Microchip FY 4Q17 Earnings Call Notes

Steve Sanghi – Microchip Technology, Inc.

End market breakdown

“Based on fiscal year 2017 results, our largest market is industrial, with 35% of our business in this market. The second-largest market is automotive, with 25% of our business. Then comes consumer, with 24% of our business, computing with 9%, communication with 5% and, finally defense and aerospace, with 2% of our business. Over the last several years, our fastest-growing markets have been industrial and automotive, which together account for 60% of our business now. Additionally, our consumer exposure of 24% is not made up of mobile phone; it is made up of home appliances, security systems, thermostats, televisions, remote controls, power tools, drones, joysticks, headphones, furniture, consumer toys, et cetera.”

Seeing a very strong business environment

“We are seeing a very strong business environment for our products worldwide. Our bookings rate is extremely strong. As you know, we have not broken out our book-to-bill ratio in a long time, since it is largely misunderstood. However, to make you aware of the strength of our bookings, we are providing this indicator for one time.”

*Inventories are low and lead times extending

“Other inventories at Microchip as well as at our distributors are towards the low-end of the normal range, therefore we are starting to see some lengthening of our lead times. We’re starting to see challenges in fab, foundry, probe, assembly and test capacity. We have increased wafer starts in our three internal fabs and we’re adding capacity in our three back-end facilities. Despite all this, we are seeing significant business that we’re not able to support by the customer requested dates.”

There are only three uses of capital

“There are three uses of capital. There can be three different uses: using it in our own business in making investments, giving it as a dividend or using it as M&A, and you can call it maybe, fourth, stock buyback.”

We’re also seeing general strength in the economy

“Beyond that, we’re also seeing general strength in the economy, especially happened post-election in U.S. The whole world seems to be positive. You can talk to distributors and they are seeing strong bookings and a strong environment. Lead time for equipment is lengthening, lead time for packages, all sorts of things is lengthening. So those are some of the signs of what’s happening generally in the economy. But I think what we are seeing has really also a significant company-specific element on the top of that.”

General Electric’s (GE) Q4 2016 Earnings Call

Jeff Immelt – Chairman and CEO

No much change outside the US

“we haven’t really seen much change so far. I think if I took it by segment, the Affordable Care Act is getting the most, I would say both attention and the media and by our customers. I think you could see some caution around the Affordable Care Act as you go forward….I think outside the U.S., I really haven’t seen much change in interplay, post the election in terms of what our customers are saying and how to think. ”

 

Jeff Bornstein – SVP and CFO

Challenging environments in oil and gas.

“In oil and gas, the environment continues to be challenging and activity levels remain muted, external market indicators appear to be stabilizing with expected more balanced supply and demand fundamentals, partly influenced by the recent OPEC production agreement…2016 was an extremely difficult year for oil and gas, and the business expects the first half of 2017 will continue to remain challenging with sequential improvements in the second half of the year. ”

On healthcare segment

“Healthcare executed strongly in 2016, delivering good organic growth and operating leverage and earnings. They delivered $450 million of cost out versus $350 million target. Margins for the year expanded 100 basis points. In 2017, we expect the same focus on cost and product competitiveness with similar results. We will launch 25 new products and are targeting a point of share in 2017. We expect China, Africa and Asia Pacific to continue their strong growth. Europe is expected to be roughly stable, while the U.S. maybe a bit slower due to the uncertainty around the repeal or replace of the Affordable Care Act.”

Looking for a more competitive tax rate

“I think what GE wants and what we think is most important to competitiveness for U.S. companies is essentially a competitive tax rate, something that looks more like the OECD averages, which is just roughly 21%, 22%. And this notion of territoriality that you pay the tax in the jurisdiction that you actually earn it and then from there those earnings are fungible and can move cross border….although you may — companies may find themselves in place with a relatively lower U.S. tax liability, I don’t think it changes in anyway how they think about what their foreign tax liabilities are.”

Texas Instruments 4Q16 Earnings Call Notes

Texas Instruments (TXN) Q4 2016 Results

David Pahl – VP and Head of IR

Industrial improvement continued

“Revenue for the fourth quarter increased 7% from a year-ago, as demand for our products remained strong in the automotive market. The improvement we saw in the third quarter in the industrial market continues. Demand in personal electronics market was down slightly from a year-ago. ”

revenue segment overview

“Specifically, in 2016, industrial comprised 33% of our revenue, up 2 points from 2015. Automotive was 18% of our revenue, up 3 points. Personal electronics was 26%, down 4 points. Communications equipment and enterprise systems were 13% and 6% respectively, both year and to last year, while other was about 4%. We did not have a customer that was more than 10% of our revenue in 2016.”

