Intel’s (INTC) CEO Brian Krzanich on Q2 2014 Results – Earnings Call Transcript

Source: Seeking Alpha

 

Intel Corporation (NASDAQ:INTC)

Q2 2014 Earnings Conference Call

July 15, 2014, 17:00 PM ET

Executives

Mark Henninger – Head of IR

Brian M. Krzanich – CEO

Stacy J. Smith – EVP and CFO

Analysts

Vivek Arya – Bank of America Merrill Lynch

Joe Moore – Morgan Stanley

John Pitzer – Credit Suisse

Jim Covello – Goldman Sachs

Ross Seymore – Deutsche Bank

David Wong – Wells Fargo

Mike McConnell – Pacific Crest Securities

Stacy Rasgon – Sanford C. Bernstein & Co.

Romit Shah – Nomura Securities

Hans Mosesmann – Raymond James

Christopher Rolland – FBR Capital Markets

Ian Ing – MKM Partners

Operator

Good day, ladies and gentlemen, and welcome to Intel Corporation Second Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we’ll conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions). As a reminder, today’s conference call is being recorded.

I would now like to turn the conference over to Mr. Mark Henninger, Head of Intel Investor Relations. Sir, you may begin.

Mark Henninger – Head of IR

Thank you, Saied, and welcome everyone to Intel’s second quarter 2014 earnings conference call.

By now, you should have received a copy of our earnings release and the CFO commentary that goes along with it. If you’ve not received both documents, they’re available on our investor website, intc.com.

I’m joined today by Brian Krzanich, our CEO; and Stacy Smith, our Chief Financial Officer. In a moment, we’ll hear brief remarks from both of them followed by Q&A.

Before we begin, let me remind everyone that today’s discussions contain forward-looking statements based on the environment as we currently see it and as such, does include risks and uncertainties.

Please refer to our press release for more information on the risk factors that could cause actual results to differ materially. Also, if during this call we use any non-GAAP financial measures or references, we’ll post the appropriate GAAP financial reconciliation to our investor website, intc.com.

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So with that, let me hand it over to Brian.

Brian M. Krzanich – CEO

Thanks, Mark. The second quarter exceeded our expectations. The improving economic environment, PC refresh, form factor innovation and the end-of-life of Windows XP combined to drive better than expected demand. In fact microprocessor volume in the second quarter was an all-time record.

From the most powerful supercomputers to the smallest energy-efficient embedded machines, the breadth and strength of our results suggest that our reach is extending. The PC Client Group’s results reflect the third consecutive quarter of year-over-year unit growth. In Q2, both the desktop platform revenue and the notebook platform revenue grew year-over-year.

The installed base of PCs that are at least four years old is now roughly 600 million units and we are seeing clear signs of a refresh in the enterprise in small and medium businesses. While there are some signs of renewed consumer interest and activity, the consumer segment remains challenging, primarily in the emerging markets.

The Bay Trail family of SoCs has been a standout that has helped us expand into [new] [ph] segments. Bay Trail’s performance allows us to deliver a much smaller and lower cost Atom based core in our Pentium and Celeron brands for the first time. Our Bay Trail SoC volume in desktops and clam shells more than doubled over the last quarter and now represents more than 60% of our Pentium and Celeron mix and nearly 20% of our notebook mix.

This is enabling our growth at lower price points and in new segments like Chrome-based systems without sacrificing margin. The data center business had a strong quarter with 19% growth year-over-year leading to all-time record revenue $3.5 billion. Following last quarter’s launch of the Ivy Bridge-based Xeon E7 processor family, we saw strong NP volume and a richer product mix and ASP mix.

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Cloud, networking, high-performance computing and enterprise revenue all grew more than 15% in the second quarter. Demand and revenue growth in several segments demonstrated the growing reach of Intel technology beyond CPUs for PCs and servers. Our Internet of Things Group grew 24% year-over-year and set a revenue record, as the retail and manufacturing sectors performed especially well. NAND revenue grew 20% and McAfee revenue grew 5%.

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