Intel Announces Q3 2014: Mucho Dinero

Subject: Editorial | October 15, 2014 - 12:39 PM |
Tagged: revenue, Results, quarterly, Q3, Intel, haswell, Broadwell, arm, amd, 22nm, 2014, 14nm

Yesterday Intel released their latest quarterly numbers, and they were pretty spectacular.  Some serious milestones were reached last quarter, much to the dismay of Intel’s competitors.  Not everything is good with the results, but the overall quarter was a record one for Intel.  The company reported revenues of $14.55 billion dollars with a net income of $3.31 billion.  This is the highest revenue for a quarter in the history of Intel.  This also is the first quarter in which Intel has shipped 100 million processors.

The death of the PC has obviously been overstated as the PC group had revenue of around $9 billion.  The Data Center group also had a very strong quarter with revenues in the $3.7 billion range.  These two groups lean heavily on Intel’s 22 nm TriGate process, which is still industry leading.  The latest Haswell based processors are around 10% of shipping units so far.  The ramp up for these products has been pretty impressive.  Intel’s newest group, the Internet of Things, has revenues that shrank by around 2% quarter over quarter, but it has grown by around 14% year over year.

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Not all news is good news though.  Intel is trying desperately to get into the tablet and handheld markets, and so far has had little traction.  The group reported revenues in the $1 million range.  Unfortunately, that $1 million is offset by about $1 billion in losses.  This year has seen an overall loss for mobile in the $3 billion range.  While Intel arguably has the best and most efficient process for mobile processors, it is having a hard time breaking into this ARM dominated area.  There are many factors involved here.  First off there are more than a handful of strong competitors working directly against Intel to keep them out of the market.  Secondly x86 processors do not have the software library or support that ARM has in this very dynamic and fast growing section.  We also must consider that while Intel has the best overall process, x86 processors are really only now achieving parity in power/performance ratios.  Intel still is considered a newcomer in this market with their 3D graphics support.

Intel is quite happy to take this loss as long as they can achieve some kind of foothold in this market.  Mobile is the future, and while there will always be the need for a PC (who does heavy duty photo editing, video editing, and immersive gaming on a mobile platform?) the mobile market will be driving revenues from here on out.  Intel absolutely needs to have a presence here if they wish to be a leader at driving technologies in this very important market.  Intel is essentially giving away their chips to get into phones and tablets, and eventually this will pave the way towards a greater adoption.  There are still hurdles involved, especially on the software side, but Intel is working hard with developers and Google to make sure support is there.  Intel is likely bracing themselves for a new generation of 20 nm and 16 nm FinFET ARM based products that will start showing up in the next nine months.  The past several years has seen Intel push mobile up to high priority in terms of process technology.  Previously these low power, low cost parts were relegated to an N+1 process technology from Intel, but with the strong competition from ARM licensees and pure-play foundries Intel can no longer afford that.  We will likely see 14 nm mobile parts from Intel sooner as opposed to later.

Intel has certainly shored up a lot of their weaknesses over the past few years.  Their integrated 3D/GPU support has improved in leaps and bounds over the years, their IPC and power consumption with CPUs is certainly industry leading, and they continue to pound out impressive quarterly reports.  Intel is certainly firing on all cylinders at this time and the rest of the industry is struggling to keep up.  It will be interesting to see if Intel will keep up with this pace, and it will be imperative for the company to continue to push into mobile markets.  I have never counted Intel out as they have a strong workforce, a solid engineering culture, and some really amazingly smart people (except Francois… he is just slightly above average- he is a GT-R aficionado after all).

Next quarter appears to be more of the same.  Intel is expecting revenue in the $14.7 billion, plus or minus $500 million.  This continues along with the strong sales of PC and server parts for Intel that helps buoy them to these impressive results.  Net income and margins again look to appear similar to what this past quarter brought to the table.  We will see the introduction of the latest 14 nm Broadwell processors, which is an important step for Intel.  14 nm development and production has taken longer than people expected, and Intel has had to lean on their very mature 22 nm process longer than they wanted to.  This has allowed a few extra quarters for the pure-play foundries to try to catch up.  Samsung, TSMC, and GLOBALFOUNDRIES are all producing 20 nm products with a fast transition to 16/14 nm FinFET by early next year.  This is not to say that these 16/14nm FinFET products will be on par with Intel’s 14 nm process, but it at least gets them closer.  In the near term though, these changes will have very little effect on Intel and their product offerings over the next nine months.

Source: Intel

Intel Talks Finances And Growth At Investor Meeting 2011

Subject: General Tech | May 18, 2011 - 05:29 PM |
Tagged: revenue, Intel, cagr

Intel held its annual Investor Meeting today, where the chip maker talked software, the state of the business, as well as new hardware and leveraging microarcitecture leadership. This installment focuses on the business growth and financial aspects.

With 43,905 United States employees and a rank of 62 on the 2010 Fortune 500 list, Intel is a huge company.  And with an over $10 billion dollar Q1 2011, Intel is doing quite well.

