Thread - Q498 Intel Conference Call Notes...
Great conference call. The headlines:
- PIII will displace the PII this year with lower product cost.
- Intel plans to regain lost U.S. Retail market share, by offering Celerons with higher performance made at lower cost than competition.
The conference opened with a rehash of the earnings release. Andy Bryant highlighted continuing cost reduction resulting in increased product margin. He cited lower "purchased component" cost as the major factor. (This translates to fewer purchased cache SRAMS).
Otellini: "Great quarter - record units - demand unfulfilled,
Celeron unit cumulative shipments now second behind PII,
Flash volumes, revenues at record level - ASP at record level,
Net products running at record unit and revenue,
APAC set a new record - Taiwan noted,
Europe growth highest of the sectors,
Intel introduced Xeons at 4x and 8x,
PIII "later this quarter".
Questions: The following was taken from audio. I have likely misspelled every name and the quoting is not accurate. Please forgive the mess :)
John Garrity (sp?) - How is the low end?
Otellini: "we've done a nice job... except for US retail market... New products should our restore historic share."
Question #2 ASP's?
Bryant: "were in our historic range... cost declining" Andy noted his margin guidance and then said he could see changes in ASP's.
(I take this to mean that Intel plans to "cost plus" price the Celeron. I look to see Celeron prices to decline as manufacturing cost decline, and I read that Intel believes this will result in prices that allow increased US retail share increases.)
Bogin(sp?): Why down in Q1?
Bryant: "Yes, we have unfullfilled demand, but looking mainly at history."
Scott Newinberg (sp?):"What are incentive programs to gain more shelf space for Celeron?"
Otellini: "We have stepped up our energies"... Increased merchantdizing at point of sale and radio, not TV. Q4 retail met expectations...but U.S. retail is not the be all and end all." (cautioned to look at direct channels)
Newenberg: "Will this increase share?"
Otellini: "If not, I'd be very disappointed"
Newenberg:"Corporate Demand?"
Otellini: Corporate demand - "Too soon to call Q1 due to Y2K uncertainties."
Drew Peck: "inventories?"
Bryant"I hope inventories do rise"... Want to add wip inventory...expect margins slightly down.
Question: "Please comment on your roadmap for Celeron socket vs slot"
Otellini: We plan to do both, at least through '99...
Plan to go with smaller form factor for PIII later in '99.
Ashok Kumar (dig on Celeron, no meaningful answer)
Larry Morgan - "discuss cap spend decline"
Bryant: less overall
Andrew Nuff: Was Celeron below expectation?
Otellini: "Didn't quite double because PII was much, much stronger than expected...We switch over some production to PII"
Japan - same o same o
T Kurlak: "re: PC Week shows Celeron benchmark vs 400 PII as similar or better - Does this imply lower PII price or does this [PII] go away?"
Otellini "The latter - (PII goes away)
"PIII will change the whole nature of how we position our high end brand"
[Intel thus plans to displace PII with PIII, but will maintain PII for corporations that want commonality with existing resources.]
"No more engineering on PII"
Kannoca: Mix on the high end?
Otellini: "yes - it will grow... Strong growth rate for some time."
question: "inventory - now fairly low - please elaborate"
Bryant: We want to be sure that we are prepared for whatever comes at us"
question about whether the low inventory was channel.
Bryant:"We haven't managed the channel any better. Don't see that this would help us."
Mark Edelstone: Why are consumers buying up in technology?
Otellini: I don't know if I can say that.
[Edelstone didn't listen! - he thinks that the greater PII / lesser Celeron was demand driven. NOT! Otellini previously said that PII demand was exceeded capacity and Intel intentionally moved capacity from Celeron to PII. The lower margin Celeron demand was left unfulfilled.]
question: "Have greatest cost savings been done?"
Bryant "Nope - it is continuous and will continue through the year." Bryant noted the slot to socket switch.
Elliot Glazer: "Y2k - will there be front loading?"
Otellini: Haven't seen it at all
Ken Pearlman: "y2k - increased demand? Also with asps comming down - have you seen increased elastisity in demand?"
Otellini: Y2k - There is one school,those who are working on it and will freeze the 2nd half. And there is a 2nd school that hasn't worked it and will madly scramble at end of year. Intel will help by:
1- PII continues
2- Putting up inventory
No, Have not seen low-end elasticity [with pricing]
ragsdale "Celeron in Corp Space?"
Otellini: "Sure, there is some, but what is the impact? Big business buys with a longer term outlook rather than on price... This trend is unlikely to change."
J.Joseph: Do you buy into the growth rate forecast of 15%?
Do you see that Q2 volatility will be less?
Otellini: Too early to subscribe to numbers
Don't see volitility going down near term.
"We are doing structural programs with customers which gives dampening effect. The top 20 customers are done. We are working on next 100 now."
question: low end - Celeron - "Forecast numbers of all competitors exceed forecast demand. This will result in a price war?"
Otellini: "Or one of us will end up with inventory... hence the reason to be competitive."
end
CNBC call take:
stronger demand in APAC
"sales mix is a two way street"
noting the lower than expected Celerons
one big negative - continuing loss of us market share
acknowledged "took it's eye off the ball"
plan to try and get it back this year.
trading up sharply higher in aftermarket.
Jeff
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