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Earnings calls from computer manufacturers set out to manage expectations amid a shortage of components.
Both HP and Dell issued earnings reports yesterday (26 November), which prepared shareholders for the impact of Intel’s chip shortages on computer sales.
Earlier this month, Intel’s general manager of sales, marketing and communications, Michelle Johnston Holthaus, issued an apology to customers and partners “for the impact recent PC CPU shipment delays are having on your business”.
Unfortunately for those businesses, this apology did not come with an assurance that these problems are nearing an end. “Despite our best efforts, we have not yet resolved this challenge,” wrote Johnston Holthaus.
She went on to explain measures already taken by Intel to meet the “continued strong demand” for its components, including investing “record levels” of capital expenditure to increase 14nm wafer capacity, ramping up 10nm production, and increasing use of foundries to produce more CPU products. This last move should see Intel’s PC CPU supply increase “by double digits” on the first half of the year.
‘We are assuming that the CPU supply will constrain our revenue in Q1’
– STEVEN FIELER, HP CFO
Supply and demand
Intel explained the shortage as the result of market growth in excess of third-party forecasts, which outpaced its manufacturing efforts. Indeed, HP beat analysts’ estimates in its latest quarterly earnings thanks to higher sales of PC and workstations.
The world’s second-biggest PC-maker after Lenovo saw revenue from personal systems such as notebooks and laptops rise 3.6pc to $10.43bn – $140m above its estimate.
However, HP admitted that supply shortages will limit sales in the current quarter, which includes the holiday shopping season.
“We are assuming that the CPU supply will constrain our revenue in Q1, and if you think about it on a sequential basis, certainly in the personal systems business, we would expect to have declines from Q4 to Q1 above the normal seasonal patterns,” said HP CFO Steven Fieler during analysts’ questions on the earnings call. However, he assured that the revenue impact would be worse than the profit impact for the quarter “as we expect our mix should be better”.
‘The shortages are now impacting our commercial PC and premium consumer PC Q4 forecasted shipments’
– JEFF CLARKE, DELL VICE-CHAIR
While HP tackles the additional challenge of an attempted hostile takeover from Xerox, Dell’s struggle with the Intel chips shortage is compounded by political and economic uncertainty impacting the sale of servers.
“Intel CPU shortages have worsened quarter over quarter. The shortages are now impacting our commercial PC and premium consumer PC Q4 forecasted shipments,” said vice-chair Jeff Clarke.
The company’s CFO Tom Sweet said during a call with analysts that Dell’s adjusted sales forecast for the fiscal year 2020 will be $91.8bn to $92.5bn, down from $93bn to $94.5bn forecast in August.
Reporting this decreased expectation for sales in what should typically be the busiest quarter of the year saw Dell’s stock fall 4pc in after-hours trading.
