Burt and Intel investors, my notes on the conference call.
Andy Bryant and Paul Otellini on stage. Mood of Andy and Paul was flat to slightly up. Kidding. Andy was all business as usual (CFO type), Paul very positive throughout (sales type). Actually, forward looking opinions were as good as I've heard in the last 4 cc's.
Boilerplate at the beginning:
Expect 4Q to be slightly up revenue-wise, but they pointed out that as recently as early September, Intel said 3Q sales would be 8 - 10% higher than analysts had, but actual turned out to be +14% with record quarterly revenue. Are they admitting Intel is conservative looking a ways out (know that), but tend to far exceed when it comes down to it?
All parts of the segmented product line contributed significantly. Celeron A was 4X original Celeron.
Xeon demand ramped faster than expected.
PII strong, 450 MHz big.
Mobile strong.
GM improvements due to increase over expected revenue, and improved product cost. Latter because less effect of expensive purchased components, SRAM mostly, for Slot 1, as production on other non slot 1 products rose (also SRAM cost came down during qtr).
Cash is UP $1B vs. beginning of 3Q!
No long term view of GM given, in fact, said they would no longer predict this long term (remember they had been predicting LT 50% + or -).
Expenses. Headcount down 2,000 from start of year (planned 3,000 attrition, expect remaining 1,000 by EOY {not including minor ex-DEC head cuts}).
Cap equip expenditures for all 1998 now expected to be $4.2B, had been about $4.5B. Try to re-use as much equip as possible, even for 0.18 micron (does that work, process guys, Yousef, Paul?).
PAUL O. TALKING
- 3 of 4 major geographies UP, only Far East (Japan mentioned) down re sales.
- Strength in all channels...OEM, MORE LATER
- 3Q revenue strength GREW through quarter, and is spilling over into 4Q.
- Segmentation is WORKING. Paul was all +++ throughout the cc when this came up.
- Chipset record levels, MOBOS up, (Jeff), NICs, etc. record levels (look out 3COM), Flash still #1 and extended lead.
INDIVIDUAL QUESTIONS
- Steve Orr, State St Research...how's October start...Paul - excellent, extension of 3Q (see 3rd point before this part).
- Tom Bogan ? firm...turns outlook?...didn't get.
- Jack Geraghty...What do cap expenditures look like for '99? Andy...don't have prediction yet. My comment...'99 budget not complete yet? In general, Intel not giving much of '99 predictions, but will after 4Q results (Jan. '99). Street doesn't care for this (me).
- Ashok Kumar...Nice qtr.!...2Ques's, 1. wanted product split info re different segments...Paul said Intel doesn't give this. 2. Japan recovery?...can't tell.
- Jim Bartlett...Xeon shortage status? Paul said demand for Xeon is higher than even Intel expected. Intel is in "good shape" now re one way and 2 way MP (can meet high demand), and will be in good shape on 4 way, 8 way in about a month, i.e., no longer supply constrained.
- Scott Randall...what is Q4 visibility WRT turns for all channels. Paul again avoided (I think) the turns word, but said ALL three channels: distributors, OEM (box makers) and direct wanted product NOW.
- David Wu...all I wrote down was 4Q very strong in US.
- Drew Peck...Will Celeron encroach on PII sales. Paul...no, Celeron is doing its job of replacing PMMX. PII sales are strong and TV and other ads intended to keep that way.
- Joe Moore...Katmai ramp? Paul said would be slower than was PMMX ramp. He also said that, at the analysts meeting in November, "they may get that info out of me" (chuckle).
- Dan Niles, Robby Stephens...Great Q!...will manufacturers' build to order scheme now (ala Dell) affect 4Q. Paul...No because inventories are way down. ME: This would have been a perfect opportunity for Intel to hedge if they wanted to, but, no, very positive answer.
- Andrew Neff...what are the drivers for 1999. Paul...1. Xeon...EXECUTE! 2. Tie to internet trend, client computing, etc. (ed. I didn't get this one too well). 3. Return of Asia.
- Bardeen of Vlotnikov (sp?)...why 4Q just slightly up? Paul...because 3Q was very strong.
- Charles Boucher...is Intel constrained in making enough of the higher speed chips. Paul...constrained on all, which is mostly a capacity thing, but expect to catch up in a month or so. Ed, SOLD OUT OF EVERYTHING!
- Kurlak...if revenues were up so much YOY, why were profits only up a cent per share. Paul...SECC components cost reason again (SRAM). Bye Tom (ed).
- Kurlak again (later)...how do 4Q orders look? Paul...continuing at very strong rate as exiting 3Q.
Enough. All in all, very positive.
All that typing and the stock is down. What a crock.
Tony
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