Intel at Bernstein Conference Notes

Brian Krzanich – Chief Executive Officer

The PC is not dead but it is declining

“the PC is not dead, right so it is a declining market. It is what you’re seeing is the effects of replacement cycle pushing out and some other functions eroding, but it is still a very profitable business for us”

Growth drivers will be data center IOT and memory

“The growth engines we believe are going to be the three pillars of the data center, IOT and memory. And so, that’s really the transition you are seeing us go through is really push much more of the resources, much more of the focus on to those three segments.”

We have to move the culture to focus on different things

“Now what that means is that we have to really get a culture that’s been all about the PC, PC first, innovation around the PCs to be focused on innovation in these other new areas. And that’s really – at the last earnings announcements we announced a headcount reduction and the movement of resources, that’s really an effort to do the last push of the organization over from being very PC centric to much more cloud and IOT centric which is what we’re going to drive moving forward.”

Organizationally people get the roadmap now but there is a lot of work technically that still needs to be done

” Organizationally I think this will be the last big push we need to do. If you talk, if you look into the halls of Intel, if you talk to the people, they understand the strategy much, much clearer now. They’ve bought into this transition and they understand how this is the big push organizationally right from kind of an emotional standpoint. Technically there is still a lot more work to do.”

When I became CEO three years ago people were saying tablets were going to replace PCs

“Remember three years ago when I became the CEO tablet’s were growing at 30%. People were really worried tablets were going to replace PCs. We made a pretty strong effort to make sure that we built our position there that allowed us to if that did happen we were going to be well positioned and we actually become the number one merchant producer of tablet silicon. So what happened though is, you are right in that three years tablets have rolled over. They are actually declining somewhere 10% to 20% now depending on whose numbers you get and what they see.”

PC replacement cycle has extended

“What’s happened in the PCs is it has kind of continued to decline at this mid to high single digits. I think that’s a combination of two things and they are somewhat related to the tablet as well. First, the replacement cycle for the PC has extended. It was – we talked about four years was the average, now it has moved to about five or six years.”

Leadership is about a cost per transistor and performance per watt type of number rather than transistor density

“to me, process leadership is cost per transistor and performance per watt type of number and that’s really where we believe we’ll continue to have leadership. We try and classify that with our consistent scale ourselves, but it is our scale, it is not going to necessarily correlate to our competitors’ scale.”

Competitors may come out with a new node but the performance improvement isn’t real

” this gets back to what level of performance are you really providing with each one of those nodes. So if you come out with a new node, but you have very little improvement, but you say, hey I went from 14 or 16 nanometers to 10 nanometers, but I provided a 5% to 10% improvement, that’s not really a node, they are not well. What we’ll do is stay forward out a little bit longer, but yes we’re going to provide a standard 20% improvement, 50% scaling factor. So we’re going to keep all those numbers very consistent as we go and that’s actually what we believe continues to keep us in our leadership.”

The data center is no longer one segment–it’s now three

“Sure, so let’s step back for a second and talk about the data center, right? The data center is no longer one segment. It is really, you talk about enterprise data center and cloud based data center and high performance computing data centers and those are all growing at different rates and seeing different types of technology needs.”

Public cloud is better from a security standpoint

“There is just scale and virtualization and the public cloud is working through the security issues and you can argue and especially for smaller companies, security is better in the public cloud, they have back up all kinds of things that says for many, many small businesses, small-to-medium businesses, the public cloud is a much better space to put your business into. ”

Machine learning is part of what’s going to fuel the cloud

“Sure. So let’s talk about that, machine learning is absolutely a space that is going to be – it’s part of what’s going to fuel the cloud. When you think about machine learning, this machine learning occurs on the device, the autonomous car, the robot, whatever you want the electrical device or whatever it is you want to put out there at the Edge and then there’s the cloud, and those two are constantly sharing data and sharing algorithms back in forth. I absolutely believe that machine learning will be one of the key drivers for this 20 plus percent comp growth. We think we factored in the right amounts of what machine learning is going to drive into our growth forecasts, but I’ll be honest it is so nascent to that it could be much, much bigger than even what we’ve estimated.”

I wish I could go back and know that tablets were going to decline

“So three years ago right, we were all worried to death about the tablet and 30% growth and I guess if I could go back and look at it I’d say, you know what take your beatings you’ll be right. The tablets are going to fade away and don’t make the investments. I don’t think any of us could have known, but sure I would have loved to have that foresight and say, yes tablets are going to die within a year and start declining 10% to 20% would it have saved us a lot of efforts and all.”

We think we’re now world class in modem

” Our modem technology we believe now is world class. We are able to stay up with the competition really within ahead of or right on top of or just shortly behind them in performance and characteristics. We think that’s going to be critical as we go into the 5G world. We believe we’re leaders in 5G right now, both of the base station and in the connectivity portion. ”

We’ve made a lot of investments in phone but that looks like it’s starting to level out now

“On the phone, we’ve made a bunch of investments. We’ve started to produce silicon, but you said yourself it appears that the phone business is starting to slow and may be its starting to level off. The profit is becoming very tight in that market and so we’ve been very careful about not getting into that market in a way that’s going to erode profitability and erode margin in the company, so we’re going to continue with the modem development.”