At this point, technology is synonymous with evolution. We should be used to seeing the giants lose their monopoly over the tech industry.
It happened to IBM, Microsoft, and is coming for Facebook. In a few years it will come for Google and Amazon, even if it’s hard to believe now.
One thing that is undeniable is that it’s happening to Intel right now, and is very likely to get worse before it gets better.
Intel’s problems are expensive, and by no means a quick fix, which is why the tech giant is currently trying to leverage emergency funding from America and EU.
Intel stocks fell a whopping 8% last friday after the chipmaker reported a disappointing second quarter earning that missed on both top and bottom lines. Combined with the 22% year over year decline, this has been the most disappointing era for the company since 1999.
During their most recent earnings call with analysts, CEO Pat Gelsinger admitted that Intels data-processors hadn’t been improved in five years. An embarrassing confession considering how much digital transformation has impacted businesses and office workers over the past 3 years.
What went wrong?
On of the three major areas of the chip giants business, client computing reported a 25% drop in revenue compared to 2021. In fact, several areas of Intel saw a drop in revenue this year, apart from the networking and edge group, which grew 11%.
Is intel going down the same path as previous giants of the tech industry? Potentially, yes. Their lack of meaningful changes over the past five years is concerning considering the changes in PC purchasing, business tech needs, and digital transformation.
Last year we saw reports that Apples transition away from Intel fueled a 70.1% growth in Mac revenue for the company.
Not to mention the current global chip shortage, which is leading to demand exceeding supply.
Gelsigner said “This quarter’s results were below the standards we have set for the company and our shareholders. We must and will do better. The sudden and rapid decline in economic activity was the largest driver, but the shortfall also reflects our own execution issues.
We are being responsive to changing business conditions, working closely with our customers while remaining laser-focused on our strategy and long-term opportunities. We are embracing this challenging environment to accelerate our transformation.”
He discussed plans to lower expenses for the rest of the
year, as well as taking additional actions in the second half of 2022. Whilst
this expense discipline is not impacting the strategy, and plan to remain
firmly on track to better leadership and performance by 2025.
What’s next for Intel?
Dave Zinsner, Intel CFO commented on the future plans for the company, with new budgets in mind:
“Due to the difficult macroeconomic environment, together with our own execution challenges, our results for the quarter were well below expectations and necessitate a significant revision to our full-year financial guidance.
That said, we are taking the actions necessary to maintain our prior full-year adjusted free cashflow guidance, including a slowdown in hiring, capex reductions and the expectation for increased capital offsets consistent with our smart capital strategy.
“We remain fully committed to the business strategy and long-term financial model presented during this year’s investor meeting in February.”