During the investor meeting, Intel's CFO (Chief Financial Officer) Stacy Smith took the stage to talk about the company's financial performance and how the company is growing. One of the first points that he talked about was Intel's design and manufacturing advantages. Intel spends a great deal of it's capitol on R&D (research and development). and this investment in itself and the amount of research that is completed, allows the chip maker to maintain it's x86 market leadership. The company has also started acquiring other companies in an effort to differentiate itself from its competitors. For example, the recent McAfee acquisition has brought security and software engineers to Intel's portfolio, and will allow them to create security software solutions that can easily be paired with their hardware.

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Intel also stated that it is growing, and expects to sell even more hardware thanks to emerging markets and the rise in "cloud computing" requiring larger and more numerous data centers.  The chart above shows Intel's CAGR (compound annual growth rate), which is a number created by taking the nth root of the total percentage growth rate with "n" being the total number of years calculated.  It is a way for companies to describe the rate of investment growth if it grew at a steady rate (which is unlikely to happen in real life due to a dynamic and constantly changing market).  Including the company's projections for 2011, Intel is looking at a 12% CAGR for revenue and a 35% CAGR in EPS or earnings per share.

Paul S. Otellini, who is the President and Chief Executive Officer for Intel reaffirmed Intel's growth by stating that 74.5 quintillion transistors shipped in 2010.  This rapid rise in growth can be attributed to cloud computing demands for more data centers, emerging markets adopting more computers, and Intel's interest in the mobile market.

The historic part of the graph above shows the rise in traditional servers from 1995 to its highesd point in 2010 as the Internet becomes further adopted and more and more applications execute server side.  The right side of the graph; however, shows Intel's projections for the future from 2010 to 2015.  They expect to see a massive increase in processor growth for data center market thanks to an influx of new cloud computing applications and networked storage.  Intel also stated that the company's latest Xenon processors are no longer second to Itanium for mission critical applications, and thus Intel expects a rise in Core processors for mission critical servers.  In 2010 alone, the company had $8.4B in revenue and $4.4B of operating profit.  In 2013, Intel forecasts a 15% growth in revenue with operating margins at ~50% for the data center group.

From the PC Client Group, which encompasses both desktops and laptops, Intel had almost $7 million dollars for Q1 2011 revenue, which is at least $1 million more than Q1 2010.  Further, their reported Q1 revenue for 2011 is the highest that it has ever been between Q1 2008 and Q1 2010.  Their operating margins have also increased compared to 2008, with a 17% CAGR.  Intel also revisited the issue of high R&D budgets, and showed that the overall cost across platform segments have declined since 2008.  As research cost for new technologies increase, the cost to make wafers decreases.  Intel forecasts that for the Performance, Mainstream, and Atom platforms, the costs will continue to decrease into 2011 and 2012 while the Value platform will see a slight increase in 2011 and remain stable into 2012.

Emerging markets are also responsible for the company's growth.  Intel stated that "you will see a rapid increase in PC penetration rates in China, Latin America, and Eastern Europe."  Both Brazil and Eastern Europe are projected to reach 80% PC penetration in 2015, for example.  China is expected to attain a 40% penetration rate, while India will have 10%.  Intel stated that this is possible thanks to falling prices in computers along with rising incomes worldwide.  Once a country's incomes reach a level where 4 to 8 weeks is enough to purchase a PC, the penetration rate sees a rapid increase.  Currently, Intel has determined 4.2 WOI (weeks of income) are necessary to purchase a PC worldwide, which is much lower than the 9.9 weeks of income necessary the previous year.  In 2014, Intel projects that only 2.3 weeks of income will be necessary.  Inside the worldwide WOI spectrum, North America has the lowest WOI each year, followed by Japan and Western Europe.  India and China have historically had the highest WOI; however, Intel projects that by 2014, the countries will have greatly reduced their WOI at 10.3 and 2.6 respectively.

While data centers, emerging markets are responsible for the majority of Intel's projected growth, Intel also has both the embedded and software and services group.  On the embedded side, Intel is expecting a 11% CAGR between 2010 and 2013.  In 2010, the embedded group saw $1.5 billion dollars in revenue, and Intel projects almost $2 billion dollars in revenue in 2011.  Intel has stated that they are "making significant investments in SoC, tablet, and smart phone R&D" and that they "expect market segment share gains and growing businesses in tablets, smart phones (application and base band processors), and connected CE (consumer electronics) devices."

The Software and Services Group also accounts for a small portion of Intel's revenue.  The company's software acquisitions include McAfee, Wind River, and Havok among others.  The group is a rapidly growing part of Intel, with a projected $3 billion dollars of revenue in 2013 compared to $330 million dollars in revenue in 2010.  The group is an "upside opportunity as we embed additional security features into hardware and software," according to Intel.

Further, Intel showed a glimpse of it's NAND Solutions Group, and indicated that it forecasts a slightly increased operating profit for 2011 which coincides with Intel lowering the Cost/GB of NAND based devices (such as SSDs) compared to the industry leader.

As a company that diversifies it's products, leads the x86 markets, and invests heavily in itself with acquisitions and R&D, Intel is a profitable company that shows no signs of slowing it's growth.

Source: Intel