Wednesday, April 18, 2007

Earning some respect

AMD had announced (twice) that they were going to miss earnings for Q1. Intel products have been getting good press, and the super-geeky seem to be thrilled with the performance of Core2 Duo and Quad chips. Even Intel motherboards have gained favor with the over clocking crowd. But as recently as a month ago, Computerworld was less than flattering about Paul and Intel's 2007 product lineup.

Earnings for Q1 were good. Income was $1.61 billion, 27 cents a share. Last year was 23 cents/share. The tax settlement I mentioned earlier was a big factor and netted Intel and extra 5 cents. Analysts were expecting 22 cents, so we were right in line with the expectations. Our sales were just below expectations, $8.85B vs. an expected $8.9B. There good news here is that profit is up, since we hit the income expectation with lower than expected sales. Gross margin is 50.1%. One analyst said:

It doesn't appear that Intel is waging a price war. Rather, AMD has been cutting its processor prices in an attempt to maintain its market share gains to no avail.

That's great to hear from an analyst, but keep in mind that Intel has some good price cuts happening next week (this is public info). We'll have to see if these impact Q2 earnings. Intel foretasted Q2 sales between $8.2-8.8B. Wall street is expecting the higher number. Some analysts are concerned about rising inventory, and that Intel will be stuck with too much product. My uneducated guess is that the upcoming price cuts will take care of any inventory issues.

The other news is that Intel hit the employee target of 92K about 3 months ahead of schedule. I'm guessing this was due to a combination of aggressive layoffs and higher than average attrition.

My short take: it was a good quarter that demonstrates demand and affinity for Intel products is much better than it has been in recent years. Intel is doing well while AMD continues to cut prices and lose revenue and market share. Things may change when AMD gets more competitive products to the market.

3 comments:

Anonymous said...

I think we're all hoping that the old growth rate and stock price will come back. Unfortunately fighting it out with AMD is a bit of a false battle. Even if AMD disappeared overnight it wouldn't thrust us to a $40 share price. Where is the next big sales opportunity coming from. I see a couple of possibilities but little was discussed in the earnings call and I doubt if they will pay off soon. I just don't see the forward thinking or optimism we need coming from top management.

Former Engineer said...

Bottom line is that the company has not grown in terms of revenue since the year 2000 or so. The stock price since January 2004 has done nothing but go down. The dividend yield is a pittance as well. The stock is just a bad investment.

Anonymous said...

Well some time has passed since the quarterly report. The stock sits at only slightly higher than it was, just under 22.00 US per share. This stock has been virtually flat since the dot com bubble burst in 2000 with a total of about 5.00 US change in that 6-plus years. Factor in inflation and the stock may well be going backwards. I have to say the market is looking for some sort of vision and future outlook and it's not seeing it. Simply smashing at AMD is not a winning strategy. BTW... which previously hyped product will be quietly allowed to die soon? The market is not stupid. They'll know by the lack of hype that management is "distancing" themselves from the product but would prefer not to come out and admit publicly that the product is dead. Need a hint? Leave a request here ;-)