Kevin March – SVP, CFO

We have been intentional about directing investments towards auto and industrial

“Joe, this isn’t — as you know and you have been tracking our revenues inside of that market for some time. It’s not something that is capping this quarter, right. We have been having very strong growth inside of automotive and that is a result of how we allocate capital. We have for some time been directing investments and increases both in automotive and industrial. And that’s because we think that those are the two markets that are going to provide growth, not just for us but in our industry. So — and as you know, these are long tail type of design wins and revenue strength. And we are very intentional as I mentioned earlier trying to direct our investments, so we are not just seeing growth in one sector or at one customer.”

Not a lot has changed in the overall environment

“Yes. So, first Vivek, I’ll just point out that when we look at the overall microenvironment, we really don’t see something that has significantly changed in sometime. So, we continue to believe that we’re operating in a very similar microenvironment that we have, that we haven’t been If you look at inside of the quarter, demand came in stronger, really across most markets in businesses. The only notable exception as I talked about before was personal electronic came in about as we expected. And to your point, we are seeing choppiness in particular markets. Some of that more recently has been driven by one large customer. You can go back to clock not too long ago into last year we saw some choppiness in comps equipment before that we had a PC, XP refresh cycle that came to an end. And none of those were really tighter the overall economy, there was just very specific things going on within specific market. So, that’s really the environment that we thing that we’re operating in now.”

Rafael Lizardi – Co-CFO

Intel at Citi Conference Notes

Murthy Renduchintala – President, Client and Internet of Things Businesses and Systems Architecture Group, Intel Corporation

Left QCOM for INTC

” I spent 12 really enjoyable years at Qualcomm. It was a great company to work for. I learnt a hell of a lot, made a tremendous number of friends and some very strong relationships in the industry. But as I looked at the opportunity at Intel, it provided me with an opportunity to personally grow in terms of scale at which I could contribute, as well as learn. And I think at the high-tech industry every executive needs to be looking for opportunities to learn. And I spent quite a bit of time with Brian understanding the strategy of the Company. And I really got to profoundly believe in it.”

Intel has made strides in delivering wireless

“I think that there is a tremendous future for Intel and others as the wireless opportunity continues to become fundamental in many areas of technology, as we see the collision of IoT and 5G capability and real prowess in the wireless area is going to be really, really important. And I think for Intel, I think it’s made some good strides in really being able to master the basics of what it takes to deliver really good wireless technology.”

Connectivity is a fundamental ingredient

“I think it’s really important to realize that connectivity and wireless in general is material to Intel now and it’s going to be material to Intel in the future. It’s one of these things that I think is going to be a fundamental ingredient to almost everything that Intel plays in. I regard it as, for example, essentially an elemental need of the Company, you know, just as good CPU technology is going to be necessary, just as good transistor technology is going to be necessary, these are kinds of things that are going to be the basic building blocks used by the product regimes of Intel, and really whether it comes to broadband cellular connectivity or technology that drives unlicensed band connectivity, those are going to be real raw materials, and mastery and capability in those space is going to be fundamental, particularly as you see the collision of IoT and 5G going forward, and essentially a redefinition of the wireless landscape beyond just mobile broadband and into the connectivity of everything”

Lines between licensed and unlicensed communications are blurring

“I think you’re seeing the lines between licensed and unlicensed communications continuing to blur. You’ve got the advent of technologies such as LAA, which really are requiring a mastery of all wireless technologies. It’s no longer just to be good at cellular, you have to be really great at Wi-Fi, you have to be great at Bluetooth. And as you look at narrowband IoT, there are other technologies that we’re going to have to be really good at.”

Transition to 5G is not for the faint of heart

“I think if you look at the future as it relates to what’s going to be required to deliver on the full vision of 5G and its interconnectedness with IoT, what’s really becoming apparent is that this is not an R&D equation for the faint-hearted. It’s going to require a lot of stamina and the ability to actually invest now for a route to revenue that may be some distance in the future, but for those that have the ability and stamina to invest now, I think the opportunity is really broad and really pervasive. So I think you really need to have a well-structured business that can provide you the investment capability to be able to invest in that in the long term. Again these are not just incremental investments.”

