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April 13, 2020, 3:31 p.m. EDT

Intel could experience sales surge due to coronavirus, but ‘all bets are off’ after that

Intel in the age of COVID-19: Businesses that need laptops from workers staying at home and cloud providers who need data-center chips could be buying fast, but second half is a mystery

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By Wallace Witkowski, MarketWatch


MarketWatch photo illustration/iStockphoto

This article is part of a series tracking the effects of the COVID-19 pandemic on major businesses, and will be updated. It was originally published on April 9.

Intel Corp. could experience a huge early sales boost from companies outfitting stay-at-home workers with computers and a surge in cloud-services adoption, but the long-term picture for COVID-19 effects is not as clear.

Intel /zigman2/quotes/203649727/composite INTC +0.14%  started off 2020 with a reversal from a difficult year, reporting that it broke the $20 billion quarterly sales mark for the first time as its fastest-growing segment, data-center chips, surged 19% to $7.2 billion. That time — when China was reporting 830 cases of COVID-19 with 26 deaths and the U.S. had just confirmed its second coronavirus case — seems a world away now after the coronavirus spread across the globe and sent most Americans into their homes to avoid contracting the virus.

As a result, millions of employees who still have jobs in the U.S. now work from home while millions of students take lessons online, making companies like Zoom Video Technologies Inc. /zigman2/quotes/211319643/composite ZM -4.13%  wildly popular while stretching the limits of older hardware. Much of that traffic is passing through cloud data centers like those maintained by Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN -0.62% , Microsoft Corp. /zigman2/quotes/207732364/composite MSFT -1.06%  and Alphabet Inc.’s /zigman2/quotes/205453964/composite GOOG +0.47%   /zigman2/quotes/202490156/composite GOOGL +0.58%  Google, which will need new chips to expand capacity.

Business in the age of COVID-19: Read profiles of how other large companies will be affected by the coronavirus

At the same time, businesses are being prompted to speed up their digital transformations like baby birds being kicked out of a burning nest. With PC, server and data-center sales representing the majority of Intel’s business, there’s little question that the chip giant could benefit from a sales surge thanks to all those dynamics.

“If you’re doing PC and data center, there’s definitely buys that have to happen right now to support demand,” Maribel Lopez, principal analyst at Lopez Research, told MarketWatch in an interview. “We’re going to pull in a lot of demand.”

The question is how long that surge will last, as companies start to slow capital spending to preserve their liquidity and consumers slow down purchases thanks to lost jobs or other economic concerns. Given that some locations like the San Francisco Bay Area issued their first stay-at-home orders in early March, other regions have just started to come around to issuing those orders, so there could be another wave of demand.

“The demand will probably be another quarter’s worth of demand,” Lopez said, likely lasting into mid-summer. “After that, I think, all bets are off with the economy in general.”

Smaller chip company Microchip Technology Inc. /zigman2/quotes/208326291/composite MCHP +6.88%  has already said it’s seeing a sales surge but doesn’t expect it to last past initial COVID-19 panic-buying.

What the numbers are saying

Revenue: Back in late January, Intel projected revenue of about $19 billion for the first quarter and about $73.5 billion in 2020. Analysts surveyed by FactSet initially set their first-quarter mark at $18.98 billion by Jan. 31, but expectations declined to $18.63 billion by April 9. The average forecast for the full year declined to $71.92 billion from $73.8 billion as of Jan. 31, FactSet reported.

Earnings: Intel forecast adjusted earnings of $1.30 a share for the first quarter and $5 a share for the year. Analysts project adjusted earnings of $1.28 a share, down from $1.32 a share on Jan. 31, and $4.83 a share for the year, down from $4.98 a share.

Stock movement: Intel shares fell 9.6% in the first quarter of the year, while the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +2.17% , which counts Intel as a component, declined 23%.

/zigman2/quotes/203649727/composite
US : U.S.: Nasdaq
$ 62.34
+0.09 +0.14%
Volume: 20.93M
May 26, 2020 4:00p
P/E Ratio
12.07
Dividend Yield
2.12%
Market Cap
$263.59 billion
Rev. per Employee
$659,665
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/zigman2/quotes/211319643/composite
US : U.S.: Nasdaq
$ 164.00
-7.06 -4.13%
Volume: 6.69M
May 26, 2020 4:00p
P/E Ratio
2,020
Dividend Yield
N/A
Market Cap
$48.23 billion
Rev. per Employee
N/A
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/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 2,421.86
-15.02 -0.62%
Volume: 3.57M
May 26, 2020 4:00p
P/E Ratio
115.69
Dividend Yield
N/A
Market Cap
$1215.46 billion
Rev. per Employee
$359,671
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/zigman2/quotes/207732364/composite
US : U.S.: Nasdaq
$ 181.57
-1.94 -1.06%
Volume: 36.07M
May 26, 2020 4:00p
P/E Ratio
30.23
Dividend Yield
1.12%
Market Cap
$1391.64 billion
Rev. per Employee
$902,473
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/zigman2/quotes/205453964/composite
US : U.S.: Nasdaq
$ 1,417.02
+6.60 +0.47%
Volume: 2.06M
May 26, 2020 4:00p
P/E Ratio
28.59
Dividend Yield
N/A
Market Cap
$769.02 billion
Rev. per Employee
$1.39M
loading...
/zigman2/quotes/202490156/composite
US : U.S.: Nasdaq
$ 1,421.37
+8.13 +0.58%
Volume: 2.23M
May 26, 2020 4:00p
P/E Ratio
28.68
Dividend Yield
N/A
Market Cap
$769.02 billion
Rev. per Employee
$1.39M
loading...
/zigman2/quotes/208326291/composite
US : U.S.: Nasdaq
$ 93.85
+6.04 +6.88%
Volume: 5.16M
May 26, 2020 4:00p
P/E Ratio
42.29
Dividend Yield
1.57%
Market Cap
$21.54 billion
Rev. per Employee
$352,817
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
24,995.11
+529.95 +2.17%
Volume: 426.29M
May 26, 2020 5:20p
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