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Margaret Moran
Articles (418) 

Intel Shares Rise on Strong 4th-Quarter Results

The company sets guidance high on confidence in its transformation steps

January 21, 2021 | About:

After the markets closed on Jan. 21, American multinational technology company Intel Corp. (NASDAQ:INTC) released its earnings results for the fourth quarter and full year of 2020.

Following the news of a strong end to the year and optimistic guidance for 2021, shares of Intel were up in after-market trading.

Overview of results

Intel reported revenue of $20 billion for the quarter, down from $20.2 billion in the same quarter of last year, while GAAP earnings per share were $1.42 (down 10% year over year) and non-GAAP earnings per share came in at $1.52 (flat compared to last year). Wall Street had been expecting revenue of $17.4 billion and non-GAAP earnings of $1.10.

The operating margin decreased to 29.5% compared to 33.6% in the prior-year quarter, while free cash flow was up 25% to $21.1 billion.

By segment, Data Center Group revenue fell 16% to $6.1 billion, NSG revenue was down 1% to $1.2 billion and PSG revenue fell 16% to $422 million. PC-centric revenue increased 9% to $10.9 billion, while Internet of Things revenue was mixed as Mobileye increased 39% to $333 million and the rest of the segment saw revenue decline 16% to $777 million.

For the full year, revenue was $77.9, up 8% compared to 2019, while earnings per share increased 5% to $4.94 on a GAAP basis and 9% to $5.30 on a non-GAAP basis. The company generated a new record of $35.4 billion in cash from operations during the year while paying $5.6 billion in dividends and using $14.2 billion for share repurchases.

"We significantly exceeded our expectations for the quarter, capping off our fifth consecutive record year," CEO Bob Swan said. "Demand for the computing performance Intel delivers remains very strong and our focus on growth opportunities is paying off."

Looking forward

Going into 2021, the company expects first-quarter revenue to fall around the $18.6 billion mark, with earnings per share of approximately $1.03 and an operating margin of 27%.

Intel plans to sell its flash-memory, or NAND, business to Korean chipmaker SK Hynix Inc. (XKRX:000660) by the end of 2021. Hynix currently has 10% of the NAND market, while Intel has 9%. The $9 billion deal represents a move to get rid of the hot potato of a declining business as more data is moved to the cloud, though analysts are divided over whether this is a wise move or whether Intel's divestiture and outsourcing strategies are part of what is losing the company its edge over competitors.

Activist investor Daniel Loeb (Trades, Portfolio) also made his interest in the company known during the quarter, issuing a letter encouraging Intel to explore strategic alternatives.

"The loss of manufacturing leadership and other missteps have allowed several semiconductor competitors to leverage TSMC's and Samsung's process technology prowess and gain significant market share at Intel's expense," Loeb wrote in the letter.

Intel followed up by issuing the following statement: "Intel Corporation welcomes input from all investors regarding enhanced shareholder value. In that spirit, we look forward to engaging with Third Point LLC on their ideas towards that goal."

Another major change coming to the company is that VMware (VMW) CEO Pat Gelsinger is set to take the reigns as Intel's new CEO after Swan steps down on Feb. 15. The announcement for this came shortly after Loeb's letter was issued. Gelsinger is expected to bring strong technical expertise to the position as he previously worked at Intel, eventually becoming its first chief technology officer.

Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Investors should always conduct their own careful research and/or consult registered investment advisors before taking action in the stock market.

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