Intel profit sinks 27% on dreadful PC sales

[Phynaz]

In the US if you sell inventory for less than its book value you have to take a charge.

Period.

 

[pablo87]

Thanx. It will take forever for me to understand the numbers, so good to get at resume

I dont see anything threatening Intels cash cows and stars (cloud)?

They will continue to generate solid profit for many years on near monopoly markets, - unless someone by pure chance found the magic 100%+ button on Kaveri

So at least for the medium outlook this is a very, very healthy business.

What i dont understand is why the shareprice have dropped so much over that last years. Isnt the server segment enough on the more long perspective?

I mean how much profit is in the markets where Atom and low TDP IB/Haswell is headning, fighting kabini/temash and A7/little-big & NV. Its peanuts. I dont understand what they want there, why not expand and develop - perhaps even beeing innovative- the markets where they have monopoly power because they have superior competences and technology here?

They really have no threat in the cloud - the 5% ASP increase they reported is a strong clue - the fear everyone has that prices will go up without competition is real and will happen IMO. Mind you, the whole computer business is becoming a quasi-monopoly/oligopoly - its not only Intel, its the hard drive guys and the memory players as well.

Intel's share price is an interesting discussion - my opinion is Intel never cared that much to improve actual earnings, they care more about having market share.

First problem for the share price is investors compare with Y2k/Dot com bubble which was unsustainable for everybody, Intel included (though Intel peaked at $75, rumor is that an Intel senior executive at a sales conference told staff the stock was going to $100 or at least that was their goal).

Then the share price dropped back to realistic level but one of the effects of the run up to the dot come bubbles was the granting of excessive stock options. So Intel spent $60B over the next 10 years on stock buybacks which at $20 a share, should have reduced shares by 3B whereas in fact shares were 6.7B in 2000 and are now 5B. The rest? Dilution.

And now, investment community sees the same thing I see - spending a lot of money on factories and R&D, not much cash on hand net of debt (compared to peers, its measly), and earnings that are down despite a) lower tax paid b) depreciation not keeping up with capital expenditures.

And then of course, the investment community is worried about the future of PCs as a whole, and how profitable this smartphone/tablet business will be and there you hit the nail on the head - the prices for processors in tablets/smartphones even Chromebooks are going to be much lower than Intel is used to because they are competing with an ecosystem that is very viable AND, low cost.

Demand will shift towards that model in consumer, then will be followed by small business and education, then finally corporations and government. Where can intel recover? High end. They will have no choice but to raise prices on high end processors and server market.

But as you say, its shocking that they're not more aggressively promoting PCs but keep bullhead investing capex in factories a third of which is dedicated to building inferior "good enough" integrated graphics, not to mention how short life these factories are (celeron pentium is already 22nm, why???).

This btw, is an interesting read of what went on in 2000 with Intel share price. http://docentes.fe.unl.pt/~psc/IntelCase.pdf

 

[pablo87]

32nm gonna be used for the 8 series chipsets for example. 22nm for Pentium/Celerons.

The only reason to do this is lower power though of course, this is practically the last generation of chipsets so kind of a waste IMO.

Unlike TSMC which keeps old factories running (because of their superior business model), Intel has been wasting money shutting down perfectly good factories.

One takeaway from the conference call? Intel is very interested in building for 3rd parties. Its about time.

 

[Idontcare]

This btw, is an interesting read of what went on in 2000 with Intel share price. http://docentes.fe.unl.pt/~psc/IntelCase.pdf

Interesting link, but is it just me or did they completely forget to actually put a conclusion in their brief conclusion section?

The conclusion is 50% asking questions and 50% pointing out the fact that questions need to be asked...but they never make a statement regarding the answers to any of the very questions they raise

Also, this may be just me but I thought Exhibit 1 made a far more compelling argument that something even more dire was happening with Microsoft in terms of market devaluation over the same time period. That graph reads to me that the story ought to have been about MS, not Intel.

 

[Abwx]

You think that HP or Dell are asked the same prices as second
rate OEMs..??.

They have non public agreements , anyway , the public price
is specified for 10000 units , above this quantity it s a negociable price.

 

[ShintaiDK]

You think that HP or Dell are asked the same prices as second
rate OEMs..??.

