Microsoft, AMD, VMware slip following Intel's earnings; targets questioned

Intel's (INTC -3.6%) partial blaming of weaker-than-expected Q4 server CPU division sales (revenue +8% Y/Y, but volumes only +1% Y/Y and -3% Q/Q) on a government shutdown comes across as a "bad excuse," thinks FBR.

Though reiterating an Outperform, FBR is skeptical about Intel's long-term 15% revenue CAGR target for its server CPU division. Bernstein questioned the division's growth outlook yesterday afternoon.

Goldman, reiterating a Sell (previous), says Intel's numbers "confirm our view that there is downside, not upside, to Intel's 2014 EPS." It's worried about both server CPU sales and a softening corporate PC upgrade cycle (driven by the Windows 7 transition) following Q1.

JPMorgan, which upgraded Intel going into earnings, is defending the company. It's pleased with stabilizing PC demand and dismisses server concerns, given sales have historically been volatile.

A major headwind faced by Intel's server CPU unit: Server industry revenues have been steadily declining, as demand shifts towards Web/cloud service providers with bigger economies of scale and a penchant for using cheap white-label hardware. IDC estimates total server sales fell 3.7% Y/Y in Q3, and that x86 server sales rose just 2.8%.

Microsoft (MSFT -1.6%) and AMD (AMD -1.1%) are ticking lower following Intel's report. So are server virtualization kingpin VMware (VMW -1.9%), parent EMC (EMC -0.9%), and rival Citrix (CTXS -0.8%). Intel suggested on its CC virtualization growth is softening.

More on Intel's Q4, CC transcript

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Comments (1)
  • skopat
    , contributor
    Comments (12) | Send Message
    Intel is sitting around with unused Chandler Fab 42: I suggest they convert It into a laboratory data center, replete with photonic servers and cabling, coupled with the latest in SSD memory. That could be a mechanism for licensing data centers, either in joint arrangements, wholly-owned by Intel or wholly-owned by the licensee. Thus every data center can be labeled "Totally Intel Inside." I have seen much written lately about photonic microprocessors. I have reservations about the need to design <1 nm circuits for such microprocessors. In addition, I would have reservations over such adversely affecting microprocessor sales to the current data center market. It would take years for competition to develop microprocessors which are competitive with those being offered by Intel. Not all companies would opt for such a licensing arrangement.
    19 Jan 2014, 10:40 AM Reply Like
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