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3 Positive Indications In Intel’s Q2 Earnings Call

August 19, 2014 | About:
ICRAOnline

ICRAOnline

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Intel's (INTC) most recent earnings report released on July 15 was fantastic as the company reported revenue of $13.8 billion and earnings of $0.55 per share beating analysts’ expectations of $13.71 billion and $0.52 per share. Hence, Intel once again surprised the market with numbers that came in above the analyst consensus.

While the top and bottom lines look pretty good, there were quite a few other positive developments discussed during the earnings call. Let’s take a closer look at Intel’s success run.

The bright display of numbers

During the earnings call, Intel’s CFO Stacy Smith stated, “It was a good quarter representing financial growth and solid momentum as we approach the second half of the year.” Quite matching his words Intel’s PC Unit, registered revenue of $8.7 billion, a 6% increase from that reported a year ago. Also the data center group revenue went up 19% year-over-year to $3.5 billion, and the “Internet of things solutions” group saw revenue rise to $539 million, up 24% from the previous year’s comparable period.

The only segment that witnessed a drastic revenue drop was the mobile segment where revenue plummeted 83% year over year closing at $51 million at the end of the quarter.

Nevertheless, earnings improved by a whopping 40% to $2.8 billion from that reported a year ago. The company also generated solid operational cash of $5.5 billion, paid dividends worth $1.1 billion and utilized $2.1 billion to repurchase 74 million shares of common stock.

Bay Trail stealing the spotlight

Bay Trail is a family of system-on-a-chip product developed by Intel, based on the Atom architecture primarily for the tablets, notebooks, smartphones and low-cost desktops selling in the market. Since these devices require low-power and cost-effective products, the technology seems to be a perfect fit for the market.

According to Intel’s CEO Brian Krzanich, "[Intel's] Bay Trail SoC volume in desktops and clamshells more than doubled over the last quarter and now represents more than 60% of our Pentium and Celeron mix and nearly 20% of our notebook mix." Krzanich also said, "This is enabling our growth at lower price points and in new segments like Chrome-based systems without sacrificing margin."

This shows that Bay Trail, built on the Silvermont architecture, is receiving a positive response. Management expects this line of Atom processors to drive Intel’s sales graph further in the upcoming quarters. Intel’s desktop chip unit sales went up by 8% in the quarter, primarily attributable to Bay Trail.

Tablet chips shipment on track

Management is upbeat about the current year chip shipment, expecting at least 40 million chips to get shipped into the tablet market by the end of the year. Krzanich gave an update during the earnings call noting that Intel is squarely on track to deliver the same after having shipped nearly 10 million units in the second quarter.

While Intel incurs significant per-unit-losses for its tablet chips as it requires providing temporary contra-revenue support to vendors for offsetting the high bill-to-material costs, executives are treating this strategic goal as the most vital target for this year.

Core M processors qualified for sale

One of Intel’s key structural advantages has been its lead in chip manufacturing over the rest of the industry. However the company isn’t resting on its laurels, it’s been working hard to maintain supremacy in chip making over its rivals. Though presence of better manufacturing technology is not the only factor that aids in creating an edge over competition in the chip market, it does offer the vendor a better choice and a solid advantage over its contenders.

In the modern-day tech realm, “smaller is smarter”. Keeping in sync with this, Intel’s assembly line has created Broadwell. The company is using the latest manufacturing technology for production of 14 nanometers thick Core M processor codenamed “Broadwell.” The 14-nanometers chip from Intel will enable PC makers to make sleeker, lighter and power-efficient PCs and laptops. This has been the key for Intel’s Broadwell development – pushing the chip into existing tablets and laptops.

Last words

With Bay Trail having entered the market, chip shipments in place, and the Core M processor recent release, Intel looks all set to create a benchmark in the PC and tablets market that remains its prime focus area. Even revenue for these segments has shown an upswing in the past quarter. The top bosses are satisfied with the results and are looking ahead for better performance in the upcoming quarters. So, let’s stay tuned to watch how these three positive indicators help Intel to cement its dominance in the tech market.


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