Intel profit slides due to restructuring costs

Intel has reported that its profits dropped last quarter due to heavy costs from a restructuring announced in April, however, company sales were up fueled by the strong performance of the company’s data centre group.

The chip vendor’s profit for the quarter, ended 2nd July 2016, was $1.3 billion, down from $2.7 billion a year earlier, the company announced on 20th July, its revenue also climbed three percent to $13.5 billion.

Intel said in April that it would cut 12,000 jobs worldwide, or 11 percent of its staff, in a plan to reduce costs and focus on growing businesses like server processors and chips for the Internet of Things.

In the process, it canceled the development of low-power Atom processors and more or less gave up on the smartphone and tablet markets – areas where it’s never done well.

As a result of those changes, the company said that it recorded restructuring costs of $1.4 billion, which is what caused its profit last quarter to fall. Results elsewhere were mixed. Revenue from Intel’s data centre group, which sells Xeon server chips, were up five percent from last year, to $4.0 billion. However, revenue from its client computing group, which makes chips for PCs and mobile devices was down three percent to $7.3 billion.

Its IoT group produced sales of $572 million, up two percent year over year. On an adjusted basis, factoring out the restructuring costs, Intel’s earnings came in at $0.59 a share, better than the $0.53 analysts had been expecting. The revenue figure was roughly on target.

“Second-quarter revenue matched our outlook, and profitability was better than we expected,” CEO Brian Krzanich said in a statement.