- In tandem with its Q1 report, Intel (NASDAQ:INTC) says it will cut up to 12K positions (11% of its workforce) "through site consolidations worldwide, a combination of voluntary and involuntary departures, and a re-evaluation of programs." The company adds it "plans to increase investments in the products and technologies that that will fuel revenue growth, and drive more profitable mobile and PC businesses."
- The restructuring, which confirms a recent report from The Oregonian, is expected to yield a $1.2B charge and produce $1.4B/year worth of savings by mid-2017. Most of the actions will be finished in the next 60 days.
- CFO Stacy Smith will "transition to a new role at the company, leading sales, manufacturing and operations once his successor is in place." A search for a successor has begun.
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Gross margin/capex: In addition to slightly cutting full-year sales guidance, Intel has lowered its full-year gross margin guidance to 62% (+/- 2%) from 63% (+/-2%). Q1 GM was 62.7%, down 210 bps Q/Q and up 130 bps Y/Y, and above a 62% guidance midpoint. However, Q2 GM guidance is at 61% (+/- 2%). The 2016 capex budget is still at $9.5B (+/- $500M).
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PC/mobile CPUs: In spite of a very weak PC market, Client Computing Group revenue rose 2% Y/Y to $7.5B, with a 19% increase in ASPs offsetting a 15% drop in volume. Op. profit rose 34% to $1.89B (improving mobile margins). Desktop volume -4%, ASP +6%. Notebook volume -2%, ASP flat. Tablet volume -44%, ASP "up significantly."
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Data Center Group: Revenue rose 9% to $4B, with volume rising 13% and ASP dropping 3% thanks to strong networking/storage unit growth. Intel has been targeting a ~15% near-term Data Center Group revenue CAGR. Op. profit rose 4% to $1.76B.
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Other segments: IoT Group revenue +22% to $651M; op. profit rose to $123M from $87M a year ago. Non-volatile memory (NAND/NOR flash) revenue -6% to $557M; the unit had a $95M op. loss vs. a $72M year-ago op. profit. Security revenue +12% to $537M; op. profit rose to $85M from $15M.
Programmable Solutions (Altera) revenue was $359M; Intel says the unit saw mid-single digit growth after accounting for $99M in deferred revenue. The business had a $200M op. loss (integration expenses presumably weighed). "All other" revenue totaled $50M vs. $76M a year ago, with op. loss rising to $994M from $669M.
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Financials: $793M was spent to buy back 27M shares. Q1 EPS benefited from an 18.4% tax rate (up from 16% in Q4, but down from 25.5% a year ago). Intel now expects a 22% tax rate for the year's remaining quarters, down from 25%.
Ahead of the job cuts, R&D/MG&A spend (boosted by Altera) rose 9% Y/Y to $5.4B. Intel ended Q1 with $15.1B in cash ($14B offshore) and $25.4B in debt.
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INTC -2.4% after hours to $30.81, after coming off a halt.
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Intel's results/guidance, earnings release (.pdf), CFO commentary (.pdf)