Seeking Alpha

Intel adds to losses as Street mulls investor day guidance

  • Bernstein's Stacy Rasgon, who has been bearish on Intel (INTC -4.8%) for some time. "We could actually feel the cheer leach out of the room a bit during [CFO] Stacy Smiths’s final presentation, as outlook for 2014 (mostly flat on revenues, gross margins, operating income, and capex) was likely not quite as good as some had hoped."
  • Goldman (Sell) isn't pleased with Intel's guidance for flat 2014 revenue/EPS growth, nor with its steep capex budget (~$11B). It also thinks the revenue forecast could be aggressive since it "assumes no negative impact from the end of the corporate [PC] refresh cycle," and also assumes a pickup in server CPU division growth to a low-teens rate.
  • Jefferies, however, is lifting its PT to $32. "Intel's message was compelling: its product line is geared to the new market reality, PCs are stabilizing, servers are growing, and it expects to grow its tablet MPU shipments by 4x to 40m units in 2014."
  • SA contributor and Intel bull Ashraf Eassa is upbeat about the pending launch of Intel's dual-core Merrifield Atom smartphone CPU, the 2H14 launch of its 14nm Cherry Trail Atom tablet CPU (Bay Trail's successor), and (especially) the 2015 launch of its Broxton smartphone/tablet CPUs.
  • Perhaps the biggest issue weighing on investors' minds: While keeping capex high to maintain its manufacturing edge, Intel is trying to offset declining sales of Core PC CPUs by ramping sales of Atom CPUs that often have far lower ASPs, and which some think could end up cannibalizing low-end Core sales.
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Comments (25)
  • Justin Jaynes
    , contributor
    Comments (3151) | Send Message
     
    Stacy Rasgon is bearish on almost anything that has a transistor.

     

    Long $AMD, $INTC (barely)
    22 Nov 2013, 11:47 AM Reply Like
  • wigit5
    , contributor
    Comments (4222) | Send Message
     
    Guess my $25 call by 2015 was a decent bet lol... With this guidance unless they severely low balled I see rangebound 22-25 for 2014. Not bad though if you can get shares below 22 for an expected 2015 growth.
    22 Nov 2013, 11:50 AM Reply Like
  • Justin Jaynes
    , contributor
    Comments (3151) | Send Message
     
    I'm through a very small position in my IRA, and will likely put a good chunk of next year's contribution in INTC if the stock is punished.
    22 Nov 2013, 12:20 PM Reply Like
  • Gary Jakacky
    , contributor
    Comments (2750) | Send Message
     
    I wish INTC all the luck in the near future, but they should appoint Obama as their CEO. I never heard a company make so many EXCUSES for so long.
    22 Nov 2013, 12:21 PM Reply Like
  • Khyber Pass
    , contributor
    Comments (290) | Send Message
     
    Can't get away from politics, can we?
    I've not heard so many ignore accomplishments for so long.
    Maybe we could stay with the financial and drop the political gnawing?
    6 Dec 2013, 10:18 AM Reply Like
  • alpine
    , contributor
    Comments (1545) | Send Message
     
    As someone who listened in on the entire presentation well past midnight my time, I drew the following, man-on-the-street conclusions:

     

    a) the CEO may be paranoichal, as AGrove once preached, but for the most part, the senior management of Intel has long forgotten this mantra, and is in desperate need of a major refresh. As special mention, the CFO, who seemed to imply that he has been through so many such presentations, that this will be another one that he will just "breeze" through, making disparaging remarks about the once long serving/suffering ABryant, to me, he "took the cake".....to bring up that Heikou joke, at a time, in front of long suffering Intel shareholders (or their representatives), who have suffered through so many quarters of always, "blue sky tomorrow" presentations, but disappointing actuals, to be followed by impressive presentations, I say, to Mr. BK, please replace SS asap, he is just a bad (sorry), Apple (which has just proven what it can do with the lowly A7 chip), as he simply does not even know anymore that there are big headlights coming Intel's way;

     

    b) Intel has so many good things going for it in terms of technology advantages, some of which could be deemed "permanent", perhaps, even if it is strange to use such a word in the chip world, but to me, most of the long term advantages are actually less technology, but more, to use a much maligned description, "exceptionalism, beacon on the hill" stuff;

