Intel Corp. Chief Executive Officer Pat Gelsinger said the worst of a sales slump has passed and struck a bullish tone about the chip maker's prospects for the rest of the year and beyond. Investors are waiting to see proof that the company can regain dominance in the semiconductor industry.
The key to winning them over will be Gelsinger's ability to lure back some of the largest companies in technology, cloud giants like Amazon, and Google's purchases of server chips for data centers have been the main engine of Intel's profit and growth.
While demand for Intel's server processors picked up in the second quarter from the first, investors fretted that the division's 9% year-over-year decline in sales may signal a long road to recovery. Intel's Xeon chips, some of which sell for as much as a compact car, compete for business with souped-up offerings from Advanced Micro Devices Inc. and increasingly from the internal chip-design efforts of major cloud customers, who are keen to supply their own parts.
Sales to those cloud providers like Amazon's AWS and Google dropped 20% in the recent period. Gelsinger projected double-digit percentage sales increases for the data center business as a whole in the second half of the year and said he expects pricing and market share to remain stable. Still, prices dropped in the June quarter because of competitive pressure, and the unit won't match its revenue total for 2019 this year, he said.
The performance of the data center unit is a bellwether for the progress of Gelsinger's drive to restore Intel to the leadership of the industry. Gelsinger has pledged to restore Intel's technological leadership in the semiconductor industry, following a spate of production issues that delayed some of its most advanced chips. He has outlined plans to spend heavily to expand its reach in manufacturing to pose a more robust challenge to Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co.
The company said sales in the current period would be about $18.2 billion, compared with an average analyst projection of $18.3 billion. Shares fell about 2.8% in extended trading following the announcement. They had earlier closed at $55.96 in New York, leaving them up 12% this year.
Gelsinger offered a far more upbeat outlook for personal computer sales, arguing that many households are now home to multiple devices and that many older machines are due for replacement. He projected the PC market would grow again next year.
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