5G is going to be a fundamental transition

“I think the transition to 5G is going to be as fundamental as the transition from analog to digital, and it’s going to be as much about the transformation in the network and the infrastructure of the network than it is just the air interface. So for me, 5G is another G but it’s a fairly profound G. And I think the investment hurdle to really be a leader in that space is going to be much more significant than for maybe the transition from 3G to 4G.”

5G will see a transformation of the client environment and an explosion of data

“I think 5G is going to see a transformation of the client environment. It’s going to be move beyond just the simple definition of smartphones and connected PCs and move towards an environment where we’re talking about connected cars, robots, drones, connected factories and connected homes. And that environment is going to see an explosion of data in the client environment for megabytes per hour and gigabytes per day, to more like gigabytes per hour and hundreds if not thousands of gigabytes per month, for example, in the case of a connected car or connected factory.”

The explosion of data will transform the network

“And that explosion of data in the cloud environment is going to transform the network, because of the client’s intolerance of latency and the enormous amount of data creating a real bottleneck as it relates to backhaul. And to solve both those problems, I think the network will go through a fundamental transformation, where technologies that used to live in the cloud-based infrastructure now get distributed into the fabric of the very network, transports that data, to minimize latency and to deal with the issue of backhaul being a limitation.”

Will see 5G in the 2018/2019 time frame, mainstream in 2020

“I think 5G is going to be something that transitions over time as we see various flavors and elements that are all key parts of 5G become real. And I think you’ll see trial networks and real experimentation in the 2018 timeframe, 2019 timeframe, some very well-publicized trials to that effect. But I think you’re really going to see the mainstream advent probably in the 2020 timeframe and beyond. ”

Taiwan Semiconductor 2Q16 Earnings Call Notes

Taiwan Semiconductor Manufacturing’s (TSM) CEO Mark Liu on Q2 2016 Results

Silicon content in smartphones continues to increase

“This silicon content increase is driven by increasing adoption of innovative smartphone features, such as dual camera, security sensing, augment reality, virtual reality and migration of 4G, 4G Plus and to 5G. Most of the high end smartphone features are also proliferating into lower end smartphones, because those innovative features usually require more advanced technologies. With our customers, we will gradually increase our market share in the smartphone market.”

High end smartphone has been slowing but we don’t expect that to continue

“Indeed, the smartphone has been slowing down in the past six quarters, particularly for the high end. And actually, but at the same time, the mid end, certainly in content, is increasing very fast. And the unit number at the low end also increasing very fast. As far as the high end, we don’t believe the trend for the last year drop will continue. Okay? Innovation will surface to drive the momentum of the unit growth. So in total, we still estimate the growth rate will be about 5% in unit growth. Significant content I mentioned is also about equally important. So that’s the general model we have.”

Lora Ho

Better than expected second quarter due to increases in mid and low end smart phones

“We had a good second quarter. Our second quarter, our second quarter revenue increased 9% sequentially to NT$222 billion, exceeding the high end of our guidance given in April, due to business upside resulting from the demand increases in mid and low end smartphones and customer inventory restocking.”

Increase in demand from China smartphone

” Our second quarter result was helped by an increase in demand from China 4G Plus smartphone ramping and continued 3G to 4G upgrade from emerging markets. Given a stronger than seasonal business for our fabless customers in the second quarter, we estimate our fab-less customers’ DOI exiting, exceeding second quarter is above seasonal level.”

Capital intensity declining

“TSMC’s CapEx-to-sales ratio, known as capital intensity, has come down significantly in the last two years. Compared with the high 40s level seen in 2011 to 2013, our capital intensity has dropped to about 31% last year. Going forward, we estimate our capital intensity will remain at mid-30s level for the next few years. One major factor contributing to this moderate level of capital intensity is our effort made to minimize the conversion loss between two adjacent technology nodes.”

Micron FY 3Q16 Earnings Call Notes

Results impacted by continued weakness in PC

“op line results were primarily impacted by continued weakness in the PC segment and the mobile qualifications we discussed last quarter. With recent data points indicating some improvement in channel pricing, an expectation of finalizing our mobile qualifications and continued progress on our technology and operational milestones, we remain confident about our opportunities.”

