Intel 1Q14 Earnings Call Notes

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Stable PC segment driven by enterprise

“Even as challenges remain in the consumer client segment, we saw continued improvement in enterprise clients, driven by increasing form factor innovation and refresh”

Nice growth in internet of things group

“The newly formed Internet of Things Group, which includes our embedded business, grew 32% year-over-year”

On track for 40m tablets

“We set an aggressive goal of shipping 40 million tablet SOCs this year. And I’m happy to say we’ve tallied more than 90 designs on Android and Windows and shipped 5 million units in the first quarter, placing us squarely on track to that goal.”

Shipped Quark

“We also shipped our first Quark SoCs for the Internet of Things and announced an upgrade of Edison to the Silvermont Atom architecture. Edison is on track to ship this summer.”

Began production on 14nm

“And in the Technology and Manufacturing Group, who’s worked to advance Moore’s laws foundational to our long-term success, we began production on our 14-nanometer process technology and remain on track to launch Broadwell in the second half of the year.”

Gross margins expanding

“We’re forecasting the midpoint of the gross margin range for the second quarter to be 63%. The three point increase from the first quarter is primarily driven by lower factory startup costs as we ramp 2014 in.”

Maintaining flat rev guidance, but increasing gross margin guidance

“Turning to full year 2014. We’re still planning for revenues to be approximately flat to 2013. We expect PC Client Group revenue to decline in the mid-single-digits and the Data Center Group revenue to grow in the low double-digits.

We’re forecasting the midpoint of our gross margin range at 61%, up one point from the outlook provided in January. This increase is primarily driven by lower unit costs across both our PC and tablet products and lower non-production manufacturing costs.”

PC market playing out like expected

“if you look at Q1 and even as we head into Q2, it’s playing out as we pretty much expected. We continue to see strengthen the enterprise and that’s pretty much across-the-Board everywhere.

Emerging market starting to strengthen

“Consumer still remains a bit weak for us. Emerging markets starting to strengthen in the consumer, but the rest of the world still showing weakness at the consumer level.”

Lower price points are helping to drive the stabilization

“If you look at the form factors that we’re bringing out, the price points that we’ve been able to enter, you’re seeing strong PCs down in the $200 range now. Haswell really coming to market as we enter into Q1 and Q2. You saw the 130 Atom designs that we have out there. So, it’s a series of real vectors that are driving the stabilization we believe.”

I don’t really understand this, but it seems important

“what we’re doing is we’re taking Bay Trail, which is a product really designed for the PC market, and we made the decision to take it broadly across different segments of the tablet market this year.

It brings along with it, at least over the course of 2014, a higher bill of materials. And that’s independent from the SOC cost. It’s the power management subsystem, it’s the motherboard that it goes on, it’s the memory solution, those kinds of things. And so, we’re providing some contra revenue to offset that bill of material delta over the course of 2014.”

PC Inventories normalized

“Actually inventories are in very good shape as we look across the entire supply chain, both within Intel and outside. So, we think inventories, after that correction in the beginning of 2013, are actually normalized now where they will probably stay.”

Takes a while to get customers comfortable with the foundry

“I’d say the interest since we opened up the foundry has been high. These interactions, just getting people comfortable with what the technology is, take several months typically.

There’s deep interaction between the technical teams on both sides, really understanding what the process of silicon technology incorporates, what the design tools are, what IP we have to offer, where they can go get third-party IP, all of those kinds of interactions. Those have been ongoing with many customers. And then, you start the business discussions around pricing and availability and all of that.”

Still learning how to be a good foundry

“We’ve been in many interactions. As far as what does it tell us about what needs to change within Intel, I think we still have a lot to learn about how to be a good foundry.”

Altera has been a great customer

“Altera, who is really our lead premier customer — I’d say big customer has really been helpful. They’ve helped us see where we’re strong and where we are not and what it takes to become strong in those areas. They are making good progress on their products.”

roadmap moving in the same direction as customers

“I don’t think there’s a lot of change from a technology standpoint that’s outside the changes we’re going to make, say, at 10-nanometers of our own product. We’re driving to lower power, more mobility, able to integrate better, all of those things into our own products. Integration of memory capabilities, that’s driven by our own need to move into those mobile spaces. And that’s helping us with the same roadmaps that are being required by the foundry partners.”

Laser focused on 40m tablets

“the 40 million tablets is one of the things I see Brian just laser focused on. And as we’ve talked about before, it gets us into the 15% to 20% range of the total tablet market.”

Architecture is an asset

“Remember, Intel has two assets. We have our silicon technology, but we also have our architecture. And one of the things an OEM gets when they build with Intel technology is that they can go into any OS and they can build a single platform and move that on to Chrome, on to Android, on to Windows. And that’s a very unique capability that we provide to OEMs for flexibility.”

You want to be in tablets even if not driving revenue and GM

“You’re probably not going to make as much revenue dollars and as much margin dollars as the PC business, but we think this is still critical. And it’s critical for a variety of reasons. Part of it is simply the scale. You want to have those units. You want to have a presence in all areas of computing.”