(Bloomberg) — Intel Corp. shares rose in late trading after the chipmaker pledged to slash costs as it weathers a persistent slump in computer demand, causing third-quarter revenue to slide and leading to sales and profit forecasts that widely missed analysts’ estimates.
The company said it will take unspecified actions to reduce expenses, resulting in savings of $3 billion next year and swelling to much as $10 billion in cuts by the end of 2028. Like its peers, Intel is reining in spending on new plants and equipment. Fourth-quarter revenue will be about $14 billion to $15 billion, the company said in a statement late Thursday, compared with analyst estimates for $16.3 billion. Profit, excluding certain items, will be 20 cents a share, below the average prediction of 66 cents.
While an economic slowdown worldwide causes a continued decline in PC shipments, the company pledged to step up its already-aggressive cost-reduction efforts. Chief Executive Officer Pat Gelsinger had been banking on a rapid rebound in demand to help fund his ambitious plans to restore Intel to its former dominance in the $580 billion semiconductor industry. Three months ago, when he slashed billions off Intel’s annual sales projections, the executive promised investors that the third quarter would be the bottom for the market. That prediction now looks premature.
Earlier this month, Bloomberg News reported that Intel was planning a major reduction in headcount, likely numbering in the thousands, according to people with knowledge of the situation. Some divisions, including Intel’s sales and marketing group, could see cuts affecting about 20% of staff, according to the people. At the time, the company declined to comment.
Third-quarter net income was $1 billion, or 25 cents a share, down from $6.8 billion, or $1.67 a share, in the same period a year ago. Revenue dropped 20% to $15.3 billion. Before certain items, profit was 59 cents a share. Wall Street was looking for a profit of 33 cents on sales of $15.4 billion.
Intel shares initially fell, then rose about 4.5% in late trading following the announcement. Earlier, they closed at $26.27. The stock has plummeted 49% this year.
For the year, Intel reduced its revenue forecast to $63 billion to $64 billion, a decline of as much as 20% from 2021. Gross margin will narrow further than earlier anticipated to 47.5%, and earnings per share will be about $1.95.
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