DRAM industry supply growth in 20% range

“we believe that the DRAM industry supply growth will be in the low to mid 20% range in 2016, which is consistent with our prior commentary. If wafer output declines in the latter half of the year as some parties have forecast, we would expect to exit the year on a slower run-rate and 2017 bit supply growth could be in the mid to high-teens. This compares to our long-term bit demand forecast in the low to mid-20% range. The significant improvements we are seeing in channel pricing are not currently impacting other segments. And as a result, we continue to take a conservative view of the market environment.”

3D XPoint should generate revenue in 2017 and beyond

“Relative to 3D XPoint, we are working with market enablers across a number of market segments and continue to believe this innovative technology will be a strong contributor to Micron’s future success with revenue in 2017 and beyond”

Ernie Maddock

DRAM segment breakdown

“DRAM represented 60% of our total revenue with the following segmentation. Mobile was in the mid 20% range. The PC segment represented about 25%. The server business was in the low 20% range. And specialty DRAM, which includes networking, graphics, auto and other embedded technologies, was in the high 20% range.”

Jabil 3Q15 Earnings Call Notes

Mark Mondello

Current decline in demand is more acute than in past years

” the current decline in demand we’ve seen in existing products is more acute than in past years, thereby amplifying the negative impact to the earnings this quarter.”

We’re dealing with a single issue that cuts deep emanating from one sector of our business

“As I try to articulate in today’s prepared remarks, we’re dealing with a single issue of being an issue that today cuts deep. The company is in great shape and we’ll get past these product demand issues that emanate from one sector of our business, a business that’s quite broad. ”

We do expect a snap back in FY Q1

“when it comes to our Green Point business, again I mentioned during my prepared comments that it’s really about what happens with phone demand and phone sell-through through the calendar year and our first quarter being September, October, November, is right in the middle of that. So, in terms of in Q1, as we sit today, we do expect a snapback. Everything that we’re looking at in terms of demand, the product launches on new products that go in as expected and are on track, so, hence my comments about the snapback for Q1.”

Best Buy FY 1Q17 Earnings Call Notes

Best Buy (BBY) Hubert Joly on Q1 2017 Results

Delivered better than expected flat comps

“In our domestic business, we delivered better-than expected, essentially flat comparable sales, versus our guidance of 1% to 2% decline. Contributing to these better-than expected results was the strong performance in our online channel which grew 24% in the quarter; and similar to last quarter’s trends, from a merchandizing perspective, we saw strong year-over-year sales growth in health and wearables, home theater and appliances, offset by continued softness in mobile phones and tablets.”

Q1 represents less than 15% of full year earnings

“Although we are reporting better-than expected results today, we are not raising our full year outlook as the first quarter represents less than 15% of full year earnings and at this stage, we have no new material information as it relates to product launches throughout the year.”

The wireless industry market is obviously soft

“Yes, good morning, Matt. The wireless industry market and there is some public information around this, has continued to be quite soft in the quarter as we anniversary a more iconic launch the previous year. So it’s continued to be soft and we continue to believe that significant launches in the back half of the year can revert the trends. So really, very consistent pattern compared to the previous quarter”

Computing was better and phones were softer

“In the quarter, I think, compared to our expectations, computing was better. No doubt about this. Again the results of our partnerships with the key vendors and great customer experience across all of the touch points, computing was better and phones was softer.”

VR revenue impact will be very small at this point

“Yes, virtual reality is a very exciting technology. I bet you all have seen that we were the exclusive place where you could try the Oculus in our stores. So a lot of excitement there. The impact on the business this year is going to be very marginal. So, I think exciting from a consumer NPR standpoint, very small at this point from a revenue standpoint.”

Sharon McCollam

Online revenue now 10% of total

“Domestic comparable online revenue increased 23.9% to $832 million, primarily due to higher conversion rate and increased traffic. As a percentage of total Domestic revenue, online revenue increased 210 basis points to 10.6% versus 8.5% last year.”

Qualcomm FY 2Q16 Earnings Call Notes

QUALCOMM (QCOM) Steven M. Mollenkopf on Q2 2016 Results

Derek K. Aberle – President

Reducing estimates for device shipments

“We are adjusting our estimate of calendar 2016 global 3G/4G device shipments to 1.625 billion to 1.725 billion devices, with year-over-year unit growth of approximately 8% at the midpoint, down from our previous midpoint estimate of approximately 10% growth. The strong 4G ramp in China continues, as each of the operators pursues aggressive subscriber growth targets with their 4G-plus service offerings, and design momentum is moving rapidly towards all-mode devices across China. The strength in China, however, is being offset by a reduction in growth rates in other emerging regions, which we believe is attributable to macroeconomic headwinds. In addition, our forecast for premium-tier device shipments is down slightly versus our prior view, driven by slower than expected upgrades within one of the premium-tier ecosystems.”

