Intel Does Balancing Act
SAN FRANCISCO — Intel reported flat Q1 revenue year over year, with $2.6 billion operating income, up 4 percent over last year. Intel, the largest semiconductor company, hit a Q1 revenue of $12.8 billion with operating income of 2.6 billion (net income 2.0 billion), the company reported Tuesday (April 14) in its earnings call.
“Year-over-year revenues were flat, with double-digit revenue growth in the data center, IoT and memory businesses offsetting lower than expected demand for business desktop PCs,” said Intel CEO Brian Krzanich in a prepared statement.
Revenue drop 8% year over year in the PC Client Group (personal desktops, notebooks, tablets, and phones), but tablets were a bright spot. Bolstering the lower PC numbers, the IoT group grew by 11% year over year ($533 million) “based on strength in the retail and digital security market segments” said Stacy Smith, CFO, in the call. The Data Center Group, at $3.7 billion in revenue, also grew 19% year over year. Both groups, however, were down 10% over last quarter. The company’s software and services operating segments were down 4 percent sequentially and 3 percent year-over-year, making revenue of $534 million in Q1.
The summer release of Microsoft Windows 10 plays into Intel’s projections. “Our customers will lean-out inventory levels in the second quarter and then they’ll rebuild inventory levels in the third quarter,” around the Windows 10 launch, said Smith in the call.
Also anticipated are the launches of Skylake and the 3D NAND technology, developed with Micron, which will be available in the second-half of this year. Intel confirmed that the Micron partnership was going well. 10 nanometer ramps this year, and the company will shift fab use off of 22nm to 14nm.
Intel is also reducing its capital expeditures in Q2, which the company played off as nimbleness. “You’re seeing better utilization, better efficiency, but also the ability to move more 22-nanometer capacity over the 14-nanometer,” said Krzanich. “14-nanometer and the ramps of our Broadwell products, are slightly ahead of our forecast,” said Krzanich. “And we’re seeing some things like better yields, better utilization out of our 14-nanometer as it continues to get healthier. And so all of those combined have led us adjust our capital.”
“The bottom line is I don’t expect this always to have this lower level CapEx,” Krzanich offered. “The capital intensity will go up in some nanometers where we’veVolumetric Efficiency got them” but Krzanich stressed that densityA figure of merit usually expressed in Joules per cubic inch for capacitors improvements might keep the costs of ramping up to next node down.
“The real fundamental of Moore’s law is [that] one is economic and on the 50th anniversary of Moore’s law which this year is we should remember that Moore’s Law is an economic law and that we’re going to reduce the cost as well as we’re improving the performance of these parts” said Krzanich.