A solid summer so far for Intel: The chip giant blew away Street revenue and EPS expectations for Q2, but gross margins were a bit lower than forecasted. Why? Greater demand for cheap laptops, which include cheaper chips. Guidance for Q3 is solid.
“As we enter the second half, demand remains strong for our microprocessor and chipset products in all segments and all parts of the globe,” Intel CEO Paul Otellini said in a statement.
Nothing earth shattering on the call — but some more reassuring commentary suggesting that the economy hasn’t significantly hurt Intel.
Q2 Revenue: $9.5 billion, up 9% year-over-year, vs. $9.0-$9.6 billion guidance and $9.32 billion consensus
Q2 EPS: $0.28, vs. $0.25 consensus
Q2 Gross Margin: 55.4%, vs. 56% guidance
Q3 Revenue Guidance: $10.0-$10.6 billion, vs. $10.1 billion consensus, $9.9 billion (FBR)
Q3 Gross Margin Guidance: 58%, vs. 58.2% (FBR)
Full Year Gross Margin: 57%, vs. 57% guidance, FBR
Live Conference Call Notes:
5:32 Call begins. Standard disclaimers.
5:33 Record revenue; fourth record quarter in a row. Demand strong. Rev and unit shipments near high end of seasonal norm. Better 45 nm yields are lowering unit costs, increased flexibility meeting diverse requirements.
5:35 Record channel shipments in servers. Also some noteworthy design wins at Cray and Dreamworks. Growing notebook demand as prices continue to decline. Notebook beating desktop sooner than expected. Expect unit shipments of Atom processors to grow sharply in 2H.
5:37 Excited about Centrino 2 and 6-core server chip. A final word on the economic env: Very aware of global economic conditions that dominate market. We saw order patterns play out as anticipated in beginning of the year. Inventories at healthy level. Q3 see continued healthy demand for our products.
5:38 Going over results from the release.
5:45 Q&A to begin. First, an ad! — for Intel developer forum.
5:46 Atom launched in Q2 — but units shipped were small. Expect ramp rapidly in second half. Traditional notebook market now more than 50%. Growth in channels like retail. That growth is good, but lower ASP. Buybacks? No buyback or cash forecast for Q3.
5:48 What’s happening with desktop market? Look at what we’ve seen so far: Demand holding up across segments, particular strength with notebooks; servers. Q2 tends to be seasonally lower for servers, but expect better in second half. Demand pretty normal across Q2.
5:49 Guiding GM up for Q3, but keeping steady for full-year: Why? See costs improving q/q from Q2 to Q3. See volume up seasonally in Q3, too.
5:50 More Atom-based notebooks in Q3 and Q4.
5:52 Desktop and server pricing? Q2 DP was a bit heavier; drives mix a bit lower. Expect MP to pick up; Q4 is big server quarter but cautious given overall market. Desktop trends: Emerging market, but desktop replacements from corporate customers.
5:54 NAND business? Taking some actions to limit the amount of supply growth in this environment. Focusing on supply and cost. Looking for longer term solutions; not wavered in my commitment to making sure this business isn’t a long-term drag to P&L.
5:58 Plenty of die for Atom. As demand’s going up, jumping to keep enough test capacity in place.
6:00 View of Atom hasn’t changed: Atom platform to be about 10 product margin points lower than mainstream of product line.
6:03 No more granularity!
6:06 Consumer notebook purchases as a % of consumer PC purchases has grown from 15%ish to 50%ish. Consumers shifting to notebooks; those are lower than enterprise price points. Nothing more than price/volume expansion of consumer business on worldwide basis. Netbooks focused on emerging markets.
6:07 What’s going on in China? Quarter had an early interruption with earthquake. Everyone that operates in China had some impact. Other trends there are good: WiMax trials, Olympics, etc.
6:25 Q&A over. Obviously missed a bunch of the transcription here — apologies. Nothing earth shattering, though.
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