This summary is based on the fourth quarter fiscal 2008 earnings call conducted by Intel Corp. (INTC) on January 15, 2009.
Management:
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President and CEO: Paul Otellini
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CFO: Stacy Smith
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VP, IR: Kevin Sellers
Key Investors Issues
- Revenue declined 23% to $8.2 billion.
- Net income was $234 million or 4 cents a share, down 90% from $2.3 billion or 39 cents a share in 2007.
Full Year Highlights:
- Revenues were $37.6 billion, down 2% from $38 billion in the prior year.
- Net income of $5.3 billion or 93 cents, down 24%
- The firm paid over $3 billion in dividends, and repurchased over $7 billion of stock.
Fourth Quarter Highlights
Revenue declined 23% from $10.7 billion in 2007 to $8.2 billion, as downstream inventory corrections attempted to keep pace with the decline and demand that occurred over the course of the quarter.
- Revenue of microprocessors, excluding Atom, was significantly below seasonal pattern, but average selling prices were up.
- Revenue for Atom-based microprocessor and associated chipsets was $300 million, up 50% from the third quarter and including Atom microprocessor revenue, overall microprocessor average selling prices were flat to the third quarter.
- Revenue in the digital enterprise group and the mobility group was down due to a decline in microprocessor and chipset unit shipments.
Gross margin of 53.1% was down six points from the third quarter and down five points from the fourth quarter of 2007.
- The firm responded to reductions in demand, reduced factory loadings, which resulted in about $250 million in underutilization charges, or about a three point decline, in gross margin from the third quarter.
- An additional three point decline came from inventory write-offs on computing related products, which were primarily demand related.
- Spending on R&D and MG&A was $2.6 billion; $300 million lower than the third quarter due to lower revenue and profit-related expenses and targeted spending reductions.
- In the separate category for restructuring and asset impairment charges, expenses were approximately $250 million, with about $200 million related to the shutdown of 200-millimeter NAND manufacturing facilities and the Intel-Micron joint venture.
Gains/losses on equity investments and interest and other income was a net loss of $1.1 billion, higher than the outlook net loss of $50 million, primarily due to a $1 billion reduction in the carrying value of the company''s investment in Clearwire.
- Net income was $234 million or 4 cents a share, down 90% from $2.3 billion or 39 cents a share in 2007 due to weaker revenues and losses in equity investments.
- Total cash investments comprised of cash, short-term investments and fixed income trading assets, ended the quarter at $11.5 billion, approximately $250 million lower than the third quarter.
- The credit quality of the fixed income investment portfolio remains high with other than temporary losses during this tough credit environment minor, at approximately $10 million..
- Cash flow from operations was approximately $2.6 billion and capital spending was $1.8 billion, with dividend payments of nearly $800 million.
Operational Highlights:
- The pace of the revenue declined due to reduced demand and inventory contraction across the supply chain.
- The firm launched two ground breaking architectures with Atom and Nehalem, which together, strengthened the competitive position in the traditional PC marketplace and offer incremental growth opportunities in new markets and form factors.
- It continued its focus on efficiencies and divested a number of non-strategic businesses and spun out others, such as the NOR flash operations.
- It also scaled out of the 45-nanometer manufacturing process, and the design completion of the next generation 32-nanometer process technology.
- WiMAX entered commercial deployment and holds great promise of becoming a ubiquitous mobile broadband technology.
Priorities for managing during this environment:
- There is the absolute need for fiscal discipline and the firm has in place several initiatives focused on savings and modulating investments.
- Restructuring efforts have yielded greater than $800 million in savings in 2008, leading to cumulative savings of greater than $3 billion since the program began in 2006.
- It will continue the pace of investments in R&D and in 2009, has a slate of new products and technologies coming to market that offer superior value for customers.
- It remains on track for introducing the 32-nanometer process technology and believe that the shift to 32-nanometers will increase performance lead, lower product costs, and usher in a new era of high volume System-on-Chip products.
Intel will continue to invest in growth initiatives, with the recently launched Atom being well received and a great addition to the product portfolio, enabling new capabilities at affordable price points and good margins.
- In the handheld market, the first-generation product is in production with multiple customers ramping in volume.
- The second-generation is sampling, and the system-on-chip third-generation is well into design.
