Wall Street Beat: Intel disappoints, Salesforce excites at analyst, partner events

Costs are an issue for both companies

By , IDG News Service |  IT Management

With a lull in major tech earnings news this week, Intel's investor day and Salesforce.com's Dreamforce developer and partner conference gave market watchers plenty to mull over.

While Intel appears to be making the right technology moves, flat revenue and investments needed to move into the mobile market are dampening the chip giants' numbers. Intel officials said Thursday that the company will offer new Atom chips for mobile devices in 2014, aiming to increase graphics and overall CPU performance as it tries to edge its way into an area dominated by rival ARM.

The new, 64-bit Atom chips, however, are not likely to appear in smartphones and other mobile devices until 2015. Meanwhile, though company officials expect server chip sales to increase 9 percent next year, they also forecast a significant decline in revenue from chips for client machines. Essentially, the company is expected to be spending a lot of money before reaping expected rewards in the mobile arena in the 2016 timeframe.

Intel also said it is expanding its contract manufacturing program to essentially any company that wants advanced silicon. Up to now Intel has been doing contract manufacturing for only a handful of customers, so the move to expand the program will put it directly in competition with manufacturing giants such as Taiwan Semiconductor Manufacturing Co. and GlobalFoundries.

Even the more positive analysts were not too upbeat.

"Overall, we see some positive indications here -- a more aggressive foundry strategy with a more pragmatic view of who the competitors are, an aggressive investment building a beach head in tablets -- but the most significant elements of the bull case would be PCs stabilizing or Data Center accelerating. We don't see much indication of either," according to a research note from Morgan Stanley.

More pessimistic analysts focused on the presentation of CFO Stacy Smith, who forecast flat revenue for 2014, and earnings per share of US$1.92. Though the EPS expectation is up slightly from earlier estimates, it would still be the third year in a row of annual EPS decline.

"We could actually feel the cheer leach out of the room a bit during Stacy Smiths's final presentation, as outlook for 2014 (mostly flat on revenues, gross margins, operating income, and capex) was likely not quite as good as some had hoped," said Stacy Rasgon, in a research note for Bernstein Research.

On a day where the overall market was up, Intel shares closed Friday at $23.87, down by $1.36.

Salesforce.com did better after its Dreamforce event, with shares closing Friday at $54.69, up $0.25.

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