Intel 1Q15 Earnings Call Notes

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Despite PC weakness, revenue was flat as other areas grew double digits

” Our PC business was impacted by slowing desktop sales, particularly in small and medium business. At the same time, challenging macroeconomic conditions and an appreciating U.S. dollar weighed on our business and important geographic markets. Despite this, revenue was flat year-over-year as our Data Center, Internet of Things, and NAND business all delivered double-digit growth.”

Notebook was up for 5th consecutive quarter

“while desktop volume declined, notebook volume grew year-over-year for the fifth consecutive quarter. Our Silicon Technology Leadership remains a valuable competitive advantage, and the percentage mix of our latest 14 nanometer processors, the 5th Gen Core and Core M processor, is just ahead of our expectation.”

There was a worldwide PC inventory burn

” We believe there was an inventory burn across the worldwide PC supply-chain in the first quarter and we expect a further reduction in inventory supply-chain levels in the second quarter in anticipation of Windows 10 launch in summer. We are forecasting the midpoint of the gross margin range to be 62%, plus or minus a couple of points, 1.5 point increase from the first quarter.”

Seeing 10 nm startup cost ramp into second half of the year

“we’ll start to see — we’re seeing 10-nanometer start-up cost to-date but the ramp pretty significantly will get into Q3 and Q4. So, that’s one element.”

Not going to address any M&A rumors obviously

am not going to comment on any of the rumors and on the press. Our strategy on investing in this business or what we do with our cash hasn’t changed. And it’s really the same strategy that’s been before me and that is always first investment of business, firmly believe in that, and that investment, Morris Law, new architectures, technology as things like that and M&A at times and then share buybacks and dividends.’

Our first priority is to invest in the business

“We’re stewards of our shareholders’ cash and we always feel like that’s always the first thing we do. And if we can invest in the business and get a better return in that, then we do that, no matter how we can invest in that. But yes, I am not going to speculate on any of the rumors.”

Seeing a shift in linearity of inventory accumulation

“We’re seeing a little bit of shift in linearity over the course of the — we saw a fairly significant inventory burn in Q1. Normally in Q2, we would expect to see customer spread to put inventory in place for the back-half.

Our guide for Q2 is assuming that we’ll see a continued inventory burn in the quarter and that’s because of the timing of Windows 10, it’s sitting in the summer. And so what we think is going to happen is that our customers will lean-out inventory levels in the second quarter and then they’ll rebuild inventory levels in the third quarter”

14 nm has been ahead of forecast

“14-nanometer, the ramps of our Broadwell products, are slightly ahead of our forecast. So we’re seeing a very nice migration of our product demand over to the 14-nanoemters. And we’re seeing some things like better yields, better utilization out of our 14-nanometer as it continues to get half-year. And so all of those combined have led us adjust our capital. So you’re seeing better utilization, better efficiency, but also the ability to move more 22-nanoemter capacity over the 14-nanometer.”

Most people are thinking that tablets will be down

” I would agree most people are thinking that tablets will likely be down, we’ve all heard a variety of forecasts, a little more difficult to forecast the tablet space.”

Question on PC longevity

“The first one was around what is happening to system longevity or system lifespan. Data is continuing to grow, our estimates are that there’s something approximating 600 million PCs out there and that’s growing somewhat by the day that are greater than four years old. You could look at that as this is continuing to grow and push, you can also look at this as this is a great opportunity.”

We’re seeing the line blur between devices

“We’re seeing this bluring of lines between different devices and we were doing some unnatural things to try to categorize them. I think the Microsoft Surface is a perfect example of that. When you look at partners in IDCs, where they characterize the market, they count that as a tablet. We were including that in the PC revenue line and we’ve realized that the customer is reviewing this as one category of devices, we wished manages as one category devices and we would be more efficient and more accurate I think of client broadly.”