Intel shares plunge 18% on Israel factory blast and weak PC demand
Intel shares fell 18% after the company said a factory explosion in Israel would cost about US$600 million in revenue over two quarters. The company also warned of a continued PC slowdown, with fourth-quarter revenue forecast below analysts' estimates.
Intel shares plunged about 18 per cent on Thursday after the company disclosed that a factory explosion in Israel will cost it roughly US$600 million in lost revenue over two quarters because it has been shut down for about two weeks.
The October explosion at its Kiryat Gat, Israel factory, or fab, killed two and seriously injured one, according to local media reports. Finance chief David Zinsner said Intel planned to start ramping up production at the facility by the end of this week.
The company said the fourth-quarter revenue outlook would be reduced by roughly US$300 million and its gross margins by about 200 basis points, Zinsner said in an interview with Reuters. He said the company expects a similar revenue impact in the first quarter. Intel is in the process of determining which wafers are salvageable for use and sale after the blast. “We're still assessing all of the wafers to see which ones are usable and which ones aren't, so we'll have to see whether there is an impact that stretches beyond that,” Zinsner said.
The Kiryat Gat fab largely produces data center chips using the company's 10 nanometer manufacturing process. The guidance - hurt further by the explosion-related revenue loss - could test confidence in a stock that has more than doubled this year, as investors weigh ongoing manufacturing constraints and soft PC demand against strong demand for its AI server chips and efforts to revive growth through a costly foundry expansion.
“Looking ahead, we see the PC slowdown continuing at least through the first half of next year,” Zinsner said in a statement. “We will continue making disciplined investments in capacity and working capital to increase supply and support future growth.” The company expects PC revenue to decline in the mid-twenty percentage range for its fourth quarter, Zinsner said in the interview. Sales in Intel's PC chip business fell 5 per cent to US$8.10 billion, missing estimates of US$8.98 billion.
Intel expects fourth-quarter revenue between US$15 billion and US$16 billion, below analysts' average estimate of US$17.07 billion, according to data compiled by LSEG. Adjusted profit is expected to be 25 cents per share, trailing estimates of 43 cents. In the third quarter ended September 26, revenue rose 21 per cent to US$16.51 billion, largely in line with estimates of US$16.50 billion. Adjusted profit came in at 52 cents per share, beating estimates of 40 cents.