INTEL´s Q4 earnings CC statements on NOR flash
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Our flash businesses had a challenging quarter. NOR units declined sequentially even though ASPs increased. Our NAND business continues to ramp with revenue higher in the third quarter on sharply higher unit sales. The NAND competitive environment was worse than anticipated, causing ASPs to decline significantly from the third quarter.
We plan to close the Numonyx transaction in the first quarter of 2008, something Stacy will address in his remarks momentarily.
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Computing related products and NOR Flash met expectations, while NAND Flash fell short.
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Flash revenues grew in both NOR and NAND product lines.
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Restructuring costs in the quarter were approximately $230 million, $100 million higher than our expectation, primarily due to an impairment related to assets, which we plan to sell in conjunction with the divestiture of our NOR Flash memory business. The impairment is based on the revised value we expect to receive when the deal closes.
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On the balance sheet, inventory declined during the quarter by approximately $170 million to $3.4 billion. The quarterly decline in inventory includes a reduction of NOR inventory of approximately $200 million that has been classified as held for sale and is now presented under other current assets.
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Consistent with our plan to close the Numonyx transaction in the first quarter, we have included NOR Flash in our forecast for consolidated results for Q1. However, our full year forecast does not include a forecast for NOR Flash for the rest of the year since we assume that the transaction will have closed in Q1.
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As we go into Q1, there’s a variety of small factors, no one of which I’d say is significant but the combination of these has us a little bit conservative, a little bit cautious as we look at the first quarter.
We see that NAND pricing will probably continue to be weak, so that’s a piece of it. We had some supply agreements in place to provide supply to Marvell as part of the sale of our business to them. We saw some of that revenue go away in Q4 and more goes away in Q1, so that exacerbates seasonality a little bit.
Based on what we see and economic indicators, we think it’s right to be a little bit cautious as we go into the year. And you’ve got NOR that’s in our results now for the first quarter. NOR tends to have exacerbated seasonality Q4 to Q1, so that moves our seasonality a little bit from what we thought.
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Srini Pajjuri - Merrill Lynch
Okay, and then as we move into Q2, obviously you are assuming that you exit the NOR business and historically, I think you did about flat to down 2% or so, so I’m just -- I don’t have a good idea as to how big your NOR business is and any thoughts on how we should model it for Q2?
Stacy J. Smith
In terms of gross margin?
Srini Pajjuri - Merrill Lynch
No, just the revenues.
Stacy J. Smith
Oh, in terms of revenues? We don’t typically break out NOR from NAND. We give you a segment for the memory business. We actually took away that segment this quarter in anticipation that the Numonyx deal would have closed and it actually becomes a much less important driver of our business.
If we still had that segment, so consolidated results for NOR and NAND, what you’d see from Q3 to Q4 is that revenue grew a little bit from 553 to 586. Paul gave you the elements of that. The NOR units are down a bit. ASP is stronger based on increase in density. We are seeing the NAND business ramping, pricing coming down. But I won’t break out the NOR results specifically there but in terms of the full year gross margin, once we’ve taken the Numonyx transaction and it’s closed, it’s a point to a point-and-a-half of gross margin for the year, for the rest of the year.
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Sumit Dhanda - Banc of America
Stacy, I had a question for you on the divestiture of the Flash business. Am I correct in assuming that there’s a benefit to SG&A and R&D which is reflected in your full year forecast, mainly in the last three quarters of the year? And how should we, if you can give any guidance, think about modeling the [one line] consolidation post the divestiture?
Stacy J. Smith
Yes, for all of the annual forecast numbers I gave you, it assumes that the NOR business is part of our consolidated results in the first quarter and then not part of the consolidated results Q2, Q3, Q3.
The impact of that is you’ll see the revenue come out, you’ll see gross margin get a little bit better, we’ve talked about that. You will see a minor impact to SG&A and then we’ll pick up on a one quarter lag the gain or loss from Numonyx, but it’s going to be outside the consolidated operating profit results of the company. So it will be in the EPS but not in the consolidated operating profit results.
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Stacy J. Smith
Well, I think you can do the math. I think I gave you all the pieces. In Q4, the computing related products and NOR Flash came in roughly in line with my expectations when I set the quarter. The miss was based on NAND and specifically the NAND pricing environment was quite a bit more challenging than we thought.
As we go into Q1, again that’s a variety of factors. NAND pricing is one of them that has us at the lower end of the seasonal range that we’d expect. |
