Intel 3Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

PC trends continued good developed markets, weak EM

“The trends we observed in the PC market last quarter continued with stability in mature markets offset by ongoing declines in emerging markets”

Our LTE technology is paying off in tablets and even PCs

“Our LTE technology, which we originally developed for phones, is becoming increasingly valuable in tablets and even PCs as wireless, wide area network connectivity becomes increasingly common. We estimate, for example, that by 2018 remain of baseband attached to tablets will roughly double and in PCs will rise to more than 15%.”

Still running behind schedule in 14nm process

“14-nanometer yields improved meaningfully but we’re behind where we expected to be. These challenges highlight just how difficult it has become to ramp advanced process technology”

Robust growth in the data center

“Our Data Center Group revenue grew 16% from a year ago with platform volumes up 6% and platform average selling prices up 9%. We are seeing robust growth rates across all the segments of our Data Center business.”

PC market overall was probably flat y/y, our billings did better than that because we took market share and customers were building inventory ahead of the holidays

” When you adjust for some of the other form factors like core based tablets and things I’d say our view of the end market compared to say an IDC isn’t terribly different in terms of the growth rate. We would both say it’s relatively flat year-on-year in the third quarter.

In terms of our billing results, I think there’s a couple of things driving that. First, we saw in Q2 that we gained a relatively significant amount of share once everybody had reported. If I had to branch predict it I’d say we’d probably continue to gain some share in Q3. As is per usual we’ll wait to see all the third party results come in to know for sure but our sense is that we gained some share in the third quarter so that helped.

And then we’re also seeing our customers putting in place a normal supply line in anticipation of a consumer-led seasonal fourth quarter and that’s different from what we saw a year ago where people were managing inventory levels very low in anticipation of a very muted fourth quarter. So I think the combination of those two things has our billing results ahead of the IDC but feels like it’s pretty appropriate based on where I sit.”

We’re still on track for GM targets

“as you rightly pointed out, the gross margin forecast for the year is pretty much on. We were a little light in Q3. We look a little better in Q4 based on the algebra that I gave you in the last call. In essence, we’re seeing more of the 14-nanometer costs coming through in the third quarter versus the fourth quarter, and that’s why you see that shift between quarters and the year staying on track. ”

Wont call a turn in the PC market world wide quite yet

“I think what we would phrase this as or what we did phrase this as is it’s seasonal and so we’re not saying that the there’s a – as a matter of fact we said that the consumer we believe is flat. There’s seasonal growth as we move into the fourth quarter but we’re still seeing that mature versus emerging market trends that we talked about in the previous quarters where the mature markets are a bit stronger – the U.S. especially, Western Europe though as well. And the emerging markets: China, Latin America and some of the others are still soft and so those trends are continuing”

We don’t think there’s excessive inventory out there

” I’d say the inventory levels, what we see is when you look at it in terms of weeks of inventory, it’s appropriate levels of inventory. It’s kind of right in the range of what we’d expect. So you termed it as excessive inventory, I think. We’re not seeing that. As always, if demand doesn’t materialize then customers adjust their buying pattern and bring inventory levels down, but what we see is kind of normal levels of inventory in anticipation of a seasonal Q4. ”

More htan half of our product ships out of hubs now

“Remember a lot of our – more than half of our product ships out of hubs now and we actually control the inventory on it, so the OEM pulls it at the last moment of use. So we see the actual usage rates there to what’s flying off the shelves at the point-of-sale. So we are watching all of those and I think we’ve demonstrated in the past, back in the variety of market moves, that we’ll react very quickly.”

We’re expecting a typical holiday season not great, not bad

“we’re expecting not a great holiday season, not a bad holiday season, a standard holiday season for the consumer in the PC segment. We continue to see enterprise strength. It’s shifting. It was strong in desktops earlier in the year. It’s kind of moved to Notebooks as we move to the second half of the year. Some of the markets have shifted a little bit but overall the enterprise, all the way from large enterprise to small, medium businesses stayed fairly strong through this year”

More than just XP driving PC sales

“based on what we see in our surveys, there’s a variety of things that are causing people to go and upgrade their PC. Certainly the Windows refresh is one of them, but it’s also form factors, it’s the age of the PCs and the price points. I’d say all of that is playing in. And I think when we look across the breadth of our SKUs and knowing which of those are going into business – large enterprise, small and medium consumer, we get a sense of we’re seeing growth that’s more broadly than just something where people are upgrading Windows’