While listening in on hour-long industry financial conference calls should be the most fulfilling part of any geek’s day, for some reason people expect outfits like us to break it all down into nice bite-size chunks that they can assimilate over morning coffee. Whatever, who are we to judge? Bottom line, Intel is on a tear this year and has just announced record quarterly; revenue ($10.8B), gross margin (67%), operating income ($4.0B), and earnings per share ($0.51).
The primary factor attributed to this recession-defying, money-harvesting rampage was a somewhat unexpected increase in datacenter server purchases, and a return of the corporate PC refresh cycle. In fact the datacenter group brought home the bacon to the tune of $1.1B USD, which is reportedly the first time they’ve broken the giga-dollars barrier. The spike in datacenter sales was said to be caused by increased Internet usage among consumers, which in turn generates a need for more severs to dole out your favorite LOLcats, Rick Astley videos, and ROFLCOPTER status updates. It is also believed that new server updates for the purpose of consolidation/virtualization and energy efficiency are a driving factor in this bonanza.
Some tidbits about Sandy Bridge were discussed along the way. Otellini mainly drove home the point that their new plaything will be splayed open at IDF this fall for all to admire, and that we would all have to wait until then, but he did more or less confirm it will be launching in Q4 this year as some of us may have already expected. It was also revealed that Intel is planning on increasing capital expenditures (to the tune of approximately $400M USD) late this year to open up the marketing floodgates and indoctrinate every man, woman, child, and working Furby about its newest chip’s supreme awesomeness.
The topic of low channel inventory levels coupled with Intel having a seemingly large stockpile of inventory on hand (86 days worth or so) was brought up multiple times throughout the call. This amount of spare silicon laying around is within the realm of “normal” but just barely. Intel’s response to the high inventory level questions sounded a bit like a 6th grader trying to cover up a trip to the principal’s office when asked about it by his parents (listen for yourself), but they claim that they are stockpiling excess amounts of 45nm and 32nm chips as a “32nm ramp buffer” while they transition their manufacturing over to the new process.
In Atom news, Intel could not seem to contain their contempt for Apple’s defection to ARM processors in their new iPad tablets. When asked whether they were worried about Atom processors cannibalizing sales of desktop and laptop CPU’s due to upcoming tablet sales, Intel laid the verbal smack-down on tablets (calling out iPad by name) and netbooks reassuring people that they were “additive” products, and would in no way, shape or form slow the progress of full featured notebook or desktop sales. This time-tested “Pfff, whatever” strategy has been hugely effective amongst teenage girls for decades. Rest assured if a Jobs v. Otellini pillow fight breaks out, S|A will be first on the scene to bring you all the details.
Finally, Intel predicts that they will maintain their current levels of profitability and gross margins throughout the end of the year and with Sandy Bridge launching near the holiday season they expect a smooth transition into 2011 as well. The uptick in financial numbers does not however appear to coincide with an uptick in market share according to Intel, which would seem to indicate that rival AMD should be benefiting from the same datacenter and corporate spending spree. AMD’s quarterly earnings conference call takes place July 15th at 5:00PM EDT, so we’ll know if this is the case in short order.S|A