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10 Takeaways From Intel’s Q1 Results

{complink 2657|Intel Corp.} is red hot. The company blew away analysts' revenue and profit estimates in the first quarter, boosting its stocks on the equity market. The stocks rose 7 percent by midday today, April 20, and helped to lift the major indices.

What made Intel so successful during the quarter was carefully laid out during a conference call by CEO Paul Otellini, who explained that even analysts got their numbers twisted up in the PC segment because they were not looking deeply enough into demand from white box manufacturers in developing economies. Also, demand for data products has shot up in recent months, due to the proliferation of smartphones, tablet computers, and other mobile computing devices.

Here are my ten takeaways from the company's latest financial results:

  1. A strong 2011 performance is easily achievable:
  2. Intel reported revenue of $12.9 billion for the first quarter, up 25 percent on a year-over-year basis. Net income rose 29 percent during the same period, while sales by segment showed strong performance. “The first quarter was a great start to 2011 and puts us on track to exceed our financial goals for the year,” said Intel's CFO, Stacy Smith, during the conference call.

  3. Emerging markets are driving Intel's growth:
  4. Intel now generates more than 50 percent of its sales from emerging markets, and this trend is likely to continue for the foreseeable future. Demand for technology is strong in emerging markets, and the level of penetration is low — a great combination that's driving sales of PCs and enterprise hardware, according to Intel.

  5. Top OEMs aren't the only game in town:
  6. While everyone is concentrating on the biggest OEMs, the trend in emerging economies is towards non-branded white goods. As more buyers purchase products from small outfits, companies like Intel stand to gain because of the emphatic name recognition — Intel is still the name many buyers want inside their equipment.

  7. Consumer demand is weak in Europe and North America:
  8. Sales in Europe and North America are weak in the consumer end, due to continuing economic problems in the regions. A major part of current demand in Europe and North America is for secondary or replacement/upgrade equipment.

  9. The impact of the Japan earthquake disaster was minimal:
  10. Intel suffered some damage to sales and marketing offices in Japan, but otherwise, the company has not experienced any negative impact from the earthquake and tsunami that rocked the country on March 11. Intel's supply chain has not been hit, despite some problems at some Japanese high-tech companies.

  11. Inventory pipeline is healthy:
  12. No problems emerged with inventory during the first quarter, according to Intel. In fact, the company benefited from some inventory replenishment during the period.

  13. Explosion of mobile devices is boosting demand for datacenter products:
  14. Intel wants a piece of the tens of millions of smartphones, tablets, and other mobile computing devices being shipped. But, as it turns out, the company is getting a slice of the action, as these devices run on its servers and use its components. That action contributed to a 32 percent hike in Intel's datacenter business during the first quarter, the company said.

  15. The cloud is booming:
  16. As the world migrates to data-on-demand services, demand is surging for the equipment that hosts the information, to the benefit of Intel's data business. Intel says its sales into the cloud computing market are growing by a factor of 2 or 3.

  17. Don't trust those research forecast numbers?
  18. Forecasters' numbers usually get close to reality, but only after parts suppliers and manufacturers deliver the actual sales figures. Until then, take the forecast numbers with a pinch of salt because, especially in the case of PCs, they can be off by several percentage points — which, for a segment running into billions, could translate into a wide miss.

  19. No apologies for high capex:
  20. Intel's capital expenditure budget is among the highest in the industry, but that's something the company believes is a major competitive advantage. The $10.2 billion Intel plans on capex this year is going to go primarily into next-generation process technologies, including 22 and 14 nanometers.

19 comments on “10 Takeaways From Intel’s Q1 Results

  1. Jay_Bond
    April 21, 2011

    I have to agree that your number 3 takeaway is a huge factor. While there are many companies out there producing off brands of electronics i.e.; televisions, blu-ray players and computers, most of which are just as good as the big name manufacturers, most computer buyers want a known name. The consumers have no problem looking at brand X if they see there's an Intel processor inside. With the ever expanding sales in emerging markets, Intel's name being associated with smaller companies should generate a large amount of sales and growth. 

  2. mfbertozzi
    April 21, 2011

    Keeping quickly an eye on the list, I was wondering real status about cloud market. Is it booming or in reality “slideware” about, is booming? What is really ready in terms of readiness of services? Of course mobile handsets are forcing apps from datacenters and high powerCPU; this is good for Intel, but in case this should be the picture, we are still far from cloud principles. Maybe it takes more time to reach aimed target for both users and market players.

  3. Taimoor Zubar
    April 21, 2011

    “Intel now generates more than 50 percent of its sales from emerging markets”

    I belong to a developing country which comes under the emerging markets. In the recent months, Intel has done a very smart thing here which I think would also apply to other emerging markets. This may be a big reason for it's success in the emerging markets.

    In developing countries, consumers are very inclined towards buying low-cost hardware and computer equipments. The trend over the years had been to buy used branded computer systems that have been discarded by developed countries. To counter this, Intel has launched and promoted cheaper models of processors and chipsets in developing countries. Some of these models are even cheaper than used branded equipment. From what I have witnessed, this has boosted Intel's sales considerably in emerging markets.

