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Intel CEO overestimated PC chip demand

Posted: 20 Jan 2014  Print Version  Bookmark and Share

Keywords:Intel  PC industry  CPU  microprocessor  data center 

Intel has recently announced a three percent increase in revenue and six percent increase in profit YoY. The company's Q4 results were mixed, however, attributing the results to the PC business stabilizing while tablet and data center business growing modestly. Intel also offered additional information about Fab 42, which reports said was closing. The space, instead, will be held for future technologies, and Intel is housing 14nm process in existing buildings, the firm indicated.

Asked during the earnings call about Fab 42, Brian Krzanich, Intel's CEO said, "When you start these construction projects, you have to start them three years in advance. They are some of the most complex construction projects imaginable. We started this one three years ago. Our view of the PC industry and PC growth three years ago was much more robust than it is today."

Krzanich went on to explain how the time it took to get the project started allowed Intel to react to the lower-than-expected demand for microprocessors. "We brought it up until the shell was complete and we held back putting equipment in until the demand requirement comes about," he said, adding that the time taken to do so is part of the procedure that has been in place at Intel for the thirty years Krzanich spent in manufacturing at the company.

After dropping three percent YoY in Q3, Intel's PC CPU division sales, which accounted for 62 percent of revenue, were flat YoY in Q4. The division's operating profit increased 20 percent to $3.4 billion. Volumes rose three percent QoQ and YoY; ASPs were flat QoQ and down two percent YoY. Operating profit rose 11 percent to $1.46 billion. The company had $17.8 billion in cash/investments at the end of Q4, and $13.4 billion in debt. For Q4, revenue came in at $13.8 billion up three percent from a year ago. Gross margin of 62 percent was flat compared to Q3

According to Stacy Smith, Intel's CFO, operating income for Q4 was $3.5 billion up 12 percent from a year ago. Intel's earnings per share was $0.51 up six percent from the year ago. For the full year 2013, the company's revenue was $52.7 billion, its gross margin was 60 percent, operating income was $12.3 billion, net income was $9.6 billion and earnings per share was $1.89.

"The PC market was down on the year, we saw the market stabilize in the back half of the year with Q4 PC units up from a year ago," Smith said. "Additionally we saw strong tablet growth in the back half of the year and inclusive of PC and tablets are unit growth in Q4 was up almost 10 percent from a year ago."


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