Intel Q4 bests estimates, again showing double-digit revenue gains
Intel's Q4 revenue of $10.6 billion was up $2.3 billion, or 13%, on Q3's results.
By Suzanne Deffree, Managing Editor, News -- EDN, January 15, 2010
Intel Corp reported on a Q4 2009 Thursday that beat Wall Street estimates and left some industry watchers using terms including “blowout,” “robust,” and “impressive” to describe the company’s numbers and position after one of the worst economic years in recent history.
“The fourth quarter was a strong finish to what turned out to be a good year,” Intel CFO Stacy Smith said on a conference call discussing the company’s December quarter results yesterday afternoon. The improvements made to our cost structure and efficiency levels have led to exceptional financial results in the fourth quarter and served as a strong foundation on which we can build in 2010 as we refresh our product line and ramp 32-nm process technology.”
He noted that Intel’s Q4 revenue of $10.6 billion was up $2.3 billion, or 13%, on Q3’s results. The revenue was also up 28% on a year-over-year basis, making the sales gain “the largest year-over-year percent increase in more than a decade,” according to Smith.
Intel’s Q4 marked the third quarter in a row that the MPU giant showed double-digit sequential revenue gains. The quarter followed on Q3 2009, for which Intel showed revenue of $9.4 billion, the strongest Q2 to Q3 sales growth the company had seen in 30 years with a quarter-over-quarter increase of $1.4 billion. Q2 2009, meanwhile, marked the company’s strongest Q1 to Q2 growth since 1988, with revenue of $8 billion showing sequential growth of $879 million.
“Our [Q4] financial results reflect both significant improvements in our cost structure and higher microprocessor ASPs [average selling prices],” Smith said. “The impact of these improvements can be seen in the gross margin percent of 65%, which was up 7 points from Q3 and is the highest gross margin percent in our history.”
Q4 also showed $2.5 billion in operating income and $2.3 billion in net income for Intel. Q4 operating income was down 3% sequentially but up 62% as compared to Q4 2008. Q4 net income was up 23% on Q3’s results and skyrocketed 875% on a year-over-year basis.
“The PC market has recovered nicely with our microprocessor revenue excluding Atom growing 42% since the market bottomed in Q1,” Smith said of the quarter’s results. “In the same time period, Atom microprocessors and associated chip sets have grown to $438 million in revenue in the fourth quarter and $1.4 billion for the year.”
Intel CEO Paul Otellini noted that demand for the company’s latest generation of processors in both the PC and server segments “was particularly strong providing an ASP uplift in the quarter.
“Inventory levels remain in good shape with OEM component inventories roughly flat quarter-over-quarter and below levels of a year ago,” he said, further noting that distributor inventories are down sequentially. “The combination of much stronger sell through and lower year-over-year inventory levels gives us comfort that the supply chain continues to operate very efficiently.”
Otellini pointed out growth in Intel’s Atom line and 32-nm plans. “Looking ahead over the next three months we are planning to refresh our entire server product line with the new 32-nm Xeon in the single, dual, and multiprocessor segments. … Our Atom processor business also continues to do very well in netbooks and design wins. Atom design momentum is very strong with the Pine Trail platform in more than 80 netbook designs. In the embedded space, we now have more than 600 Atom based design wins and more than 2,500 design engagements across 230 customers, 93 of which are brand new customers to Intel.”
For the full year, Intel reported revenue of $35.1 billion, down a mere 7% on 2008; operating income of $5.7 billion, down 36% on 2008; net income of $4.4 billion, down 17% on 2008; and EPS (earnings per share) of 77 cents, down 15 cents on 2008.
In 2009, Intel faced a $1.45 billion fine from the European Commission and an AMD settlement agreement of $1.25 billion.
Looking to Q1 and full-year 2010, the company, in its usual fashion, took a somewhat conservative approach.
“For the first quarter we are forecasting a seasonal decrease in revenue, taking the midpoint of our forecast range to $9.7 billion, a 36% increase in the first quarter of 2009,” Smith said. “We are forecasting the midpoint of the gross margin range to decrease four points from Q4 to 61%. In addition to the impact of a unit decline, the decrease is primarily due to the higher costs associated with the early ramp of the 32-nm products.”
Otellini added that Intel plans to move 32 nm into mainstream faster than it did with 45-nm technologies. “The rate of crossover between 32 and 45 will be more a function of second-half demand in total, than capacity planning to cut one off versus the other. If demand is red hot, the transition will be slower, although we will ramp 32 as fast as possible. In terms of Pine Trail, I think we will move pretty quickly to transition that.”
For 2010, Intel estimated R&D plus marketing, general, and administrative spending will be $11.8 billion, plus or minus $100 million, up from $10.9 billion in 2009. Capital spending for 2010 is forecast to be $4.8 billion, plus or minus $100 million. Gross margin for the full year is estimated at 61%, plus or minus 3 points.
