Intel profit slides on costs related to layoffs

Sales were up in its data center division but down in client computing

Intel's profit dropped sharply last quarter due to heavy costs from a restructuring announced in April, though sales were up thanks to the company's powerful data center group.

Intel's profit for the quarter, ended July 2, was $1.3 billion, down from $2.7 billion a year earlier, the company announced Wednesday. Revenue climbed 3 percent to $13.5 billion.

Intel said in April that it would axe 12,000 jobs worldwide, or 11 percent of its staff, in a plan to cut costs and focus on growing businesses like server processors and chips for the internet of things.

In the process, it canceled the development of low-power Atom processors and more or less gave up on the smartphone and tablet markets -- areas where it's never done well.

As a result of those changes, Intel said Wednesday it recorded restructuring costs of $1.4 billion, which is what caused its profit last quarter to fall.

Results elsewhere were mixed. Revenue from Intel's data center group, which sells Xeon server chips, were up 5 percent from last year, to $4.0 billion.

However, revenue from its client computing group, which makes chips for PCs and mobile devices, was down 3 percent to $7.3 billion, Intel said.

Its IoT group produced sales of $572 million, up 2 percent year over year.

On an adjusted basis, factoring out the restructuring costs, Intel's earnings came in at $0.59 a share, better than the $0.53 analysts had been expecting. The revenue figure was roughly on target.

“Second-quarter revenue matched our outlook, and profitability was better than we expected," CEO Brian Krzanich said in a statement.

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James Niccolai

IDG News Service
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