     

    c) but the likes of SSmith simply does not get it, and never will, as he is simply, to put it crudely, a "Powerpoint jockey".....it is a shame, as by now, he should be walking around with his head in shame, esp at an Analyst Day presentation, but instead, he seemed to have opinions on many things, so unrepentent, delighted at his "absolute mastery of the numbers, and beyond", which even the entire mankind does not have answers for (as they are for the most part, where the atom will refuse to "break", and there will be current "seepage"), and he even thinks, POtellini did not "catch" him out for mixing up multiplying vs adding mistakes;

     

    d) on the other side the world, starting with some 8 hours time difference, the ARM folks are poor "Powerpoint jockeys"....they come to work, marvelling at how they are creating, designing, and even "marketing" stuff to the other side of the world, the likes of TSM, Samsung, Mediatek, Lenovo, Huawei, ZTE, and a little shorter distance, to the likes of Apple, Qualcomm, AMD, and yes, even Altera. In short, Intel has to "unlearn" arrogance, "cleanse" itself of monopolistic behaviour genes, that being big and knowing it all is not always an advantage, and, at the end of the day,
    e) Remember, Mr. AGrove, did not declare it a "law", but in your case, Intel senior management, it is a "fatwa"....."only the Paranoid Survive". Come to work at Intel from Monday, you actually know very little, but you are lucky, your CEO does, be very very humble to your fellow employees, your long suffering Intel shareholders (don't think for a moment you have done well by them, look at the stock charts, esp ones comparing alternatives in the tech space), and help the CEO get on with it. It is a long, mostly difficult road ahead, you might make it, but the odds right now are simply against you. The ARM camp has a lot in its arsenal, as it is a true eco-system, esp with a truly "Asian paranoid" angle, and even for the folks on the West Coast, you ain't seen nothin' yet;
    f) as for the CEO, Mr. BK, don't be so kind, "old Intel like" and intellectual, it is important to start off with a clean slate, breed a "new" Intel inside (and, more importantly, outside), sometimes it is better to be cruel than be kind, bring senior (personal suggestion, younger) people who can play the new, as yet, untested, potentially "fab"ulous game, using new rules, untested financial parameters, but I fear, Mr. SSmith is not going to help you go for the ride.

     

    22 Nov 2013, 12:21 PM Reply Like
  • Stock Market Mike
    , contributor
    Comments (2631) | Send Message
     
    "Perhaps the biggest issue weighing on investors' minds: While keeping capex high to maintain its manufacturing edge, Intel is trying to offset declining sales of Core PC CPUs by ramping sales of Atom CPUs that often have far lower ASPs, and which some think could end up cannibalizing low-end Core sales."

     

    I'm not sure how much money they made (or lost) selling low speed Celerons into $249.99 chromebooks, but I'm sure replacing those chips with Atoms will save them some money and improve margins. Will revenue drop? Yes. But at least those chips won't be loss leaders anymore.

     

    Although Intel's capex currently remains high, they have the potential to eventually shift to a lighter model - I could one day in the future see Intel having 8-9b capex, unlocking further earnings potential. Either that or they shift to the foundry model, and stay capex heavy, but bring in a lot more revenue.
    22 Nov 2013, 12:50 PM Reply Like
  • Justin Jaynes
    , contributor
    Comments (3151) | Send Message
     
    SMM,

     

    I felt okay initiating a long position in Intel because of their potential as a foundry.
    22 Nov 2013, 01:13 PM Reply Like
  • Bill Maurer
    , contributor
    Comments (5809) | Send Message
     
    Intel Investors Should Demand A Refund:

     

    http://seekingalpha.co...
    22 Nov 2013, 01:00 PM Reply Like
  • Robert Castleman
    , contributor
    Comments (287) | Send Message
     
    Promoting your own articles in someone else's comment section is bad form. If you want more clicks, write better stuff.
    22 Nov 2013, 01:19 PM Reply Like
  • Bill Maurer
    , contributor
    Comments (5809) | Send Message
     
    Oh, I've gotten plenty of clicks. My article probably could have been included in this market current, as it drives to the heart of Intel's failures. Including it here is for those that missed it.
    22 Nov 2013, 01:28 PM Reply Like
  • Justin Jaynes
    , contributor
    Comments (3151) | Send Message
     
