share, less than half the $2.7 billion, or 55 cents a share, it earned in the same period a year ago. However, revenue rose to $13.5 billion from last year's second-quarter sales of $13.2 billion.
Excluding one-time items, Intel earned 59 cents a share, which topped the estimates of analysts surveyed by Thomson Reuters, who were expecting Intel to earn 53 cents a share on revenue of $13.5 billion.
"We remain cautious about the PC segment," Krzanich said on a conference call to discuss Intel's results. "We expect the business outside (of PCs) to have double-digit growth (through the rest of the year)."
During its second quarter, Intel's data center group recorded revenue of $4 billion, a 5 percent increase over a year ago, while sales of chips from the company's internet of things group rose 2 percent annually to $572 million. Security technology products also put in a good performance, with revenue of $537 million, a 10 percent gain over last year's second quarter.
Intel's client computing group, which includes PCs, remained the company's top revenue generator, with sales of $7.3 billion, but that total was down by 3 percent from a year ago.
Another area of strength for Intel was its programmable solutions group, which Intel formed in the first quarter of the year after it completed its acquisition of Altera. The division accounted for $465 million in sales in the second quarter.
Krzanich said Intel was "solidly on track" with its recent restructuring efforts that are meant to improve the company's position in the data center and other markets. In April, Intel said it would cut 12,000 jobs, or about 11 percent of its workforce as part of the restructuring.
Intel shares were off by 3 percent in after-hours trading. The stock rose 1.5 percent to close the regular market session at $35.69 a share.
Rob Enderle, president of tech research firm the Enderle Group, said investors remain wary about the direction Krzanich has Intel headed.
"Krzanich is attempting to blow up the culture in an effort to make it far more agile, and that is clearly making investors nervous," Enderle said. "Still, from a standpoint of financial performance given the layoff costs, these results aren't bad at all."
For its third quarter, Intel expects to report revenue of $14.4 billion to $15.4 billion. Analysts had forecast the company's sales to come in at $14.6 billion for the quarter that ends in September.
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