Intel at Credit Suisse Conference Notes

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Intel (INTC) Presents at Credit Suisse 20th Annual TMT Conference

Stacy Smith – EVP, Manufacturing, Sales & Operations

New role after CFO

“So, my new role is leading Intel’s sales, manufacturing and operations. And when I think about that portion of the Company, I think that it has been a big part of our competitive advantage over the last decade. Our manufacturing advantage, the ability to drive Moore’s Law faster than anybody else, the ability to bring the complex products into high value manufacturing at high yields and good margins, and then our relationship across the ecosystem and in particular our deep relationship with customers that are doing innovative work.”

Moving towards a sales force aligned by vertical markets

“That said, our sales force has been designed over the years to be a very efficient functional model. And what we’re toggling towards is a sales force that’s actually aligned by vertical markets. And so, we will have a dedicated sales force, for example for automotive that has very deep skills in that space and can go in to a customer like a BMW or a Delphi which was announced [ph] this morning, and do a solution sale that touches all of the different parts of Intel. ”

Returned almost $100b to shareholders over 10 years

“Over this ten-year horizon, we’ve returned almost a $100 billion to shareholders in terms of cash generated to the model, and that’s cash generated after we spend on CapEx, after we spend on R&D, and it’s broken out about half between the dividend and half between buyback. The average buyback price over that time period is in the low 20s. So, we’ve also benefited from the fact that the stock price has been appreciating. So, when you when you zoom out, you can see in the financial model the impacts of the investments that we make.”

We’re one of the last companies standing that invests in factories and products

” we do a lot of benchmarking. Now, it’s hard for a company like Intel because we’re kind of the last Company standing that still invests in technology development factories and products. And those products range from kinds of things as Rich [ph] was talking about earlier to high-end data centers Xeons and Xeon Phi and Silicon Photonics. So, it’s difficult for us to find two or three companies that make a benchmark for us. Specifically we would create some [ph] benchmark that would include like a TSMC and companies that we compete with”

Areas of investment

When you look at where our big investments are going right now, we’re going down in SOCs for things like phones; we’re going down in the PC segment of the business; we’re going up in the data center; we’re going up in IoT specifically and automotive which is a long-term investment for us that will we believe payoff but will take some time. And we’re going up in places like through the cross point memory where we believe we have a disruptive memory that has some tight ties to our server platform and alternatively to other platforms in the Company where we can get a very good return on that investment.”

We win by providing great performance per watt per dollar

“The way that we then work with our customers to ensure the growth of the businesses, first and foremost and coming back to my new role, we have to deliver just overwhelming performance per watt per dollar equation to the customers. At the end of the day, in every market that we serve, if we can do things that are higher performance, lower cost, more energy efficient than what anybody else on the planet can do, we win. That’s how we win in the high end of the PC market, that’s how we win in the automotive space, that’s how we win in low end IoT applications and that’s how we win in the data center.”

The last 12 months have been a bad part of the cycle for memory but moving into the sunshine more

“the last 12 months have been kind of a — it’s the bad part of the cycle for memory in general. It looks like we are moving a bit more into the sunshine as we go forward. But, certainly we’ve seen prices coming down; that’s been a part of it. But the bigger Intel specific issue is that downturn hit us at the time that we were investing and bringing Dalian up, so significant start up cost in a factory that wasn’t in production”

It’s clearly getting harder to advance Moore’s Law

“It clearly is getting harder to advance Moore’s Law, there is no question about it. If we get into the world of multi-patterning lithography, it becomes really complex. I think everyone is struggling with the yields in the early phase of a ramp for everybody or a little less than what they’ve historically been. But that’s okay as far as we saw that relative leadership because that ultimately translates into leadership product.”

The company has changed from just PC

“I was reflecting after the dinner last night. I’m not sure we had a single PC question at dinner. And again, relative to 10 years ago at my first conference, it all would have been what’s happening in Taiwan, what’s happening in the channel, how’s the PC market? It was just remarkably different and it does show that how different we are as a company today. In terms of the PC market, the napkin math that are shown in a couple of different investor meetings is even in a market where the PC market’s down in that kind of mid single digits, if we’re doing a good job of segmenting the market, a good job on our cost and OpEx side, we can grow the company.”