    This isn't someone else's article. This is a market current. Bill's comment is not in bad taste at all, as these market currents are written by SA editors and staff, and frequently include links to relevant (like Bill's) article in the market current.
    22 Nov 2013, 01:35 PM Reply Like
  • Robert Castleman
    , contributor
    Comments (287) | Send Message
     
    Explain to me how profitability = failure? Have we so redefined the goals of business that steady profits no longer matter, only rapid growth in stock price, without any regard to the presence of revenue, profitability or sometimes even a actual product?
    22 Nov 2013, 03:11 PM Reply Like
  • Bill Maurer
    , contributor
    Comments (5809) | Send Message
     
    If profits were steady, it's one thing. How about a $3.5 billion drop in net income though?
    22 Nov 2013, 03:18 PM Reply Like
  • Robert Castleman
    , contributor
    Comments (287) | Send Message
     
    I'm still getting a dividend. How is that failure?

     

    The rhetoric is not consistent with reality. This is true for bulls or bears, and not just with Intel. It is really quite astonishing as "investors" hold to the conceit that they are somehow more rational and informed than the average Joe yet the articles and blogs that attract the most attention are often the ones infused with the most hyperbole. The title of your article is a great example of useless hyperbole:

     

    "Intel Investors Should Demand A Refund".

     

    Seriously? This carries no information other than your capacity for sarcasm.

     

    Or further:

     

    "After what looked like a great investor day presentation, which sent shares higher by 2.7% to the highest point in almost 6 months, the company made a stunning announcement"

     

    What is so stunning about this? Am I the only one at Seeking Alpha that wasn't surprised? Disappointed, yes. Surprised, no. Stunned? Absolutely not. Given the structural changes in the chip business and the time it takes to switch gears to a different product mix, why would any one expect anything but another year of minimal growth. If anything, it would have been far more stunning to have heard guidance for huge gains.

     

    What does it say about all of the analysts that are so "stunned" by this guidance? They wanted to hear "Everything is fantastic and growing faster than ever imagined" but what they got was the reality that would have informed their expectations if only they analyzed instead of pontificated.

     

    All this hand wringing about Intel is overwrought. Is the drop in revenue a good thing? Of course not. Did they badly misjudge mobile and the changes it brought to their industry? Hell yes. But is it reason to panic and abandon all hope? I guess that depends on if you are a rational investor or one that chases comets looking for the next 10 bagger.
    23 Nov 2013, 11:02 AM Reply Like
  • Bill Maurer
    , contributor
    Comments (5809) | Send Message
     
    Getting a 22.5 cent dividend is nothing when the stock drops a few bucks at at time.

     

    What is so stunning? Expectations called for 2% growth. They guided for NOTHING. Flat. Zero growth. More than a billion dollars plus below expectations. Stagnant margins.

     

    Yes, it is a reason to abandon hope. 3rd straight year of disappointments. Intel just isn't there yet, and that's why this stock can't trade for 25 bucks plus. At that price, it needed a fair amount of growth. Not nothing.
    23 Nov 2013, 11:56 AM Reply Like
  • Robert Castleman
    , contributor
    Comments (287) | Send Message
     
    "Expectations called for 2% growth."

     

    Who's expectations? Isn't this the point? Apparently, analysts expectations were wrong. Seems to me that means their analysis was wrong as well. Oops.

     

    Stocks dropping a few bucks at a time are because so called "rational" investors inflate the impact of news. Up 2.5% during the Investors day. Down 5+% the next. Are you seriously telling me that the intrinsic value of Intel was so radically altered by a feel good conference with a bad ending? What was so fundamentally different between the beginning of the week and the end? Only the perceptions of the traders. So much for the Efficient Market Hypothesis.

     

    Big swings in stocks are artifacts of traders' emotionally infused reactions to often irrelevant information. These traders are all looking for the big payoff and have no problem with driving prices up and down as quickly as possible. Investors that react hastily to these swings are often going to lose.

     

    Intel is not a "favored" equity because it isn't a traders stock that can be expected to show rapid growth or be shorted into oblivion. This tension between short term trading and long term investments is problematic because it drives the conversation in different directions. The analysis for a long term holding asks different questions than that of a short term trade. A long term strategy would buy on the dips and average down the cost of the holdings, not even worrying about the fluctuations. A short term strategy would be entirely different.

