Intel says chip flaws won’t hurt earnings, gives rosy outlook

Intel Corp., whose microprocessors dominate the personal-computer market, gave an upbeat quarterly and annual sales forecast, signaling optimism that demand will persist even as the industry scrambles to fix vulnerabilities in its PC and server chips.

Sales in the current period will be about $15 billion, plus or minus $500 million, and annual revenue will rise to a record $65 billion, the company said late Thursday. The projections exceed analysts’ estimates.

Intel stock rose 27 percent in 2017, lagging behind the 38 percent advance in the Philadelphia Stock Exchange Semiconductor Index. The benchmark also has outpaced Intel so far this year.

CEO Brian Krzanich is trying to remake Intel into a more general provider of chips, expanding into new markets such as self-driving cars and industrial systems. While those efforts helped, it was a 20 percent sales jump in its data-center chip business that really powered the quarter — and will determine success for the foreseeable future.

Intel repeated its assertion that chip flaws known as Meltdown and Spectre won’t have a material impact on its finances. Forecasts didn’t budge after the potential exploits were made public in early January. Krzanich said Intel has made progress on patching exposed computer systems, but said he’s “acutely aware that we have more to do.”

The chipmaker’s outlook indicates that corporations are spending on infrastructure, a good sign for earnings reports by companies such as Microsoft Corp., said Kim Forrest, an analyst at Fort Pitt Capital Group, which owns Intel shares.

“They look really good,” she said. “Even the data center came back.”

In the fourth quarter, sales climbed 4.3 percent to $17.1 billion, Intel said. The company posted a net loss of 15 cents a share because of an income tax expense of $5.4 billion, a result of the new U.S. tax law.

Excluding certain items, profit was $1.08 a share. On that basis, analysts had projected 87 cents in profit, on revenue of $16.4 billion.

Chief Financial Officer Bob Swan said the boost in Intel’s sales and profit in the recent quarter came from a return to spending by corporations on their internal networks. That trend may not continue, he said. Sales to cloud-service providers — companies such as Alphabet Inc.’s Google and Amazon. com Inc. — rose 35 percent in the fourth quarter.

“We see good demand trends” in the first quarter, Swan said. “The biggest pleasant surprise was enterprise.”

After it announced the vulnerabilities Jan. 3, Intel said its chips were not faulty — they work as promised — noting that the potential exploits affect all modern processors, not just Intel products. It then accepted more responsibility, apologized and began submitting regular updates on efforts to roll out software patches that close security holes.

While there have been no reports of data being stolen via these methods, some of the patches have caused computers to repeatedly reboot or slow down.