Seeking Alpha

More on Intel: PC/server growth picks up, mobile losses still heavy

  • As expected following its guidance hike, Intel's PC Client Group sales staged a turnaround in Q2, growing 6% Y/Y to $8.7B (63% of revenue) after falling 1.5% in Q1. Rising margins helped its op. profit grow 41% to $3.7B.
  • Data Center Group (server CPU) sales +19% to $3.5B after growing +11% in Q1. Op. profit +40% to $1.82B.
  • Notebook volumes +9% Y/Y, but ASPs -7%. Desktop volumes +8%, ASPs +2%. Data center platform volumes +9%, ASPs +11%.
  • Internet of Things (embedded product) sales +24% to $539M, op. profit +26% to $155M. Software/services sales +3% to $548M, op. profit was just $8M vs. a $1M loss a year ago.
  • The Mobile & Communications Group (mobile processors, baseband chips, Wi-Fi, and Bluetooth) remains a cash sinkhole: Revenue was officially just $51M due to contra revenue payments, and net loss was $1.12B (up from $761M a year ago). Losses should narrow as contra payments decline, but are expected by the Street to remain sizable for a while.
  • Sales from the "All Other" segment (covers flash memory and foundry, as well as one-time charges) rose 16% to $517M, but the segment also saw a $756M op. loss, up from $590M a year ago.
  • Gross margin is expected to receive a boost in Q3 from lower unit costs and higher volumes, and to be pressured by lower ASPs.
  • With huge buybacks on the way, Intel ended Q2 with $17.3B in cash/investments ($11.2B offshore), and $13.2B in debt.
  • INTC +4.2% AH. Prior coverage.
Comments (13)
  • Philip Marlowe
    , contributor
    Comments (1105) | Send Message
     
    Overall, good news for Intel and great news for the semi industry overall. If you are like me, you would be looking for small cap investments that can benefit from the overall trends indicated by INTC.

     

    The biggest loudest trend I saw here is the excellent growth in data center. For a large company like intel 19% growth is huge. It seems that SMCI is uniquely positioned to benefit there. Another possible beneficiary is SILC (which has been slumping lately). Feel free to chime in with other ideas.
    15 Jul 2014, 06:16 PM Reply Like
  • Realtor_k
    , contributor
    Comments (182) | Send Message
     
    @Philip:

     

    But let's not forget INTC $13.2 BILLION in debt. Huge debt burden even for a company this size. Interest payment per month could be over $1 BILLION.

     

    "With huge buybacks on the way, Intel ended Q2 with $17.3B in cash/investments ($11.2B offshore), and $13.2B in debt."
    15 Jul 2014, 06:33 PM Reply Like
  • David RG
    , contributor
    Comments (1503) | Send Message
     
    "Interest payment per month could be over $1 BILLION"

     

    Who do you think they are borrowing from, Vinnie the Shark? That would be about 100% interest rate. I think you mean $1 billion per year, which is still too high, but for a company their size, even that would be very manageable.
    15 Jul 2014, 06:49 PM Reply Like
  • Ashraf Eassa
    , contributor
    Comments (9157) | Send Message
     
    $1 billion per month in interest payments?

     

    Are you saying that Intel borrows money from loansharks?
    15 Jul 2014, 06:50 PM Reply Like
  • defunkdreader
    , contributor
    Comments (64) | Send Message
     
    Have you heard of that enforcer who goes by the name S&P?

     

    Real tough guy, went after the US government once...
    15 Jul 2014, 06:55 PM Reply Like
  • Grant Payne
    , contributor
    Comments (303) | Send Message
     
    I'll def look at SILC and SMCI.
    I think HIMX is good at its current levels, all those tablets and PCs need video drivers and cameras.
    15 Jul 2014, 07:01 PM Reply Like
  • MrMatt
    , contributor
    Comments (1348) | Send Message
     
    Lots of that can be attributed to stock buy backs, and on some of them they are paying less than Intels dividend rate at the time.
    15 Jul 2014, 07:08 PM Reply Like
  • Retired Securities Attorney
    , contributor
    Comments (2748) | Send Message
     
    Interest was $17 million for the quarter on that debt. That annualizes to $68 million which would be about 1/2 of 1%. That number represents the net cost of funds borrowed over interest received on funds loaned (invested in US bills, etc.).
    15 Jul 2014, 07:22 PM Reply Like
  • techy46
    , contributor
    Comments (6456) | Send Message
     
    Intel $13.2 debt which is probably at 2% or less would only generate $264 million a year in interest. Intel's FCF can easily service the buybacks and debt. Intel borrowed, like many others US enterprise, to wait for US Congress to lower the US corporation tax rate. If rate isn't lowered they'll use offshore cash to do something offshore like invest in China.
    15 Jul 2014, 07:36 PM Reply Like
  • David RG
    , contributor
    Comments (1503) | Send Message
     
    DCG growth is impressive.
    15 Jul 2014, 06:49 PM Reply Like
  • thesahibzada
    , contributor
    Comments (551) | Send Message
     
    blockbuster Quarter

     

    impressive results

     

    and strong forward guidance

     

    and they already had good news going into earnings like with the Panasonic deal and a few others they announced.

     

    This is going to be huge for INTC investors. lots of analysts will be revising and upgrading price target estimates.... including maybe our good friend Mr. Ashraf Eassa :D

     

    Ride the wave back to pre 2001 levels $60+
    15 Jul 2014, 07:19 PM Reply Like
  • thesahibzada
    , contributor
    Comments (551) | Send Message
     
    And mobile will improve. Just give it a little time. Its not a big deal for now.
    15 Jul 2014, 07:24 PM Reply Like
  • ash187
    , contributor
    Comments (218) | Send Message
     
    with results this good, I wonder how bad AMD did? No doubt there's going to be a lot of groupthink and double-talk on the new AMD articles.
    16 Jul 2014, 05:46 AM Reply Like
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