<font color=red> Intel's Q1 Conference Call
Most important comments from CC:
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Business to distribution channel is a LEADING INDICATOR and these sales out to all of our distribution channels is now STRONG and this is 25 to 35% of the biz.
The PC biz has bottomed out !
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First Quarter:
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Q1 Rev 6.7B
Q1 GM 52%
Q1 Operating Income 1.3B (or 1.1?)
Q1 EPS .16/share
Second Quarter:
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Q2 Rev Est 6.2-6.8B (press release said 6.2-6.7B)
Q2 GM Est 49% because lower mp processing costs
Q2 Spending on advertisement increase, normal seasonal
Discussion:
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Andy:
- Expect (a return to) seasonal pattern for 2001, more strength in 2nd half
- Other biz - slower recovery later this year
- Q1 had falling demand on all products, all geog, comm still uncertain
- Outlook still has high degree of uncertainty
- $1B stock repurchase approx
- $10.1B in cash
- 5,000 employee attrition by end of year
- All office building projects stopped
- CapEx 7.5B full-speed ahead for 2001, no change there
- RND 4.2B spending unchanged
-.13 mobile mid-year
Paul:
- IT expense in Japan increased
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- Q1: sales out to all of our distribution channels is STRONG and this is 25 to 35% of the biz.
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- CPU inentory at or near their goal
- Exited quarter with low inventory.
- 1 million P4 shipped - P4 is the fastest ramp ever
- Q1 drop due to economic slowdown and CPU inventories held by customers.
- mobile ASP decline to reset for highspeed mobile products, desktop ASP fixed, Server ASP decline
- P4 ramp - robust yields !
- April intro for P4 1.7 Ghz
- P4/RDRAM systems major customers as low as $1000 (very good)
- SDRAM & DDR in Brookdale - good cost
- P4/SDRAM for peak selling segment
- 688,000 in 288 processor system (missed this)
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- Itanium full production this quarter
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- McKinley on 3 OS
- First mobile processer below 1 volt half watt power
- Flash declined (comm inventory correction), but ASP flat
- Regained chipset market share
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- PC biz bottomed out !!! (VERY GOOD)
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- we expect a seasonally stronger Q4 and growth map is strongest in our history (what's "growth map"?)
- .13 ramp, mobile this summer, P4 by year-end
- crossover P4 vs P3 production will occur earlier, in late 2001, rather than Q1-02 (good)
Q/A:
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Mark Edelstone: P4 ramp when crossover for .13?
A: Paul: Next year, but P4 to P3 crossover in Q4.
First Boston: Why full-seasonal pattern? (good question)
Andy: We are expecting the old, historical pattern: slightly stronger in microprocessor, weaker in comm, than historical, which results in a combined expected normal historical pattern for 2001.
Q: Demal: Why do you feel microcroprocessor business bottomed-out? Is it because of inventory or macro's? What's the driver? (Excellent question: is it macro or something else that drives this?)
A: Andy: Not because of macro, but because of three things:
a) Business to distribution channel as strong as last.
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Business to distribution channel is a LEADING INDICATOR
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b) Return (missed this)
c) (Customer) Inventories were previously over levels, now they've exited to out or below the goal
Q: CPU waffer starts are higher in Q2 than Q1?
A: Yes
Q: Is P4 goal increased? Is H2 better because demand higher or inventory lower?
A: Paul: Production goal is unchanged and we are comfortable to hit the P4 goal for 2001. Increase in transactivity in March, inventory dropped in March, bottom over.
Q: Joe Osha: About demand. How can you be certain about Q2 demand? (good persistance)
A: Paul: Distribution channel is best leading indicator.
A: Andy?: Seasonality driving factor, as oppose to macroeconomics, so not a snap back, but (I think he may have said) normal seasonality from where we are. From new, lower level, seasonality will kick in.
Q: A return to seasonality or improved conditions? What about end-markets? IT is weak, doesn't this conflict your belief in return to improved conditions? (good question)
A: Paul: A return to seasonality. Not historical growth level, but rather seasonal level.
Q: What's driving better demand?
A: Not old demand, just seasonal demand. Outside US, things not so bleak.
Q: Microprocessor share?
A: same as last 5 quarters, plus/minus points, and expect same this year.
Q: Beck: Cutting prices on P4 is odd. Your motivation if it's not market share?
A: Paul: Health of product is very, very good. 1.7 accelerated. Sweetspots in volume allow us to do that (because 1.7 is there).
Q: What about ASPs though?
A: Paul: PC desktop Q1-flat. In Q2 we expect some pressures across board (GM to be 3 pts lower, i.e. 51.7 - 49 = 2.7%).
ASP dependent upon when Server bounces back. Server bottomed overall, but the very high-end, like 280 processor servers, need more lead-time.
Q: Is your comm like Cisco?
A: (My note: Cisco's drop was 70% due to Service Provider business and only 30% due to Enterprise business.)
Intel is less Service Provider business.
Expect recovery at end of this year. Nw comm has softness.
Contracts holding in comm (amazing)
Q: Movesman: .13 P4, what speed.
A: > 2 Ghz.
Q: Missed question
A: Server drop was more abrupt than desktop, but overall server has stabilized. Mobile has stabilized. Distribution strength like desktop biz.
Q: Missed question
A: 2B out of fixed-costs
Q: Margins driven by?
A: Rev hold. ASP Q2 down 3 pts. Pricing & cost increases.
A: Japan was first to decline, but is now flat. IT purchases picking up in Japan.
A: China/India - double digit growth, good local consumption. China is the 3rd largest PC consumer. Europe more tied to USA.
A: Mobile processor - higher price than desktop
Q: Because it costs more - more features/higher cost for same speed 1-2 bins higher for desktop for equiv freq
A: CapEx - do you spend all 7.5B or achieve savings if equip costs less?
Q: We have a specific expense list to buy
(End of CC)
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I think the bad is behind us.
Regard,
Amy J |