Cristiano R. Amon – EVP, Qualcomm Technologies, Inc.-President, Qualcomm CDMA Technologies

Internet is becoming wireless, 4G has matured in developed markets

“I think one of the things is more the Internet is becoming wireless, and you see the 4G transition becoming more mature in developed markets. You see carriers now competing for premium customers. And the transition that we’ve been talking about, LTE to carrier aggregation, I think that’s actually growing faster. So I think you’re starting to see gigabit LTE modem that we demonstrated. And we will see from that one, the user from licensing spectrum with the global standard, I think was mentioned by Steve, the LAA, and maybe within the next two to three years an accelerated timeline of deployment of 5G. As we continue to invest and we see those technology transitions ahead of us, we feel very confident that the whole nature of the market is probably going to demand the latest technology and the key devices.”

George S. Davis – Chief Financial Officer & Executive Vice President

Chinese consumers are shifting from low end to high

“Sure. On the MSMs, as you look at year over year, there’s definitely a significant delta from one major customer that is contributing. And what you’re seeing in China is a shift in low/entry to mid and high, and so it’s one of the reasons why you’re seeing strong pickup in revenue per MSM in the quarter. So it’s a story more of mix shift. It’s pretty neutral outside of that. And so the low tier units, they tend to be more of those low-tier units that we’re trading off, but we’re picking up a significant amount of mid-high.

Intel 1Q16 Earnings Call Notes

Brian M. Krzanich – Chief Executive Officer & Director

Evolving from a PC company to one that powers the cloud

“We are evolving from a PC company to a company that powers the cloud and billions of smart connected and computing devices. The Data Center and Internet of Things businesses are now Intel’s primary growth engines, and combined with Memory and FPGAs form and fuel a virtuous cycle of growth.”

Not worried that PC will shrink to a point where we wont be able to fund innovation

“I’m not worried that PC will shrink to a point where the scale will get large enough to fund either the factories or the other innovations. The fact that we talked about the restructuring actually makes us more profitable in the PC. That’s allowing us to invest even more in those growth areas. Remember also, those growth areas are growing, and so they are replacing some of the volume in the factories as they grow.”

Restructuring to move into growing segments besides PCs

“Now, let’s talk about the PC. You asked, how do we take a look at the PC long term and how do we make sure we’re making the right investments, which to me that’s the key. That’s what we really tried to do with this restructuring, is take a look at the areas that are growing, that we believe we can bring innovation to, that will make a difference to the end user. You’re going to see more investments in 2-in-1s. You’re going to see more investments in thin-and-light devices. You’re going to see us push even harder on high-end gaming systems, which are growing at a very fast rate, and they tend to buy up the stack to the very, very top. And then we’re continuing to gain share in segments like set-top boxes, which are becoming more and more PC-like in their capabilities, if you think about it from a hardware standpoint.”

We are always paranoid about the competition, always driving

“having been raised by Andy Grove, always paranoid about the competition, always driving. And we know that we live or die by the performance of our products. We believe if you take a look at our roadmaps, we have a strong competitive leadership that should allow us to continue to have the position in the market that we currently have.”

Strategy is going beyond the CPU

” our strategy that is becoming much, much broader than just the CPU. What we are trying to do is really provide top-of-rack to bottom-of-rack solutions that bring, that work together and bring performance across the whole rack. And that starts with Rack Scale Architecture itself, which is a very unique architecture that will allow people to build racks in a much denser and lower cost way to Silicon Photonics for within rack communication. Then we’ve got a 3D XPoint, and then you have our whole CPU architecture from networking, storage, up through server.”

Stacy J. Smith – Chief Financial Officer & Executive Vice President

Expect PC markets to decline in the high single digits in 2016

“We now expect the PC markets to decline in the high single digits in 2016 versus our prior forecast of mid-single-digit decline. Our projection of the PC market remains more cautions than third-party estimates. ”

TAM wasn’t strong and customers were bringing down inventory levels

“We were impacted by a TAM that wasn’t terribly strong and the fact that our customers were bringing their inventory levels down some.”