Intel falls on delay of future chip technology

Intel stock fell by more than 6 percent on Thursday following the release of the company’s second-quarter earnings, which were better than expected.

baseband modem ramp at Apple,” Nomura Instinet analysts led by Romit Shah said in a Monday note. The analysts also said Intel’s Data Center Group could grow again in the third quarter given Microsoft’s expected increases in capital expenditures.

In the second quarter, Intel CEO Brian Krzanich suddenly stepped down after having a consensual relationship with another Intel employee in violation of the company’s non-fraternization policy. Chief financial officer Bob Swan became interim CEO. The company has begun a search for a permanent replacement.

At the same time, Intel has been facing pressure from competitors as Intel seeks to get to the next generation of products as soon as possible. On Wednesday AMD stock rose 14 percent after the company beat second-quarter expectations. Krzanich told analysts in April that volume chip production with Intel’s 10-nanometer process was getting delayed from the second half of 2018 to 2019.

“Even with an interim CEO in place, Intel cannot afford to leave the top post vacant for too long, particularly given the process challenges and competitive threats the company faces,” Argus Research analyst Jim Kelleher wrote in a note last month.

The core numbers will take a back seat to the technical issues and leadership shuffle for now, Bernstein analysts led by Stacy Rasgon said in a Friday note.

In the second-quarter results, Intel said that its 10-nanometer yields are “on track” with systems on the market in the second half of 2019. Krzanich’s previous perspective wasn’t specific on whether they would arrive in the first half of next year or in the second half. On the conference call with analysts on Thursday, Swan was more specific and said products would be on shelves in time for the holiday season.

Murthy Renduchintala, group president of the technology, systems architecture and client group, said on the call that the products that will become available in 2019 are client computing products, whereas products for data center use will come “shortly after.” The stock fell further after those comments but later rebounded as executives talked about ongoing research and development for next-generation 7-nanometer technology.

Meanwhile, Swan said the company will work with customers and its own manufacturing plants to ensure that it has enough capacity to meet demand for server and PC products, Swan said.

In his prepared remarks, Swan didn’t provide a meaningful update on the CEO search. He did say that while there is no timetable to appoint a new leader, the board is working with a sense of urgency.

Swan praised Krzanich.

“Personally, and on behalf of Intel’s 100,000 plus employees, I’d like to thank Brian for his many contributions to the company over his 35-year career,” Swan said. “The investments he made set us on a course for transformation. Even more importantly, he developed the right strategy and leadership team to carry that transformation forward while we conduct the CEO search.”

Intel stock is up about 13 percent since the beginning of the year.