) reported first-quarter earnings of 38 cents per share, just
over the Zacks Consensus Estimate of 37 cents but somewhat lower
than guidance indicated. The better than-expected gross margin
drove the surprise.
Intel has reported roughly in line with expectations in the last
four quarters, so the last quarter was not too different.
Guidance was in line with expectations.
Shares were up less than 1% during the day, but appreciated
another 1.5% after the company reported.
Intel's reported revenue was $12.76 billion, within the guidance
range of 12.8 billion (+/-$500 million) and in line with the
Zacks Consensus of $12.8 billion. This was down 7.7% sequentially
and up 1.5% from the year-ago quarter.
The company restructured reporting segments, providing historical
numbers for comparison-
PC Client Group
, which continues to account for the largest chunk of Intel's
business (62%), now also includes gateway and STB products. The
adjusted revenues for the segment are down 7.8% sequentially and
1.4% year over year. The decline from the year-ago quarter is
significantly lower than last year, indicating stabilization in
the PC market in line with Gartner and IDC observations.
Overall unit volume was up 1%, from the previous and year-ago
quarters, with the average selling price (ASP) down 3%. The
volume increase was driven by notebooks as desktops were
flattish. This is very encouraging since mobile computing
revenues have been flat to down in the last seven quarters.
Intel appears to be doing well in the convertible category,
where revenues increased 20% according to management. The desktop
ASP growth of 4% partially offset the 8% decline in notebook ASP.
Desktops continue to gain from improving mix.
, which generated 24% of quarterly revenue, saw units and ASP up
3% and 8%, respectively from last year, with cloud, networking
and storage each up more than 20%. Intel's dominance in the data
center enables it to generate very strong prices here. Last
quarter, Intel made a sizeable investment in Cloudera to pick up
a major share of the company that develops Hadoop code.
The secular growth drivers are increasing Internet usage by
consumers all over the world and the ongoing move towards
virtualization and cloud computing.
The new segment
Internet of Things
also includes Intel's embedded business. The segment accounted
for 4% of revenue, down 10.4% sequentially but up 32.1% from last
year. Management attributed the increase to in-vehicle
infotainment and retail, as well as a doubling in IoT atom
Software & Services
generated another 4%, down 6.4% sequentially and up 6.3% year
over year. McAfee saw an 8% increase in consumer sales with
Mobile & Communications Group
generated a mere 1% of revenue, but management stated that Intel
was on track to achieve the 40 million unit target for 2014. The
optimism stems from the 5 million chips shipped in the last
quarter and 90 tablet design wins on Android and Windows
platforms to date.
Segment revenue was down 52.1% sequentially and 61.4% year over
year, which is mostly because the baseband modem business it
inherited from Infineon is increasingly being replaced by 4G LTE
) has taken the dominant share. Intel's own integrated solutions
are yet to make headway.
segment, which comprises Intel's NAND flash memory products,
generated around 4% of revenue, down 8.1% sequentially and up
8.9% year over year.
The gross margin for the quarter was 59.7%, down 221 basis points
(bps) sequentially and up 358 bps year over year, better than the
guidance of 59% at the mid-point. The 14nm startup costs appear
to be much lower than expected, particularly if you take out the
extra $100 charged for litigation. Another factor impacting
margins is the contra revenue or subsidy that it is giving to
tablet makers for the higher cost of using Bay Trail.
Operating expenses of $5.09 billion were up 1.4% sequentially and
11.9% from last year. The operating margin was 19.8%, down 581
bps sequentially and 18 bps year over year. There was a very
significant 780 bp increase in R&D as a percentage of sales,
with along with the 221 bp increase in COGS more than offset the
447 bp decline in MG&A.
The operating margins by segment were as follows-PC Client 35.3%
(down 387 bps sequentially), Data Center 42.7% (down 648 bps) and
Internet of Things 25.5% (down 1,314 bps). The other segments
continued to make significant losses.
Intel Corporation - Quarterly Earnings Per
Share | FindTheBest
Net income was $1.95 billion, or 15.3% of sales, compared to
$2.63 billion, or 19.0% in the previous quarter and $2.05 billion
or 16.3% in the comparable prior-year quarter. This resulted in
earnings of 38 cents in the last quarter, down from 51 cents in
the previous quarter and 40 cents in the year-ago quarter.
Inventories dropped 9.8% sequentially with annualized inventory
turns moving from 5.0X to 5.5X. Days sales outstanding (DSOs)
were up by a day to 25. The cash, marketable securities and fixed
income trading asset balance at quarter-end was $19.05 billion,
down $1.04 billion during the quarter.
Intel has $13.17 billion in long-term debt and $36 million in
short-term debt, resulting in a net cash balance of $5.84
billion. Cash flow from operations was around $3.5 billion.
Important usages of cash in the last quarter included $2.69
billion on capex, $1.12 billion on dividends and $545 million on
Intel guided to second-quarter revenue of around $13.0 billion
(+/-$500 million), up 1.8% sequentially and 1.5% from the Jun
quarter of 2013 (in line with the consensus estimate of $13.0
billion). The gross margin is expected to be around 63% (+/-2
percentage points). Total operating expenses are expected to come
in at around $4.8 billion. Restructuring and asset impairment
charges are expected to be around $100 million.
Management also expects to provide for depreciation of around
$1.9 billion and intangibles amortization of around $75 million.
Other income/expense and equity investments are expected to be
$75 million. Applying the guided annual tax rate of 27%, net
income comes to around $2.40 billion or 18.5% of revenue, which
would be up both sequentially and year over year.
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For 2014, management expects revenue that is consistent with the
2013 level, a gross margin of 61% (+/- a few percentage points),
operating expenses of $18.9 billion (+/- $200 million),
intangibles amortization of $300 million, depreciation of $7.4
billion, a tax rate of 27% and capex of $11.0 billion (+/- $500
million). All except opex expectations were the reiterated. Opex
is up from $18.6 billion.
Intel's numbers confirmed the stabilization in the PC market
(this was the second straight quarter that units didn't decline
from the year-ago quarter). Tailwind for the PC business will be
) withdrawal of XP support, forcing upgrades. Intel is well
positioned to gain from this, whether customers opt for the
all-new Win 8, or deflect to chromebooks as
) would like. Management stated that Intel was the leader on the
Intel is the dominant force at the data center, but what we will
be looking at is its execution in the cloud, since this is where
ARM designs are likely to get in. Intel's investment in Cloudera
indicates that the company is taking the bull by the horns, but
this is an area worth tracking.
Mobile execution will be key this year but we don't expect a lot
of profit here, mainly because Intel seems to be a little late
with its 14nm process, which of course means it will take longer
to take down costs and even longer before a subsidy is no longer
required. Management appears optimistic about volumes and we
expect a heavier second half.
We expect the new Internet Of Things segment to do well this
year, which will support the strength in the data center and
stabilization in PC, together providing the cushion required for
a very aggressive drive to take share in mobile.
Capex expectations for the year were retained, indicating that
Intel expects strong volumes as we move through the year. 2014
could therefore be a big year for Intel, when it starts growing
Intel shares carry a Zacks Rank #3 (Hold).