NEW YORK (TheStreet) –– Intel (INTC) shares tacked on gains following a sharp run up Thursday after the company held its analyst day, announcing 2015 guidance and soothing investors' about the future of the world's largest chipmaker.
At its analyst day in Santa Clara, Calif., Intel CEO Brian Krzanich and his team laid out the road map for 2015, saying the company expects revenue growth to be in the mid-single digits for the year, as the PC sector continues to rebound off the low levels seen in 2012 and 2013. The company also announced that annual gross margins would be 62%, plus or minus 200 basis points. R&D plus selling, general and administrative Expense (SG&A) costs would be approximately $20 billion, plus or minus $400 million, with capital spending for the year at $10.5 billion, plus or minus $500 million.
The company also boosted its annual dividend to 96 cents a share, up 6 cents, as it continues to generate significant amounts of cash, returning much of it to shareholders. "Today's dividend announcement reflects the board's confidence in Intel's strategy," said Intel Chairman Andy Bryant in the press release, announcing the move. "It also reflects the board's ongoing commitment to create value and return cash to Intel's stockholders."
During the analyst day, Krzanich, who replaced Paul Otellini in May 2013, also touched on the mobile chip business, which the company announced was merging with its PC group following a third quarter that saw Intel's revenue from mobile chips decline to just $1 million, down from $353 million in the year ago period. Krzanich said, "It's not that we're proud of it, but we're not ashamed of it, either," referring to the billions in losses the group has cost Intel, losing more than $1 billion in the third quarter alone.
Even with concerns about the mobile business, Wall Street analysts were largely positive on Intel's outlook, with some noting that Krzanich seems to have put a plan in place to turn the company's mobile business around. Here's what a few of them had to say:
Deutsche Bank analyst Ross Seymore (Buy, $40 PT)
"After kicking off the 2013 Analyst Meeting suggesting INTC had lost its way, Chairman Andy Bryant began the 2014 edition expressing his belief that the co was once again on track. INTC highlighted its commitment to not only remain dominant in its core markets but committed to "catching up" within Mobile, an expensive proposition even as losses shrink in 2015. On the whole, as INTC continues to gain share in a stabilized PC market, delivers strong growth in DCG, cuts Mobile losses, and returns significant cash to shareholders, we see further upside in shares. We therefore reiterate our Buy and $40 P/T."
Canaccord Genuity analyst Matthew Ramsay (Hold, $35 PT)
"We attended Intel's analyst day in Santa Clara and walked away still with mixed feelings as to upside to the stock from current levels following the significant (and well-earned) appreciation over the last 12 months. While the management team presented very strong product portfolios and growth prospects for both DCG and IoTG, as well as confidence to continue Moore's Law beyond 10nm as a key differentiator, Mobile loss forecasts for 2015 were worse than our expectation and only modestly improved Y/Y. Further, despite 2015 guidance for PCs that was better than feared, market stabilization continues to become more dependent on a recovery in consumer PC spending versus enterprise, which drove the recent resurgence. We believe Intel is well positioned for solid earnings growth while delivering attractive capital returns over the next few years. However, we believe much of this fundamental strength is already reflected in the stock given the recent appreciation, and lingering questions regarding mobile ROI remain. We maintain our HOLD rating and $35 price target."
Barclays Capital analyst Blayne Curtis (Equal Weight, $32 PT)
"A year after CEO Brian Krzanich laid out his vision for a more pragmatic Intel, the 2014 investor meeting focused on progress on the goals laid out last year and plans to continue executing on the company's key strategic vector's: (1) Moore's Law, (2) Integration, & (3) Shared IP. All in all Intel has largely delivered on its promises in 2014 with DCG revenue projected up 16%, PCCG up 5% (vs. initial expectations for a slight decline), and MCG on track to ship >40M tablets (admittedly with material contra-revenue payments). Looking forward, the company maintained guidance for a 15% DCG revenue CAGR through 2018, sees the PC business as stabilized with potential for growth, and believes it can reduce MCG losses by ~$800M in 2015 with an eye towards a positive GM in 1H16 with new products (SoFIA) and recent deals with Chinese players. It is still unclear to us how these deals will provide a financial benefit beyond building a more robust x86 ecosystem but Intel clearly continues to think outside the box. We recognize the solid 2014 results and plan to continue executing on the revised strategy but remain on the sidelines for now given the holiday sell-through risk and our concerns that Intel will struggle to fully turn the corner in mobile."
JPMorgan analyst Harlan Sur (Overweight, No PT)
"Intel held its Investor Day at its Santa Clara headquarters yesterday providing a solid outlook for 2015 with revenue growth outlook exceeding consensus expectations led in particular by strong growth in Datacenter. Intel's conservative outlook for its PC Client Group implies a relatively stable PC market going forward and, furthermore, we believe Intel allayed fears of near-term over supply / over shipping in the channel."
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--Written by Chris Ciaccia in New York
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