Intel 3Q16 Earnings Call Notes

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Intel’s (INTC) CEO Brian Krzanich on Q3 2016 Results

Not going to say everything is good again in PC but signs of strength

“we’re not going to raise the flag and say everything is good again. But if you take a look at this quarter, what we saw was kind of an increased strength in the areas that have been strong in the past. So, definitely the mature markets were a bit stronger. The one that was probably a little bit of a shift is China, was a little bit better than we had forecasted as well. Enterprise was again strong, consumer was better but it’s still not back to where we consider it where we would like to see the consumer side. And it was a good mix between desktop and mobile products, laptops and devices like that. So, it’s kind of an increase in what’s been strong in the past as really what drove the growth for this quarter.”

Weakness in enterprise mostly driven by movement of those applications to the cloud

“Sure. I think there is two parts to this. A certain amount of the enterprise weakness right that has occurred over the last few years is certainly driven by movement of those enterprise applications to the cloud. And we’re very comfortable it doesn’t really matter for us from a product definition or product performance standpoint whether it goes, those applications go to the cloud or whether they stay in the enterprise.”

GPUs do have good accelerating performance in linear algorithms

“GPUs do have as we say, good accelerating performance in certain linear algorithms. Those are quite good and we have our Xeon Phi in that space. And then the highest performance area, are ASIC where they’re workload specific and designed around the algorithm specifically. ”

Not talking huge shifts in inventory

“And we compile all that data to give that forecast. Like Stacy said, we’re not talking about a major shift in the inventory, we’re talking about a couple of days, about a couple of days when you ship a million units a day is a big number, when you take a look at the ASPs and a million units a day. So, it doesn’t take a big swing, we’re not talking weeks here, we’re talking a couple of days.”

Stacy Smith

Diversified over the last 10 years

“10 years ago, virtually the entirety of our business was tied to the PC market. Today, we have a diversified portfolio of growing businesses, with roughly half of our profits coming from the Data Center and Internet-of-Things businesses. We’re also a different company in terms of how we look financially. 10 years ago, our revenue was approximately $35 billion with a gross margin of 52%. In 2016, we’re on a path to almost $59 billion in revenue with a gross margin of 63%.”

Saw some inventory restocking of PCs

” I’d say from in-market standpoint it’s pretty seasonal. And then from our business it’s the impact that Brian and I both talked about which is, we saw some strengthening of demand in the third quarter, we saw some refilling of the pipeline which was kind of lean coming in. And then in Q4, we’re expecting kind of seasonal in-demand but some depletion of inventory pipeline. And it doesn’t take much, if you think about the size of the PC market, you’re down to changes in inventory levels across the worldwide PC supply chain it was measured in days or certainly less than a week of inventory that kind of shifts around.”

Bob Swan

New CFO

Thanks Stacy and thanks Brian. I’m both excited and very honored to be joining the team at Intel. The Company has had a profound impact on the world with industry-leading technologies that has a great business model driven by Moore’s Law and an outstanding balance sheet.”

[analyst comment]

ASPs on PCs could go up next year

“Great. Thanks for that. And then a lot of discussions that I’ve had with the channel recently have been fairly positive around PC ASP increases next year. And part of this is the mix towards enterprise as consumer mix down. But others are pointing to sort of an inflection in ultrabooks, thin and light. So let’s say we got a massive ASP increase in laptops, like they’re up 10% or something like that. What kind of fall-through would we expect for CPU ASPs?”