Intel Corp (INTC) at Citi 2014 Global Technology Conference (Transcript)

Edited Transcript of Intel Corp (INTC) at Citi 2014 Global Technology Conference (Transcript)

Company: Intel Corporation (INTC)

Event Name: Citi 2014 Global Technology Conference

Date: September 3, 2014 8:45 AM ET


Ehud Gelblum – Analyst, Citigroup

Good morning and thanks for coming. We’re here for our keynote presentation this morning. My name is Ehud Gelblum. I do data networking and telecom equipment here at Citigroup and again I am pinch hitting for semis. We’re thrilled to have Intel here this morning.

A little brief introduction. In 1968, Bob Noyce and Gordon Moore starting way, way back left Fairchild Semi to found a company that would later become Intel. Its first product, the 3101 RAM chip was introduced two years later and after that company went public in just the strength of its memory business alone. Later that year, Intel introduced its first processor chip, the 4004 and two years the company became big enough to open its wafer fab in 1973. After several years of pioneering 8-bit processor chips in 1978, the company hit it big with the 8086 16-bit processor, the company’s answer to the ZiLOG Z80 that actually if anyone had a Radio Shack TRS-80 that’s what it used, I actually had one, kind of a geek I was.

In 1981, when the successor chip, the 8088 was put into the IBM PC, it started a virtual cycle that has lasted over three decades and could continue to dominate the way compute has done for centuries to come. From the very start of the business, in 1968 to day only six men have sat in the CEO’s chair at Intel: Bob Noyce, Gordon Moore, Andy Grove, Craig Barrett, Paul Otellini and my guest today Brian Krzanich. He’s been in Intel for a staggering 32 years, since the day he graduated college is the calculation I made, I am not sure but if it’s true but it sounds like so. And he has run various parts of Intel’s fabs and manufacturing capabilities for the better part of most of the last 17 years, including driving Intel’s moves into both 0.18 micron and 0.13 micron.

Today, Brian is driving Intel into not just 0.13 micron but 12 nanometer or 10x improvement roughly 10 years from where we were at the 0.13 space 10 years ago as well as attacking the mobility space and exploring opening up the foundries in a bigger way to other semis companies. I am pleased to have him here at this conference for the first time. Welcome Brian, thank you for being with us.

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So we will open up the Q&A.

Question-and-Answer Session

Ehud Gelblum: Let me just start with the big picture question. What does Intel look like 10 years from now? We’re seeing obviously lots of moves in the PC industry. PCs were looking weak there; they have now made a comeback. You’re getting into mobility and lot of different moving parts. What does Intel look like 10 years from now? What is the dominant part? Are you still getting 90% of your revenue and 120% of your profits from PCs and servers or has the business started morphing into other areas?

Brian Krzanich – CEO, Intel

Yeah, I think if we look 10 years out, Intel is definitely going to be a broader company across a much broader spectrum of computing. Servers and PCs, I mean you have a business of PCs that’s over $30 billion a year. Servers, roughly about $10 billion or $12 billion now growing at double-digits. They’re going to still be major portions of our business. So I mean those are just large segments, it’s going to be hard for anything to grow in the next 10 years to work that.

I think what you’ll see is a much broader — you’ll see more in mobile, you’ll see more in Internet of things and a variety of other spaces that are yet to be defined. I think one of the things we’re working on right now is really figuring out how to take our silicon leadership and our architecture down into — we talk about parts that may only cost $0.50 and have comps, CPU, everything down there and can run on small batteries. We’re trying to really work on technology to cross that spectrum now.

Ehud Gelblum: So that will be one of the IOT, Internet of things.

Brian Krzanich – CEO, Intel

Yes, IOT, wearables all kinds of devices like that that we think can benefit from those two things Moore’s law and our architecture.

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Ehud Gelblum: So we’ll definitely get into that discussion a little bit. Let’s talk about mobility, that seems to be a large part of the bet you’re placing going forward. Why did Intel feel the need to get into the business in the first place and how integral was that? Is that a side business that either succeeds or doesn’t succeed on its own merits or is that an integral part of what Intel has to be going forward?

Brian Krzanich – CEO, Intel

It’s an integral part, I mean if you look at the computing ecosystem and we think most of the devices that you have today are going to need a spectrum of comps. Whether it’s Bluetooth or Wi-Fi or 3G or LTE, things like Bingbooks and Chromebooks are going to be more and more connected. In fact they’re really only functional or highly functional when they’re connected. We think 25% to 50% of those over the next few years will have 3G or LTE connections. So even in our core business you’ve got to have that comps and mobility capability. So it’s critical to us.

We’ve shown that we can move into tablets fairly successfully. We’re on target to our 40 million units, that’s pretty good, we’ll go from virtually no presence last year to depending on what you size that market at probably 15% share in a year. That’s pretty good. I am pretty happy with that growth and that kind of a position in only a year. And in phones I think is going to be those ones where we have to figure out the right way for Intel to play. It’s dominated by two big players and we need to figure out how is the best to play our technology and our capability. But definitely mobility is critical, even in our core business you’ve got to have that comps and connectivity capability.

Ehud Gelblum: Two directions I want to go with that. One is the question you said about the comment you made about phone. Is our phones as critical part as tablets are to your strategy or they are just an upside as an opportunity because you’ve already created the comps opportunity for tablet?

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Brian Krzanich – CEO, Intel

I think some hybrid of that. So definitely tablets are closer to our core. They’re much more of a compute oriented product. I think we have — here’s what Intel does best. When we can bring our technology to a product and really use the compute cycles, use the capability inside there. We’re not going to build commodity tablets for example but we believe over the next year or so now that we’re in the market we’ve established ecosystem, we can bring real innovation to that space and bring some really unique features. You’ll start to see some of those come out as this holiday season kind of starts to play out and products start to come out. Those are very core, we can take technologies that we’re developing for the PC and move those down into tablets very easily. So it really is able to spin off of that.

Phones are a little bit different and we’re looking at those more opportunistically. We’re trying to figure out where is the best place to play. Like I said in most of the developed countries there is two big players but you move into China much more of an open market spaces like that. You saw our deal with Rockchip. I think you’ll see them move into phones over the next couple of years. Probably with our architecture you’ll see some other opportunities like that I think over the next couple of years.

Ehud Gelblum: Okay. Back on tablets for one quick second. We had Corning up here before and they made a distinction because they sell cover glass into tablets, so they’re end market in that area similarly to your opportunity. They made a distinction between the branded tablets, clearly the Apple, Samsung et cetera that we know brands, that are relatively flat this year, not growing, and the unbranded tablet world that is growing somewhat like a weed in emerging markets in China and places like that. Does it matter to you which of those two sides grow? Can you get into both of those or is it much harder to get into the unbranded side of the tablet world?

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