Semiconductor giant Intel ( NASDAQ:INTC ) fell 4.5% on Wednesday following the company’s CFO David Zinsser’s dour comments at an innovation conference on Tuesday. The announcement comes as the company’s efforts to revive its chip business come as Zinsser suggested that Intel is more than a year away from breaking even on cash flow.
The CFO also saw declining revenue from Intel’s data center unit, its second-largest business, according to S&P Global Market Intelligence data. Despite hopes of recovery, this segment has been underperforming for the past two years.
In response to these statements, investment bank Morgan Stanley said on Wednesday morning that they were not entirely unexpected. However, Citigroup (NYSE:C) analyst Christopher Dannelly expressed concern in a report released earlier Wednesday. According to Dannelly, Intel’s new guidance is below the consensus forecast of Wall Street analysts, hinting at a possible revenue shortfall for the company.
Danielle drew attention to Zenger’s mention of only “modest” improvements in profit margins for Intel this quarter. The analyst expressed skepticism about Intel’s attempt to establish a chip foundry business – the production of computer chips designed by other firms – and predicted that such an effort would not generate significant profits for Intel.
Currently, Morgan Stanley or Citigroup do not recommend buying Intel stock; Both consider him neutral. Additionally, Citigroup’s Danielle advises Intel to abandon its chip foundry operations.
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