Management gave several reasons for the particular tough upcoming quarter, but one theme that came through was that its customers simply have too many chips and need to work through inventory, so they won’t be buying many new chips. Both the PC and server markets possess slowed after a two-year boom spurred by remote work plus school during the pandemic. Now, PC product sales have slowed and the computer makers have too many potato chips. Gelsinger will be predicting PERSONAL COMPUTER sales during the year to be around 270 million to 295 million — a far cry from your “million units-a-day” he predicted in 2021. Right now, Intel’s clients have to “digest” the chips they already have, or “correct” their inventories, and the company doesn’t know when this dynamic will shift back. “While we know this powerful will reverse, predicting when is difficult, ” Gelsinger told analysts.
Underpinning all of this is that Intel’s gross margin continues to drop, hurting the particular company’s profitability. One issue is “factory load, ” or how efficiently factories run around the clock. Intel said that its gross margin would be hit by 400 basis points, or even 4 percentage points, because of factories running under load because of soft demand. Ultimately, Intel forecasts the 34. 1% gross margin in the current one fourth — a far weep through the 51% to 53% goal the company set at last year’s investor day. The company says it’s working on it, as well as the margin could get back in order to Intel’s goal “in the particular medium-term” if demand recovers. “We have got a number of initiatives under way to improve gross margins and we’re well under way. When you look at the $3 billion reduction [in costs] that we talked about for 2023, 1 billion dollars of that is within cost of sales and we are going to well on our way to getting that billion dollars, ” Gelsinger said.
The bright spot with regard to Intel: Mobileye, its self-driving subsidiary that will went public throughout the Dec quarter. According to CNBC, the company reported earnings per share of 27 cents and revenue growth of 59%, to $656 million. “It also forecast strong 2023 revenue associated with between $2. 19 billion and $2. 28 billion dollars, ” the report adds.