Intel CEO Seeks ‘Right Answer’ for 5G Modems Business in PCs, IoT Gear; Stock Down
Intel is still deciding what to do with the rest of its 5G modems business, after announcing it’s exiting 5G smartphone modems for lack of profit potential (see 1904170004), said CEO Bob Swan on a Q1 call Thursday. The stock fell Friday after "underlying trends" worries sparked Intel to cut its 2019 revenue forecast.
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The evaluation of 5G modems for PCs and IoT devices is a "work in progress," said Swan, former chief financial officer, on his first earnings call since being named CEO in January (see personals section, Feb. 1). He expects “lower spending” on 5G smartphone modems as Intel winds down that business “through the course of the year,” he said. The chipmaker dropped the 5G plans around when Apple and Qualcomm settled chip royalty litigation (see 1904160056)
The company doesn’t know yet “what to do with the wonderful IP that we've developed” in 5G modems,” or with “the real strong team that we have and the other opportunities we have,” said Swan. “We're really excited about the role we'll play in 5G,” he said. “We're working very hard” to find “the right answer about how we'll deal with the technologies we built, the capabilities we have and what the implications will be on cost structure.”
Swan thinks “we got a great product lineup for the launch of 5G,” he said. “We have a strong position today, and we think 5G is only going to accelerate that across a broad swath of our products and technologies.” Its 5G “focus” now is “on the transformation of the wireless network and edge infrastructure, where we have a clear technology advantage,” he said.
Intel is “accelerating innovation” in its PC-centric business, where Q1 revenue was up 4 percent over the year-earlier quarter, said Swan. “Our team is hard at work with our OEM customers to define and deliver a stunning new class of next-generation laptops” under the code name “Project Athena,” he said. The first of “these sleek, beautiful designs” is due in 2019's second half, he said.
The stock closed 9 percent lower Friday at $52.43 after Intel shaved $2.5 billion from its previous forecast for full-year revenue. It now expects 2019 sales to decline 3 percent to $69 billion. “Underlying trends are concerning,” including “continued China weakness” and industry-wide “inventory and capacity absorption,” said Swan. “We are also anticipating an incrementally more challenging NAND pricing environment.”