From Intel's call yesterday
Moving to the client. CCG (PCs) delivered another strong quarter, exceeding expectations for the third consecutive quarter, driven by strength in commercial and consumer gaming SKUs where we are delivering leadership performance. As we expected, customers completed their inventory burn in the first half of the year, driving solid sequential growth, which we expect will continue into Q4. We expect full year 2023 PC consumption to be in line with our Q1 expectations of approximately 270 million units. In the near term, we expect Windows 10 end-of-service to be a tailwind, and we remain positive on the long-term outlook for PC TAM returning to plus or minus 300 million units.
Revenue exceeded our expectations across all major lines of business.
Net inventory was down $500 million or 7 days in the quarter. We also significantly improved the linearity of our shipments, which brought DSO down by 5 days.
Moving to third quarter business unit results. CCG (PCs) delivered revenue of $7.9 billion, up 16% sequentially and ahead of our expectations for the third consecutive quarter. Customer inventory levels are healthy, and the market remains on track to our January consumption TAM signal of roughly 270 million units for 2023. CCG's operating profit doubled sequentially to $2.1 billion on higher revenue, sell-through of reserved inventory and stronger ASPs driven by strength in our commercial and gaming products in the quarter.
Now turning to Q4 guidance. We expect fourth quarter revenue of $14.6 billion to $15.6 billion, delivering on our January commitment to grow revenue sequentially throughout 2023. In the client business, we're encouraged by the return of historical purchasing cycles as our channel checks, partner feedback and ASPs all point to healthy inventory levels and growing demand.
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My two cents - SIMO's results and guidance are going to be great. PCs are strong, expected to grow in Q4, and that's the majority of SIMO's business. It remains unclear how cell phones are doing, but cell phones are much more depressed than PCs now. SIMO's PC SSDs were down 35% year on year last quarter, and cell phone controllers were down 70% year on year. So......with PCs on the way up, we've still got the "cell phone bounce" to look forward to. It will come eventually, and when it does that's another revenue pop which we get to enjoy.
MXL really blew it. In Q4 MXL is going to do about $135m and SIMO might do $20m. Combined, they would look great, and highly profitable. Instead, MXL looks like it's going down the tubes, while SIMO heads back up.
Now that we know China will approve a SIMO acquisition (hopefully) in 1-2 years the company hopefully finds an alternative buyer. SIMO's a defensible cash cow with modest growth. Loads of high PE diversified semi companies would benefit from SIMO's strong market position and strong cash generation. Just gotta wait for the semi cycle to turn higher, and everyone is saying that will happen 2025 at the latest. Lets see - hopefully SIMO eventually sells itself for $130 and the MXL termination turns into a blessing. |
