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Intel Meets Expectations Despite Sagging PC Market

SAN FRANCISCO?Market leading semiconductor maker Intel Corp. Thursday (Jan. 14) reported record fourth quarter revenue in line with consensus analysts* expectations, but said sales for the full year 2015 declined slightly amid a fourth consecutive year of declining PC sales.

Intel executives said the company finished the year strongly, despite a weaker than expected macroeconomic environment and a weak PC market.

Intel (Santa Clara, Calif.) reported fourth quarter sales of $14.9 billion, on the higher side of the company*s estimate of $14.3 billion to $15.3 billion. The company reported a net income of $3.6 billion, or 74 cents per share. Both revenue and profit exceeded consensus analysts* expectations, according to Yahoo Finance.

For the full year 2015, Intel reported sales of $55.4 billion, a decline of about 1% compared with 2014. The company reported a net income of $11.4 billion for the year, down 2% compared with 2014.

Intel reported that revenue from its Client Computing Group was $32.2 billion for 2015, down 8% from 2014. The company*s Data Center Group posted revenue of $16 billion, up 11% from 2014. The Internet of Things group reported revenue of $2.3 billion, up 7% from 2014.

Revenue was down in the software and services operating segments in 2015, declining 2% from 2014, Intel said. The Non-Volatile Memory Solution Group increased revenue by 21% compared to 2014, Intel said.

§Our results over the last year leave me increasingly confident in our strategy,§ said Brian Krzanich, Intel*s CEO, in a conference call with analysts following the quarterly report. While our outlook for the first reflects some caution about overall demand, particularly in China, we continue to expect solid growth in the business in 2016.§

§Revenue for the year was nearly flat, despite a significant decline in PC demand,§ Krzanich said.

PC shipments declined in 2015 for the fourth straight year, according to market research firms. Despite the sagging PC sales, Intel*s revenue dipped only slightly as Intel made increased progress in its strategy to focus on the data center, the Internet of Things and memory.

Krzanich highlighted a series of milestones that Intel accomplished in 2015, including the acquisition of programmable logic maker Altera Corp. and the introduction of 3D XPoint memory technology, which he described as the industry*s first new memory technology in more than two decades. ?3D XPoint is a great example of our growth strategy at work, using our technology expertise to innovate and expand into profitably adjacent markets. We think it*s a game changing technology moving forward.§

Intel said it expects to spend between roughly $9.5 billion on capital expenditures in 2016, an increase from 2015.

?Our results demonstrate that we are transforming the company,§ said Stacy Smith, Intel*s chief financial officer. ?We are pivoting towards the cloud with a diversified portfolio of businesses.§

Smith noted that PCs remain Intel*s largest market, but said that other businesses now make up roughly 40% of Intel*s revenue. Despite the fourth consecutive year of declining PC sales, Smith said Intel continues to believe the worldwide PC market remains healthy with appropriate levels of inventory.

Smith announced that Intel is extending the depreciable life of its fabs from four years to five years as the ?economic useful life§ of the company*s manufacturing equipment lengthens.

Intel said it expects sales for the first quarter to be between $13.5 billion and $14.5 billion, an increase compared to $12.8 billion in the first quarter of 2015.

Krzanich said Intel sees 2016 shaping up much like 2015, with sales slower in emerging markets and in more mature markets. Business conditions are looking okay in the U.S. and Western Europe, he said, with sales in China and the rest of Asia slower.

?Dylan McGrath covers the semiconductor industry for EE Times.

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