Intel 4Q13 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.

Signs of stabilization in PCs in 4Q

“The PC Client Group was down 4% for the year, but the business began and stabilized and actually grew a bit in the fourth quarter achieving all-time records of i5 and i7 unit shipments. The desktop business was particularly strong in Q4 growing 11% over last year.”

Enterprise weak though

“Enterprise, however, fell short of our expectations for the fourth quarter and the year as we overestimated the rate of recovery among corporate buyers.”

Growth expectations for 2014: decline in PC, double digit growth in Data Center

“Turning to 2014, we are planning for revenues to be approximately flat. We expect the Data Center Group revenue to be up in the low double-digits and PC Client Group revenue to be down in the mid-single-digits. We are forecasting the midpoint of our gross margin range at 60% flat to 2013.”

Analyst Q: Consensus view that Taiwan Semi has an inherent wafer cost advantage which neutralizes INTC’s density advantage:Intel response:

“what really counts in all of this is transistor cost and what we really talk about in our Moore’s Law of Curves and when we talk about transistor density is driving a consistent cost reduction of the transistors and so wafer cost is one segment of that. I’m not going to comment on you know (indiscernible) wafer cost versus our wafer cost but we feel confident that our relative level of scaling and our internal wafer cost are such that we believe we have a leadership position in transistor cost.

When you’re talking about any product whatever it is, a logic product that’s a low-end microprocessor for wearable or internet of things or high-end Xeon server. You’re talking about the number of case and hence the number of transistors required to put that logic device together, it doesn’t matter whose technology it’s on to some extent. It doesn’t matter what node and so the more cost effective those transistors are whether it’s 500 million or 3 billion the lower the product cost there is and that’s really what we focus on and why we focus on transistor cost”

Planning for too much demand three years ago creates a tricky management situation

“You know you start these construction projects, we talked about in the past, yes it starts three years roughly in advance. They are very complex, some of the most complex if not the most complex construction projects you could imagine. If you start those three years in advance so when you’re ready for operation. We started this one about three years ago, if you go back and look three years ago our view of the PC Industry and PC growth it was you know much more robust than what has played out and is our forecast today and so what we have done as we have brought it online as we have been very conservative with our how we manage the project”

Weakness in enterprise, but no cause for alarm

“if you look at the trends in the fourth quarter I think the trends actually reinforce the growth rate among cloud, high performance computing, networking storage they all came in consistent with what we thought Brian went through a lot on the year-over-year growth rates there so very robust growth rate. So it actually increased our confidence in that.”

Enterprise driving positive uptick in PC spend, emerging markets weak

“So as we said in our script that what drove a lot of it was desktop and we are seeing the mature markets enterprise is the strongest with the emerging markets still flat to slightly down. So our view that if you look out from a PC perspective was that we forecast with a relatively cautious and careful view looking out.”

We think there is more to desktop growth

“we think there is a lot more to the desktop growth. We also introduced the Haswell-based NUC, which is a smallest form factor desktop machine that you can have. So it’s those kinds of innovations that are driving this desktop growth as much and more than the software transition.”

Reached saturation point in tablets in developed markets, not emerging yet

“we think what we’re seeing in Asia is just that the tablet penetration rate increased that’s offset by a couple of years from what we saw in mature markets and so that’s why and we’re seeing some stabilization and improvement in mature markets. It’s ahead of emerging markets is we have just reached saturation points on tablet penetration and then the emerging markets are still increasing.”