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Intel near breakeven; Street mulls PC growth, mobile losses

  • Intel (INTC - unchanged) has received 11 PT hikes after beating Q1 EPS estimates by a penny, offering healthy Q2 gross margin guidance, and reporting mixed numbers for its new reporting units.
  • At the same time, B. Riley has cut shares to Neutral. The firm, which upgraded Intel in October (shares have risen 17% since), sees a rising tablet CPU mix pressuring 2H margins and is worried about "a tough 2H14 catalyst profile at a time when [PC CPU division] Q/Q growth risks escalate."
  • Pac Crest, 9 days removed from an upgrade, remains bullish on improving corporate PC demand, the potential for foundry share gains, and a "high likelihood" Intel's Grantley server CPU platform will boost 2015 IT spend.
  • Deutsche calls Intel's 2H outlook "prudently conservative," given it assumes little PC seasonality, and sees growth initiatives and cost cuts unlocking EPS/FCF growth.
  • On the CC (transcript), Intel attributed a 61% Y/Y drop in mobile division revenue to weaker baseband chip sales - the business faces tough competition from Qualcomm and MediaTek - and contra revenue payments to OEMs adopting its tablet CPUs.
  • Intel expects contra payments to decline, if not end, in 2015, and is still aiming for 40M 2014 tablet CPU shipments after shipping 5M in Q1. IDC expects 2014 industry shipments of 260.9M.
  • Barclays' Blaine Curtis pressed management on the fact the mobile unit appears to be losing $3B-$3.5B/year. CEO Brian Krzanich insisted Intel "has a roadmap to get to profitability," and that its upcoming SoFIA (low-end baseband/app processor) and Broxton (high-end app processor) platforms will help.
  • Yesterday's Intel earnings coverage

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