Sales Surge at Intel Data Centers, Warns of Possible fallout from Security Flaw

On Thursday, Intel Corp released a bullish forecast while blowing past expectations on Wall Street for its fourth quarter thanks to the strength of sales at data centers, the business it is looking at as the key to company transformation from a supplier for PCs.

Intel stock increased 3.8% boosted by a dividend hike of 10% and its forecast, which gave evidence Intel was succeeding in containing any fallout from the security flaws recently disclosed that could allow hackers to take data off computers.

The flaws, named Meltdown and Spectre, created concern worldwide amongst tech users, and Intel admitted Thursday, for just the first time, the fallout might hurt its future results. However, executives at Intel indicated consistently that they were not expecting that to take place.

Fixes to software for the flaw would by followed up by solutions designed into chips at Intel themselves later in 2018, said CEO Brian Krzanich during a conference call.

During an interview prior to the earnings call of Intel that it held with investors, CFO Bob Swan said Intel has not seen any meaningful impact on earnings from the recently disclosed vulnerabilities.

Revenue from Intel’s data center business, which is higher-margin, was higher by approximately 20% to just over $5.58 billion, which beat the street outlook of $5.13 billion. Investors were targeting growth of 10%.

Revenue from the PC group of Intel was $9 billion during the quarter, a decline of 2% from the prior year, but was up 3% overall for the full year to $34 billion.

The company saw solid growth in two small businesses unrelated to PC that it hopes will expand during the future. Its internet of things segment, which focuses on connecting industrial machines and street lights to the Web, grew by 21% ending the quarter at $879 million.

Programmable chips, which clients such as Microsoft are experimenting with in data centers, expanded 35% to end the quarter at $568 million.

Intel has forecast revenue of $65 billion in 2018, far above the expected $63.7 billion. The company said as well that it would have a 14% tax rate during 2018 following the changes to the tax law in the U.S. that executives said had created a playing field that was now level for manufacturers in the U.S.

It warned in its release of earnings that fallout could hurt from the Meltdown and Spectre discovery as well as with customer relationships and the reputation of the company.

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