They have non public agreements , anyway , the public price
is specified for 10000 units , above this quantity it s a negociable price.

Its 1000 units as list prices. And you can negotiate a different price even if you buy 50.

Just see at Microcenter, selling "235$" CPUs for 169$. And I am sure Microcenter still makes a profit.

 

[Abwx]

..........

“We started production of our next-generation micro-architecture product code-named Haswell, which we expect to qualify for sale this quarter. This production prior to qualification for sale resulted in an increase in [older-generation] inventory write-offs,” said Stacy Smith, chief financial officer of Intel, during quarterly conference call with financial analysts.

http://www.xbitlabs.com/news/cpu/di..._Next_Generation_Haswell_Microprocessors.html

 

[pablo87]

Interesting link, but is it just me or did they completely forget to actually put a conclusion in their brief conclusion section?

The conclusion is 50% asking questions and 50% pointing out the fact that questions need to be asked...but they never make a statement regarding the answers to any of the very questions they raise

Also, this may be just me but I thought Exhibit 1 made a far more compelling argument that something even more dire was happening with Microsoft in terms of market devaluation over the same time period. That graph reads to me that the story ought to have been about MS, not Intel.

come on, this is the processor forum, i'm sufficiently off topic as it is already !!!

 

[Phynaz]

..........



http://www.xbitlabs.com/news/cpu/di..._Next_Generation_Haswell_Microprocessors.html

Which is exactly what I said. You can't just sell them for less. You have to write down the inventory.

 

[Fx1]

Intel will be a good buy soon at their share price. When the PC CPU shipments smooth out once people realise tablets generally suck.

Then when intel starts rocking 14nm Atom chips for mobile and tablets they will start making a recovery. Clock for clock intel seems untouchable and their process lead will keep them ahead of everyone else. Snapdragon S4 is big right now due to the lack of anyone else decent

 

[ShintaiDK]

Intel will be a good buy soon at their share price. When the PC CPU shipments smooth out once people realise tablets generally suck.

Then when intel starts rocking 14nm Atom chips for mobile and tablets they will start making a recovery. Clock for clock intel seems untouchable and their process lead will keep them ahead of everyone else. Snapdragon S4 is big right now due to the lack of anyone else decent

Its just 2012 was a bad year for everyone. I dont think its related to tablets or others, since all those combined as sectors also went backwards.

People are just still uncertain on the financial situations in the households. The dysfunctional US government with democrats and republicans that couldnt agree with a gun at their heads didnt help either.

Overall people are saving up money instead of spending.

Example from the UK:
http://www.thetimes.co.uk/tto/business/industries/retailing/article3087935.ece

2011, 20 shops close a day.

http://www.telegraph.co.uk/finance/...01/32-shops-closing-every-day-in-Britain.html

2012, 32 shops close a day.

 

[Abwx]

Which is exactly what I said. You can't just sell them for less. You have to write down the inventory.

That wasnt the question , you are back pedaling....

What was negated by a poster , and by you ,was that they have done write offs during Q4 , hence my post.

 

[cbn]

Also, now there's a minimum voltage floor that's hard to lower. Before you lowered power by lowering voltage, somewhat offsetting the power gain. Now you have almost nothing to fall back to in terms of voltage.

Yep, I have been reading how it is hard to lower threshold voltage without too much leakage penalty.

Hopefully the new xtor (and material science) Intel will use at 10nm will help solve this.

 

[IntelUser2000]

Selling lots of heavily binned chips means producing far higher numbers of chips which don't meet those TDP targets, i.e. standard voltage parts. Demand for laptop TDP parts is flat/falling, demand for tablet TDP parts is rising- by making a binned ULV part their tablet chip, they are linking the two in their production. If they want to make enough ULV parts to meet demand they will have to make warehouses full of unwanted stand voltage parts.

1. Intel is pinning their hopes for reviving the PC market on Ultrabooks with ULV parts, and x86 tablets with ULV parts

2. ULV parts are a deep bin sort of the same dies which go into standard voltage parts

3. In order to ramp up production of ULV parts to meet the new market segments, they need to also ramp up production of their standard voltage parts

Actually, starting with Haswell, the 15W ULT parts are becoming mainstream chips. That's what they meant when they said chip TDPs are being focused in the "less than half the 35W" segment. 22nm enables better frequency at lower voltages, and Haswell is the chip designed for that process. 35W dual core parts are also the latest to arrive for Haswell, signaling that the focus has changed.

