Intel CEO Bob Swan To Investors: 'We Let You Down' But We'll Improve

'We believe that we have an opportunity to lead one of the most successful transformations in corporate history,' Intel CEO Bob Swan tells investors during a shareholder meeting, where he shared the company's forecast for revenue growth over the next three years.


Intel CEO Bob Swan acknowledges that Intel has disappointed shareholders with the company's lower-than-expected guidance for 2019 revenue but said it has the "opportunity to lead one of the most successful transformations in corporate history.”

"I want to acknowledge the present, and we just came off our Q1 earnings call, and we delivered our top and bottom line, but we let you down and we let ourselves down," Swan told investors in the opening minutes of the company's 2019 investor meeting on Wednesday.

[Related: Intel Cloud Boss Raejeanne Skillern Departs For Top Post At Flex]

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Swan's comments come after the Santa Clara, Calif.,-based company reduced its outlook for full-year revenue by $2.5 billion in late April from its previous guidance in January. The company now expects 2019 revenue to reach $69 billion, a 3 percent decline from the precious year. Swan has previously said the slowdown is the result of cloud service providers, enterprises and Chinese customers reaching capacity for their current data needs.

"My commitment to you is we are a team built on credibility, and we know we have to earn and maintain your credibility," Swan said to investors. "In the last 10 quarters we met or exceeded our revenue nine out of 10 times. And we met or exceeded our [earnings per share] 10 out of 10 times, but that does not excuse the miss we had in our outlook for the rest of the year."

Swan promised investors that Intel will get better at forecasting revenue by improving its processes, among other things. However, he pointed out, Intel has made a lot of progress in the last three years since the company last held a large meeting with investors.

"Over that three-year time frame, what's we really happened is we expect to deliver $12 billion more revenue since 2016, we'll spend less […] and as a result our [earnings per share] will grow 64 percent during that three-year time frame," Swan said. "So as we think about the three years since we last had you here, we're very proud about what we've accomplished as a team as we've expanded the role we play in this increasingly data-centric environment."

However, Swan said, the company is not satisfied with the progress it has made in transitioning away from a PC-centric company to one that is centered around data-centric solutions.

Intel is now chasing a total addressable market that is worth nearly $300 billion, the CEO pointed out, which is a drastic increase from its previous $52 billion market that was largely made up of processors for client computers and servers. Now with the company's expanded portfolio of products that range from CPUs to FPGAs and Optane memory, Swan believes the move could be historically significant.

"We believe that we have an opportunity to lead one of the most successful transformations in corporate history," Swan said, adding that he knows it won't be easy.

Over the next three years, Intel expects revenue to grow in the low single digits, with the company's data-centric businesses growing in the high single-digit range and its PC business expected to remain the same or slightly decline, according to the CEO. The company's gross margins, in the meantime, will decline as it transitions to 10-nanometer silicon products and starts to work on 7-nanometer products.

"One of the challenges we'll be wrestling with in this time frame is the pace at which 10nm ramps and the fast follow of 7nm," Swan said. "As a result, that's what's going to be impacting gross margin compressions during this time."

By 2022 or 2023, the company expects annual revenue to reach up to about $85 billion and net earnings to reach $6 per share, according to the CEO.

Dominic Daninger, vice president of engineering at Nor-Tech, a Burnsville, Minn.-based Intel partner, told CRN that the company's delays with 10nm products has caused concern but noted that Intel has been making concerted efforts to get back on track with the hiring of industry executives like former AMD executive Raja Koduri.

"They may be trying to fix that problem when they bring someone like that who specialized in a completely new architecture," he said.

Intel partners have previously said that they hope that someone with a financial acumen like Swan, who was previously Intel's CFO, can help the company "right the ship” after he was named CEO in late January.

"With Bob Swan, Intel has chosen someone that has domain knowledge and knows what is going on in terms of the delivery issues, security issues like Spectre and Meltdown vulnerabilities, and the financial issues associated with those problems," Bob Venero, CEO of Future Tech Enterprises said back in January. "Having someone with that kind of knowledge is a huge benefit to the channel."