This summary is based on the third quarter fiscal 2008 earnings call conducted by Intel Corp. (INTC) on October 14, 2008.
Management:
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President, Chief Executive Officer, Director: Paul S. Otellini
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Chief Financial Officer, Vice President: Stacy J. Smith
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Vice President, Investor Relations: R. Kevin Sellers
Key Investors Issues
- Earnings were up 12% to $2 billion or 35 cents a share.
- Revenue of $10.2 billion was up 1% from $10.1 billion in the prior year.
- Dividend payments were nearly $800 million, and stock repurchases were $2.1 billion.
Year to Date Highlights:
- Revenues increased 6.3% to $29.3 billion from $27.6 billion in 2007.
- Net income was up 7.5% to $5.1 billion or 89 cents a share.
Third Quarter Highlights
Operational Highlights:
- Intel began shipments of the Nehalem product family during the third quarter and expect to formally launch these products in November.
- Nehalem brings a new micro architecture and new performance features.
- There is also strong acceptance of the Atom microprocessor family, which was designed to enable new mobile Internet form factors at attractive system price points with healthy product margins for Intel.
- The current employee base is approximately 20,000 heads lower than the peak in 2006 and the firm has removed over $3 billion in spending.
Micron announced recently the joint decision to shut down 200-millimeter NAND operations.
- In addition, the IMFF planned Singapore fab is now on hold as Intel continues to take actions to reduce supply in light of current market conditions.
- On the product side, it launched a solid state drive product family to outstanding reviews and are currently ramping those products, giving a lead in the higher margin segment of the NAND business.
- The company expects the corporate segment to continue to show some softness as IT spending gets rationalized in this macro environment.
- Inventories in total seem in reasonable shape, with Taiwan and channel customers cutting back and some OEMs building a bit.
- In general, consumer traffic overall is light at this point in the quarter but there is continued healthy interest in notebooks and netbooks.
Revenue of $10.2 billion was up 1% from $10.1 billion in the prior year as revenues of microprocessors excluding Atom was in line with seasonal patterns on flat average selling prices.
- Revenue for Atom based microprocessors and associated chipsets was $200 million, including Atom microprocessor revenue, overall microprocessor average selling prices declined.
- The mobility group accounted for over 45% of total revenue at $4.7 billion, with microprocessor strength in every notebook segment.
- On a geographical basis, Asia-Pacific and Japan experienced better than seasonal revenue growth at 12% each.
Relative to seasonal patterns, EMEA was at the low end while the Americas lagged due to weakness in the corporate segment.
- Earnings were up 12% to $2 billion or 35 cents a share from $1.8 billion or 31 cents a share in 2007 as margins rose 7.5 points to 58.9% on microprocessor volume increases.
- Spending on R&D and MG&A was $2.9 billion, flat to forecasted range and flat to the second quarter.
- Gains losses on equity investments and interest and other income was a net loss of $265 million, higher than the outlook net loss of $30 million.
- Volatile conditions in the memory market segment resulted in a $250 million impairment on the investment in Numonyx.
Total cash investments comprised of cash, short-term investments, and fixed income trading assets were $11.8 billion, about $275 million higher than the second quarter.
- The credit quality of the fixed income investment portfolio remains high, with other than temporary losses during this tough credit environment minor at under $15 million.
- Cash flow from operations was over $3 billion and capital spending was nearly $1.4 billion, dividend payments were nearly $800 million, and stock repurchases were $2.1 billion.
Fiscal 2008 Outlook:
- There is a broader than normal range of possible outcomes for fourth quarter revenue, ranging from $10.1 billion to $10.9 billion.
- Expectation for gross margin percentage in the fourth quarter is 59%, plus or minus a couple of points, flat to the third quarter.
- Spending for R&D should be $2.9 billion, flat to the third quarter and for the full year is $11.5 billion, down from prior forecast of $11.7 billion, due to revenue and profit dependent expenses and foreign exchange rate changes.
- Forecast for capital expenditures has been reduced $200 million to $5 billion, plus or minus $100 million.
Key questions and answers from the third quarter earnings call conducted by Intel Corp. (INTC) on October 14, 2008.
