Each and every year, Intel (NASDAQ:INTC) hosts the Intel Developer Forum (known as IDF). It is usually held at least twice per year -- once in Beijng, China and the other in San Francisco. In recent years, the company has also held a third one in Sao Paulo, Brazil, although this is not always the case (and was not this year). At any rate, this is a major industry event that includes technical sessions, keynotes, and more for people from all over the industry to gain insight into the future of computing. This year, it takes place from September 10-12.
While this is always a very interesting event at which many disclosures happen, this particular IDF is going to be incredibly important not just for industry geeks, but for investors, as Intel seeks to transform itself from a PC chip company to a broad computing, software, and communications company. There is a lot of potential here, but investors have had a frustrating couple of years waiting for these new initiatives to pan out. It is my view that at the event, we finally see the fruits of this new direction that appeared to begin in 2010.
I plan to attend the conference in person, and aim to provide very high quality coverage and analysis of the event in a series of articles that I hope to publish during and following the event. In this particular article, I aim to preview the event and to talk about my expectations. Now, there's one thing in particular I'd like to address up front before I go into the preview proper.
As my disclosure states, I am long shares (and January 2015 $25 calls) of Intel and am very bullish on the company. However, I realize that for this series of articles, I will not only be wearing my "analyst" hat, but will also take on the responsibility of a reporter/journalist. As a result, the majority of my articles covering IDF 2013 will focus on delivering information, impressions, interviews, and data, rather than on talking about the stock and/or financial implications. I will conclude this particular series with a comprehensive piece that takes a look at everything and tries to piece it together to provide an update on the investment thesis. I also promise to make no transactions on shares of Intel stock until at least a week following the conference (although quite frankly, I do not trade my Intel position actively and as of today expect to hold my shares for years).
With that out of the way, let's get to the preview.
Bay Trail: The Star Of The Show
The traditional PC market has been under pressure for quite some time as users have moved towards lower power, lower cost tablets. While the recent release of "Haswell" has managed to substantially improve the portability and battery life characteristics of modern thin and light laptops such as the MacBook Air, this -- in my view -- merely shores up the high end of the market rather than materially driving growth. In order to drive growth in client devices, Intel needs to participate in a much broader variety of form factors (tablets, smartphones, and cheap and fanless laptops). While the company's high end Core microprocessors are seeing substantial improvements in power and integration, they are still unsuitable to power very cheap devices as well as very small form factor devices.
This is where the "Atom" product line comes in. While it is my view that the "Core" products will eventually hit the power targets for the majority of 8"+ tablets, these parts not only feature fairly large die sizes, but they are also much more expensive to develop as these are processor cores that are laid out by hand by fairly large teams with substantial resources, including custom-built EDA tools as well as hand-layout of much of the processor core. The Atom, on the other hand, targets lower performance and lower power envelopes, and are much less expensive to design and build (smaller die sizes, more synthesis with industry-standard tools).
Continuing on, it is worthwhile to note that there are several technical sessions that will detail several different flavors of Bay Trail, including:
- Bay Trail-T for tablets
- Bay Trail-M/D for notebooks/convertibles and destkops, respectively
- Bay Trail-I for "intelligent systems"
The idea here is simple: the potential for Intel to expand its processors into new devices and applications (tablets, intelligent systems) as well as lower cost PCs could help to drive some nice unit/volume growth, which has been missing over the last several years, could be very exciting for investors. I aim to learn more about these products and to perhaps get a glimpse of how Intel sees the future for these products.
Intel's Android Push - Stepping Away From Wintel?
It is clear that Google's (NASDAQ:GOOG) Android has quickly become the most ubiquitous consumer OS in the world by virtue of the fact that it is not only free, but it is highly customizable by device vendors. While Intel and Microsoft (NASDAQ:MSFT) still run lucrative businesses selling Windows-based PCs, it is not as clear that in a world of very low cost laptops and tablets that Microsoft's OS will be the first choice. Further, with Microsoft so desperately trying to push Windows RT, it seems clear that Intel needs to very seriously pursue Android.
No less than twelve of the technical sessions that the company is hosting involve Android-oriented hardware and software optimization. It seems that in the Android space, Intel is focusing on its Bay Trail parts, while the higher end Core products are still largely Windows-centric. However, a recent job posting on Intel's site suggests that even the high end Core products will, too, start to make serious inroads on Android beginning with Broadwell:
At any rate, it should be very interesting to see just how committed Intel is to Android, and whether this will truly become a first-class platform for the company or not.
Smartphones - A Curious Omission
While Intel seems to be going all-out in detailing Bay Trail in its technical sessions, there appears to be nothing of the company's smartphone efforts. While I remain hopeful that the keynotes from Brian Krzanich and Renee James (CEO and President, respectively), as well as the keynote from Hermann Eul (head of the mobile division, brought over from Infineon) will contain a substantial update on Intel's upcoming Merrifield platform and Intel's future modem plans, at this time I have to assume that these are not going to be heavily emphasized topics during the conference.
14 Nanometer - I'm Expecting An Update
On Intel's most recent conference call, both CEO Brian Krzanich and CFO Stacy Smith emphasized that 14 nanometer chips would go into production during Q4 2013 and that launch of the initial 14 nanometer products would occur in the first half of 2014. Now, while I expect these to be PC/micro-server oriented chips, I'm much more interested in Intel's projected timeframe for its 14 nanometer tablet/smartphone parts. Will Intel wait a full year before launching its Airmont (Silvermont successor on 14nm) based system-on-chip products, or will it try to iterate through these products as quickly as possible in an attempt to gain market leadership? An interesting snippet from the most recent conference call suggested that the current "1 chip every 12 months" cadence is simply too slow, and that the OEMs want parts faster:
I think the things that were positive for me is that, our customers especially if they want Intel to get into this expanding ultra mobile market, they're looking for Intel to be stronger and have a better and more capable product light up in there, and they're excited about the products that we have coming, the Haswell and Bay Trail. So I'd say the key message that they've been giving us is, we really want you there, we see the products coming, we want even more and we want a faster line up following those.
My guess is that Intel is likely to save the strategic update for the Investor Meeting in November, but given the recent pessimism baked into the share price (and CEO Brian Krzanich's insistence that Intel will make moves that will help to build shareholder value), some buzz (and perhaps a live demo of Cherry Trail -- Bay Trail's successor) would probably help drive more positive sentiment.
There's Plenty More
While I've talked quite a bit about what I'm expecting/hoping to see, I am hoping for some real surprises at the first IDF hosted by the Intel run by the new CEO. Intel investors have waited years for what will likely be launched/showcased at the event, and I think that following the conference, investors and analysts will have a much clearer picture of where Intel is going. Stay tuned for my coverage of the event!