Intel 3Q15 Earnings Call Notes

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Brian Krzanich – CEO

PC market beginning to stabilize. Our strategy is to capitalize on the growing need for infrastructure

“Despite ongoing macroeconomic headwinds, there are signs that the PC market is beginning to stabilize and we continue to benefit from a strategy designed to capitalize on the growing need for the infrastructure that powers the smart and connected world.”

Developed countries have been doing better than emerging economies. China has been slow especially in consumer segment

“there has been a trend this entire year, where the mature markets have tended to do — be the strongest for us, so U.S., western Europe. And Asia, PRC, parts of Eastern Europe, developing countries not being as strong, they are having some softness that carried into the third quarter as well. And so, if you just take a look at China in general, it kind of mimics that and — if you look at it, sales are down slightly, they are softer, and its more of the consumer than the enterprise in that space, and across all the different segments. We saw it across the board.”

We’ve got healthy inventory levels and balanced opportunities

“we are kind of looking at it, saying, we have got healthy inventory levels and we are going into the seasonally stronger selling season. It feels like we are kind of balanced in terms of the risks and opportunities.”

3D XPoint should go into a variety of products

“we will target the Data Center and have that very close crosslink between these. But I think 3D XPoint, you will actually see in many-many other products, as the value of both memory, storage, and performance start to play out in a variety of applications, IOT, mobile, all over the place.”

Tablets have shrunk this year as a category

“everybody sees tablets have shrunk this year as a category. And so we have been careful about not chasing the bottom as prices drop”

We’ve always had competition. We compete through innovation

“All these markets, there has always been a competitor. Whether you look in the PC market, or whether you look the Data Center market, or any of these, there has been competitors. We have worked our way up in this position. And our goal is always, to continuously push the product performance and the way we think about it is, is really, what does it take to replace ourselves even, in this market, especially the Data Center. How do we do a total cost of ownership, such that, it pays to go to our next generation, in both footprint, cost of operation and performance”

The overall enterprise segment is weak along with GDP growth rates

“the overall enterprise segment is weak, and when you look at it, that correlates very closely for us over time with GDP growth rates, and the GDP growth rates are quite a bit less than we though, when we started the year.”

General macro economic weakness is pronounced in China

“So general macroeconomic weakness, its pronounced in China, but we see it elsewhere in the enterprise segment, being offset by, I’d say torrid growth rates and cloud computing”

Stacy Smith – EVP and CFO

The supply chain is healthy

“The worldwide PC supply chain is healthy, as we ramp our sixth generation core microprocessors, formerly known as Skylake.”

Weak PC client business offset by strong growth in Data Center

“Overall, we are seeing a weak PC client business being offset by strong growth in the Data Center, memory and Internet of Things businesses.”

Margins hit by 14nm ramp costs

“The gross margin question, if you look at the margin recon, what we saw is we saw some good news associated with the richer mix. It was offset by higher 14-nanometer costs than we were anticipating. We are expecting some bad news. We had a little bit more bad news than we anticipated”

We actually probably undershipped the market in Q3

“We exited Q3 with healthy worldwide supply chain inventories. We actually think we probably undershipped the market a little bit in Q3, and we are forecasting seasonal Q4, and there was a little bit of movement into the businesses, but nothing that really moves the numbers.”

Segmentation of PC market driving higher ASPs with premium segments

“if you use our desktop business as a proxy, we have been in a low unit growth environment for a while, that’s kind of slightly down, slightly up kind of thing. This year down a bit more. But we have managed to maintain the profitability of that business, because we are seeing a lot more segmentation of the business. You still have the first time buyer PCs that happen in emerging markets, but increasingly, there is relatively expensive PCs that provide a lot of value to the consumer, in all-in-ones, and we now see dedicated gaming PCs that are doing quite well, and those kinds of things.”