In Broadwell, its rumored that 35W dual core parts cease to exist, because it'll be redundant with 15W parts that can do just as well and have cTDP.

Conclusion: Haswell and Beyond = ULT parts = mainstream

 

[cbn]

In Broadwell, its rumored that 35W dual core parts cease to exist, because it'll be redundant with 15W parts that can do just as well and have cTDP.

This is good news, if it means what I think it means. (ie, Intel has fixed this problem --> http://www.anandtech.com/show/6194/asus-ux31a-putting-the-ultra-in-ultrabooks/8 )

In fact, you can set the UX31A to 25W TDP, but it appears the cooling solution isn’t actually able to deal with the higher TDP for longer periods of time and thus the CPU ends up dropping back to 17W after a few minutes of heavy lifting. That’s hardly surprising, considering how thin the UX31A is—there’s just not much space for air to flow through.

 

[pablo87]

wall street alarmed at intel's 2013 capex plans: $13B

http://news.yahoo.com/intels-weak-outlook-spending-hikes-unnerve-wall-street-002501071.html

"people are starting to freak out about the capex"

don't worry folks, you know this already, he's talking about yours truly

 

[mrmt]

..........

When Intel is fielding a new chip generation they take a charge (write off) related to the wafers manufactured but not yet qualified. The charge is reversed in the quarter where the qualification occurs. This is not an impairment charge.

 

[Haserath]

Sheesh $13 Billion dollar Capex... Time to invest in Intel. They're gearing up for something.

 

[Abwx]

When Intel is fielding a new chip generation they take a charge (write off) related to the wafers manufactured but not yet qualified. The charge is reversed in the quarter where the qualification occurs. This is not an impairment charge.

I guess that you re so pro intel that you dont see
what is written right under your eyes..

Here it is :

“We started production of our next-generation micro-architecture product code-named Haswell, which we expect to qualify for sale this quarter. This production prior to qualification for sale resulted in an increase in [older-generation] inventory write-offs,” said Stacy Smith, chief financial officer of Intel, during quarterly conference call with financial analysts.

Write off in older generation inventory...

Is that how you call non qualified HSW chips....??..

 

[cbn]

Sheesh $13 Billion dollar Capex... Time to invest in Intel. They're gearing up for something.

wall street alarmed at intel's 2013 capex plans: $13B

http://news.yahoo.com/intels-weak-outlook-spending-hikes-unnerve-wall-street-002501071.html

From the above link....

Shares of the world's leading chipmaker slid more than 5 percent in after-hours trade on Thursday after it projected this year's capital spending at $13 billion, plus or minus $500 million, exceeding many analysts' estimates for about $10 billion.

Intel said $2 billion of its increased expenditures would go toward expanding a facility for researching future manufacturing technology.

 

[Haserath]

Thing is, I don't get why people are worried about the Capex when Intel uses it to get ahead of the entire market.

 

[shady28]

Did some looking at the Intel numbers, this might be more of a thought provoker.

-7% in all CPU types, including mobile; the one exception was server (Xeon)

Server chips was +4%

Overall -6%

Possibly the Cloud effect...

 

[Haserath]

Did some looking at the Intel numbers, this might be more of a thought provoker.

-7% in all CPU types, including mobile; the one exception was server (Xeon)

Server chips was +4%

Overall -6%

Possibly the Cloud effect...

More likely the tablet effect. Servers shouldn't be affected by consumer products.

Tablets are finally maturing into speedy, inexpensive devices with massive PPI to boot. Nexus and ipad Mini are most likely to blame.

It's the reality that people don't want to pay for something they already have, or pay more for something better than good enough.

In the end, this is why Apple falls to <10% market share(Macs) and why Intel is falling now.

Low margins will kill in the long run as it gets more difficult to provide a reason to buy.

Hopefully the low-marginers don't slow down Intel...

 

[2is]

If anything, the server market is probably flourishing with more and more emphasis on "The Cloud"

 

[jpiniero]

Thing is, I don't get why people are worried about the Capex when Intel uses it to get ahead of the entire market.

Because if it backfires (ie: sales continue to slide) it could get ugly.