  4. AnalyzeThis
    April 21, 2011

    @TaimoorZ, good post, I think many North Americans and the North American media gets too focused on the US market and forgets that there are a whole lot of people who don't live in North America or Europe.

    Yes, sales may be weak in North America and Europe, but Intel is very well positioned for the emerging markets, as you note.

    I know tablets are all the rage right now in the states now, but tablets don't make much sense for users in developing countries, which is just one of the many reasons why Intel is well-positioned for growth in the areas outside of their traditional markets.

  5. Taimoor Zubar
    April 21, 2011

    Unlike the developed countries, in the emerging markets computers are not sold under a brand name where all the accessories are of the same brand. Consumers can add the hardware components of the CPU according to their choice. This is where Intel is dominating where majority of the boards, processors and other chips are Intel's.

  6. DataCrunch
    April 21, 2011

    Hi DennisQ, I have stated on other post that people should not bet against Intel.  Intel is still the leader in chip technology for PCs and Servers, which by the results, there is still a strong “worldwide” demand.  Intel is not going to sit by and be passed up in the smartphone and tablet arena.  There is too much at stake and Intel is getting aggressive in the mobile market as well. I expect that they will emerge as the leader in this space as well.  It may take 3-5 years though.

  7. Parser
    April 22, 2011

    Emerging markets are typically quickly saturated. For a sustained success Europe and North America have to recover. It is good to see that something is leading the recovery. More and more companies, including as expected Apple, are reporting profits and increased investments. Hopefully this will show up in hiring soon. 

  8. mfbertozzi
    April 22, 2011

    Parser, personally I agree and share your position. It seems some small lights are brighting, even recovery path will take a lot more and honestly a very determined plan for leaving out current crisis is not done. Is it due difficulties in foreseeing the clear street or due to lack of professionals at C-level which prefer “cut attitutide” to gain some bit % on the EBITDA in short term?

  9. t.alex
    April 22, 2011

    There have been speculations that the boom in mobile/tablet devices would kill off Intel soon. However, it is an interesting note that the demand for data center is also exploding.

  10. SunitaT
    April 22, 2011

    I totally agree with you Dave. Definitely Intel will emerge as the leader in mobile space as well soon. Moreover mobile space is chaning so drastically that no body can dominate it for too long . Intel has money power and resource power to easily dominate mobile arena.

  11. Taimoor Zubar
    April 22, 2011

    I agree that Intel has to make a strong impact in the mobile and tablets market if it wants to continue being the hardware leader in computer chips. I think Intel will be successful if it enters in those markets and will be able to en-cash on the brand name.

  12. mfbertozzi
    April 23, 2011

    Tirlapur, at Home/Personal Computer time, Wintel has striked the market and only in the long terms tech alternatives came trying to balance the situation in a trade off PC-Intel and PC-compatible. Do you think similar scenario will happen also in mobile market?

  13. electronics862
    April 23, 2011

    Intel normally known for the processors used in personal computers as well as in servers, but had not reported a major break through for chips utilized in mobile phones and other related portable devices.The firm, which designs and manufactures computing and communications components, was confronted a tough competition from ARM Holdings. ARM based processors were widely used in Smartphones and other related small devices because of their low power consumption.

  14. mfbertozzi
    April 23, 2011

    What happened in the market is in line with analysis you have summarized, then maybe it is necessary a more prudent approach before to state Intel is going to take a leadership also on mobile. Perhaps it could happen, but not shortly, isn'it?

  15. Kunmi
    April 25, 2011

    It is just a matter of time with Intel for the company to emerge in the mobile tech and tablet. Intel had been a reliable hardware leader in computer chips. Because of the company's credibility, it will be a great attempt if the company can make an impact in the mobile and tablet technology. Someone like me will jump at it.

  16. saranyatil
    April 26, 2011

    Amid the speculations of ARM architecture eating the slice of Intel processors in the desktop market and Intel's no admit into the mobile phones still Intel is beating the expectations all the time. Their investments in Atrom and the advanced architectures like sandy bridge is giving them an edge in the industrial computing market.

  17. Kunmi
    April 27, 2011

    Does intel have flare for chips in mobile technology? I think the question is not whether Intel can emerge and do better in mobile tech but is there a need to be involved. Intel may remain as an expert in its current product lines while analyzing the market for mobile technology. One thing is sure: Intel has potential to become a cutting edge if it chose to.

  18. mfbertozzi
    April 27, 2011

    Yes, Kunmi, it is sure; maybe as consequence of today announcement from Nokia and Accenture, new events could happen and influence mobile market and then also next piece of Intel's mid-term strategy.

  19. mario8a
    April 27, 2011

    It will very interesting what  really means for Intel forecast close to reality, how many percentage points off will be close to reality in a multi-billion company.

    I flu from SFO to ShangHai next to one on the VP of mother-board development  & research, after some conversation he explain to me even though Intel is very strong, they have to “move their chesse” of a different core bussines and they have to do it soon.

    Regards

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