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Intel Corporation (INTC)
Q2 2009 Earnings Call
July 14, 2009 5:30 pm ET
R. Kevin Sellers - Vice President, Investor Relations
Paul S. Otellini - President, Chief Executive Officer, Director
Stacy J. Smith - Chief Financial Officer, Vice President
Mark Lipacis - Morgan Stanley
Sumit Dhanda - Banc of America Merrill Lynch
Glen Yeung - Citigroup
Tim Luke - Barclays Capital
John Pitzer - Credit Suisse
James Covello - Goldman Sachs
David Wong - Wells Fargo
Ross Seymore - Deutsche Bank
Stacey Razgon - Sanford C. Bernstein
Uche Orji - UBS
Chris Danely - J.P. Morgan
Doug Freedman - Broadpoint
John Barton - Cowen & Company
Gus Pritchard - Piper Jaffray
Previous Statements by INTC
» Intel Q3 2009 Earnings Call Transcript
» Intel Corp. Q1 2009 Earnings Call Transcript
» Intel Corp. Q4 2008 Earnings Call Transcript
R. Kevin Sellers
Thank you, Christina and welcome everyone to Intel's second quarter 2009 earnings conference call. I am joined as usual by Chief Executive Officer Paul Otellini and Chief Financial Officer Stacy Smith.
As we begin our call, let me remind everyone that today’s discussion contains forward-looking statements based on the environment as we currently see it and as such does include risks and uncertainties. Please refer to our press release for more information on the specific risk factors that could cause actual results to differ materially.
Following brief prepared remarks from both Paul and Stacy, we will then take questions.
We’ve posted our earnings release and updated financial statements to our investor website, intc.com. Anyone still needing access to that information can find it there.
We will also post on the investor website the appropriate GAAP financial reconciliations for any non-GAAP financial measures mentioned during the call.
So with that, now let me hand it over to Paul.
Paul S. Otellini
Thanks, Kevin. Our second quarter results were clearly better than we expected, with demand strengthening throughout the quarter. While the global economic environment is still recovering, our customers signaled increased confidence for a seasonal second half with their ordering patterns. I believe that this reflects how critical personal and enterprise computing have become to the world.
From a consumption perspective, consumer purchases led the way with a strong rebound in mobile processor shipments. Enterprise PC volumes remain weak but server processor volumes were better than expected, driven by a strong ramp of our Nehalem based products.
We are seeing significant interest in our new products from Nehalem based Xeon processors to Atom, to core i7 on the desktop. These are the fruits of our tick-tock strategy at work.
Globally we saw strength in Asia-Pacific, particularly China, where their stimulus programs continue to generate meaningful growth in their PC market. The U.S. also had a strong quarter, while Europe’s recovery lagged that of the U.S. and China.
Let me say a few words about some of our new products.
We launched our Nehalem EP server processors at the end of Q1 and in just one quarter from launch, Nehalem already makes up over one-third of all of our dual socket server shipments. We expect the ramp to continue with Nehalem shipments crossing over the 50% market in August.
We remain on track to launch our Nehalem EX processor line, which is the multi-processor version of Nehalem, in the second half of the year. Nehalem EX is expected to redefine the performance standard in that segment.
Atom revenue grew a very strong 65% this quarter, reflecting a bit of a snap-back after the inventory correction we saw in late Q4 and in Q1. While netbooks are the main catalysts of the overall growth in Atom, we are pleased to see Atom now making its way into net-tops and embedded applications.
We continue to add new customers in the embedded market segment and are pleased with the great progress Atom is making in opening up new opportunities for Intel, all with healthy product margin profiles for the company.
Next, our recently introduced consumer ultra-low voltage mobile processors are helping to create a new PC segment of ultra-thin, full function notebooks. This product line takes advantage of two key technologies. First, our high K metal gate transistors, which allow us to create the extremely low voltage variance of our processors, and secondly we have created advanced packaging breakthroughs that significantly reduce the overall footprint and thickness of notebooks based upon these products.
Ultra-thin notebooks are now shipping in the market and we believe they will further invigorate the notebook category and be a significant contributor to our profits in the future.
Finally, I want to comment on some of the strategic announcements made recently that are aimed at accelerating our growth initiatives. The first is the acquisition of Wind River, which is nearing completion. This transaction is an important step for us and we expect it will contribute -- it will combine our world-class silicon capability with their world-class software and services to create a new class of differentiated products for the embedded and handheld market segments.
Our Nokia announcement was also an important milestone as we move towards building products that will allow us to compete effectively in the handheld market segment. Our collaboration with Nokia is deep and multi-faceted. The announcement specifically referred to our open source software collaboration and the acquisition of a 3G license. Other work is underway and will be announced in the future.
In closing, I want to thank the employees of the company for their outstanding execution and attention to detail in a very difficult economic environment. Our efficiency progress and cost structures continue to be important advantages for us and our financial performance clearly reflects that.
We are now operating with more speed and agility than perhaps at any time in the company’s history. As we continue to grow our core business and ramp our new initiatives, this agility will be increasingly important to us and to our success.