Intel 4Q15 Earnings Call Notes

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Brian Krzanich

Macro weakness weighed on enterprise demand, but DCG has strong underlying trends

“Data Center Group grew 11% over last year to an all-time record of $16 billion in revenue. Macro weakness weighed on enterprise demand and resulted in slower growth than we expected at the beginning of the year. However DCG’s overall performance highlighted the underlying trends driving data center demand as cloud and communication service providers’ revenue, both, grew more than 20% for the year.”

First quarter reflects caution especially on China

“While our outlook for the first quarter reflects some caution about overall demand, particularly in China, we continue to expect solid growth in the business in 2016.”

Changed cadence of depreciation based on longer technology wave

“The depreciation change was not included in my forecast that I provided back in November. We were in the middle of the analysis. What prompted it was, we did an in-depth analysis based on the cadence of moving from one process technology node to the next. We talked about that at the beginning of 2015, and the third wave of products and we kind of completed our long range planning in the fourth quarter and that has what triggered the change in the depreciation cadence.”

We believe 2015 is starting with very healthy inventories

“We believe that 2015 ended with I would just call it very healthy inventories. In fact, one of the things we saw was a slight decrease in the inventory levels as we exited the fourth quarter. If you take a look at what we had originally projected and what would have been more an industry norm would have been a slight increase in inventory. We expect those kind of healthy inventory levels to extend through ’16. There is no sign that anybody is adding inventory or not moving of a cautious position on inventory and that is what has been built into our forecast as well.’

We are pushing to get to a two year cadence on Moores law

“10 nanometers would be closer to that two-and-a-half years than two years that we would continue to strive to get back on two years. Some of that was as we go to the fine 7 nanometers, what the complexity technology looks like, whether UV is ready or not, but absolutely we are pushing to get back on that two-year cadence.”

Stacy Smith

Worldwide PC supply chain is healthy inventory

“We continue to believe the worldwide PC supply chain is healthy with appropriate levels of inventory.’

I don’t think we’re surprised by where we came in on data center

“Let me just add one thing to the premise of your question. I think we were not surprised by where we ended up in the Data Center. If you recall back in November, we talked about Data Center growth rate for the year being in the low double digits. That is exactly where we came in.”

We have a cautious stance. Sell through to the end customer was less than we thought

“we have a cautious stance as we start the year. There were a couple of things that feed into that. Units were a little weaker for us in the Client segment and Q4. As we worked our way through the Christmas selling season, what we saw was the sell-through all the way to the end customer was a less than we thought. We made up for that with a rich mix, so that is why we ended up with a pretty good result, but a little – we are watching that carefully.”

Our team on the ground in China has gotten fairly cautious about what is going on there right now

“our team on the ground in China has gotten fairly cautious about what is going on in China right now. As you know, that is the largest PC market, so we are just little cautious on the growth rates there.”

Accounting change to depreciable life is not a signal that Moores law is slowing

“please do not take the accounting of the depreciable life to be somehow signal that we are letting our foot off the gas on process technology cadence and process technology leadership. That is the heartbeat of the company and we are driving it hard. The accounting just as looking at how long that equipment is economically viable in our factories and it is pretty clearly five years as we go forward.