     

    What's your time horizon? 1 day? 1 month? 1 year? 5 years? Each of these creates their own set of questions that must be answered before a RATIONAL decision can be made.

     

    Intel has an infrastructure in semi-conductors that is first class, perhaps BEST in class. It is this infrastructure that keeps a semiconductor company at the top. It is profitable and as best I can tell will remain so for the foreseeable future. What's the weakness here for a long term investment?
    23 Nov 2013, 12:44 PM Reply Like
  • David RG
    , contributor
    Comments (1990) | Send Message
     
    "What's the weakness here for a long term investment?"

     

    Zero growth and declining profits and free cash flow? I am with Bill on this one, but remain hopeful for 2015. The expectations for 2% growth came from Intel's previous guidance. The change to flat is because they are essentially giving away Bay Trail chips to tablet makers and calling it "contra revenue", which is another word for allowances taking revenue to zero on this entire piece of business.

     

    Maybe it is a smart strategic move, but I was stunned that we didn't find out until Stacy Smith's presentation that they are unable to sell this at any cost.
    23 Nov 2013, 10:20 PM Reply Like
  • Robert Castleman
    , contributor
    Comments (287) | Send Message
     
    2015 isn't exactly long term. More like 2020. This is one of the things that really bugs me about "investing". Apparently, thinking about things in terms of more than 12 months doesn't happen much. I see nothing about Intel that suggest that 5 years from now they will be on life support. But to hear it told by some, Intel is in a death spiral.

     

    I have no problem with short term trading. I play in that sandbox as well. But that's a different game entirely. Intel is not a trader's stock. Analyzing it from that perspective is of limited value.
    24 Nov 2013, 07:40 AM Reply Like
  • Stock Market Mike
    , contributor
    Comments (2631) | Send Message
     
    I agree - Intel is not a trader's stock. On the other hand, you can often grab long term calls in the low $20's with cheap premiums and double your money, then grab puts in the high $20's and double your money on the way back down.

     

    Buying shares and selling calls is probably a safer play than that - a strategy that would make an income investor happy. Intel has proven resistant to the overall level of the indexes - they can go up 2% and Intel goes up 4 pennies, or go down 2% and Intel goes down 4 pennies. Intel is a rare stock that is mostly valued based on it and its competitors alone - short of another 2008, the market is unlikely to pull it up or down much.
    24 Nov 2013, 12:27 PM Reply Like
  • richard costello
    , contributor
    Comments (17) | Send Message
     
    Nice snow job Intel.. All the good news while the market is open, then the bad news after the market closed.. Like I said, Nice Snow Job!!!
    22 Nov 2013, 01:56 PM Reply Like
  • scorpion.bullfrog
    , contributor
    Comments (92) | Send Message
     
    The whole thing just smells fishy to me. If you have pc sales flattening, which looks to be the case, tablet chips flying off the shelves, software growing slightly, a threat to start selling phone chips and data center growing........ How can they guide to flat y/y revenue ?!??!? It makes no sense! Which group is getting killed to offset sales increases everywhere else?
    22 Nov 2013, 05:18 PM Reply Like
  • David RG
    , contributor
    Comments (1990) | Send Message
     
    Clearly expectations are not really for flat PC/Laptop sales with this guidance given DCG growth. I kind of wish they would just come to terms with this and give an honest appraisal about long term decline rate. Is it 2%? 4%? Because they clearly have a view that is baked into overall guidance.
    23 Nov 2013, 08:09 AM Reply Like
  • scorpion.bullfrog
    , contributor
    Comments (92) | Send Message
     
    Take a looksie at the 12 month chart on Microsoft, then come back here and tell me that the pc is dead. Just a few months ago INTC was getting killed because pc sales were gonna be down something like 16% y/y. Then INTC reported y/y sales decrease of just 3% for pc. They didn't warn for the current quarter. Sure looks like mgmnt is setting the bar low for a series of beats and guidance raises. With BayTrail tablets selling like they are, and if these sales aren't cannobolizing pc, wtf is going on?
    23 Nov 2013, 09:51 AM Reply Like
  • scorpion.bullfrog
    , contributor
    Comments (92) | Send Message
     
    And didn't they also say the BayTrail wasn't cannobolizing? Didn't they say that?
    22 Nov 2013, 05:19 PM Reply Like
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