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Intel Second Quarter Results

Intel Second Quarter Results
by Paul McLellan on 07-16-2014 at 4:03 pm

 Intel announced their quarterly results earlier this week. Their mainline microprocessor business is doing well, especially the highest performance segments for servers, datacenters and cloud computing. Broken down by segment the numbers come out like this:

  • PC Client Group revenue of $8.7 billion, up 9 percent sequentially and up 6 percent year-over-year.
  • Data Center Group revenue of $3.5 billion, up 14 percent sequentially and up 19 percent year-over-year.
  • Internet of Things Group revenue of $539 million, up 12 percent sequentially and up 24 percent year-over-year.
  • Mobile and Communications Group revenue of $51 million, down 67 percent sequentially and down 83 percent year-over-year. Ouch, that has to hurt.
  • Software and services operating segments revenue of $548 million, down 1 percent sequentially and up 3 percent year-over-year.

The PC business is being driven by a couple of things, such as the end of Microsoft’s support for Windows-XP driving a reinvestment cycle. Intel reckon that the installed base of PCs that are over 4 years old is 600 million and they are seeing clear signs of a refresh cycle in small and medium sized businesses.

In tablets, they shipped 10M devices last quarter, which puts them on track for the 40M unit goal for the year. But this is really just seeding the market since they are not making any money on them, and recognizing contra revenues against them (although they expect to get costs down enough to be breakeven by the end of the year). But they have more in the pipe:

“We qualified the first Broadwell-based Core M processors and at Computex we highlighted the form factor innovation that 14-nanometer Core M product family will enable. Systems like Llama Mountain reference design, a fanless detachable two-in-one that is razor thin at 7.2 millimeters and weighs just 24 ounces.

Mobile is still doing horribly, down to $51M (which is down over 80% from the same quarter last year). Since Intel is investing of the order of $1B per quarter in this segment that means they have lost over $2B so far this year. On the call they said that they are on-track for having their SoFIA integrated baseband and apps processor in Q4 of this year. This is Atom-based but built by TSMC (I assume that their existing LTE modem will be incorporated too). They talked about a new LTE product too, which I assume will also be built by TSMC:“We are working towards qualification of our 7260, our Category 6 LTE product with carrier aggregation early this quarter.”

In reply to a question, Brian said that they intend to bring these products inside late in 2015 or early 2016 since they see it as important to be able to leverage their process technology in every market. Talking of process technology, they confirmed that 10nm production would start in 2015 with volume in 2016.

Margins are expected to come down a little in Q4 since they will be ramping multiple 14nm fabs simultaneously. And another datapoint that is important for the stock price is that they announced they would buy back $4B in stock in Q3 with more in Q4 (they bought back $2B in Q2). The total buyback will eventually be $20B.

More articles by Paul McLellan…

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