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Intel Corporation Message Board

  • ezk00 ezk00 Dec 5, 2012 12:18 PM Flag

    Intel: Raymond James Cuts to Sell; ‘Gross Margin Nightmare’ Possible

    5, 2012
    10:54 AM Intel: Raymond James Cuts to Sell; ‘Gross Margin Nightmare’ Possible
    By Tiernan Ray
    Tags
    ARM instruction set
    chips
    manufacturing
    semiconductors
    x86
    Shares of Intel (INTC) are down 15 cents, or 0.8%, at $19.82, as the company announced its $6 billion senior notes offering, and following a downgrade of the stock to Underperform from Market Perform by Raymond James’s Hans Mosesmann.

    Mosesmann writes that the recent announcement Intel CEO Paul Otellini will step down next May was “spit-my-coffee-on-my-PC alarming” and a “big deal.”

    Why? Because Mosesmann thinks Intel needs to change its culture of simply building bigger fabs.

    At issue is what Mosesmann sees as the potential for a “gross margin disaster” as rival ARM Holdings (ARMH) gains ground and Intel’s gains against Advanced Micro Devices (AMD) fade amidst a sluggish PC market:

    We believe the 62%-65% gross margins seen over the last three years were the exception to the rule. Over that time, Intel gained share vs. AMD in both PCs & servers and benefited from the last real Windows enterprise upgrade cycle. With these benefits abating, Intel has a number of new challenges in the form commoditization of x86 (by ARM), price competition in both PC and data center markets (also ARM) and an increasing capex burden (with little to no growth). We believe mid 50% (and potentially low 50% over time) gross margins are an increasing reality as opposed to a downside scenario, and investors should brace for lower estimates. With ARM-apps processor pricing at 15-20% of x86 vs. Intel on recently launched Surface platforms, we believe a gross margin baseline below 55% should not be surprising. The data center assault from ARM will be next, and that could prove even more damaging as this is the only area where Intel has posted op. profit growth in 2012.

    The idea Intel could simply build chips for Apple (AAPL) or Qualcomm (QCOM) seems to Mosemann not an answer: “Does it make sense for Intel to build $10 billion shiny new fabs for foundry work? We think not for 45-50% gross margins, and ask IBM how the foundry investment turned out.”

    And so, Mosesmann thinks Intel needs new blood, but it might not necessarily get it with Otellini’s departure:

    The sudden announcement of CEO Paul Otellini’s departure is spit-my-coffee-on-my-PC alarming. We have discussed this dynamic recently and suffice to say that in-house CEO candidates bleed more blue than Mr. Otellini himself. In our view, building bigger fabs and accelerating process nodes at a faster cadence than Moore’s Law won’t work. Hence, the prospects of an outsider getting the CEO slot at Intel is a huge undertaking as it may take years just to change the company’s corporate culture that tends to be hubristic

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    • Warren East and Jen-Hsun Huang are better predictive analysts than this Mosesmann fool and they are pretty useless to start with as history has shown.

      Every thing he said above is just so plain wrong I don't know where to start. Intel is in less danger of commoditization from ARM than it is from AMD and AMD is obviously no threat. Intel can just invent an artificial sku like Celeron867 and sell it at cost and destroy A15 profits when it ventures into serious computer devices. This Celeron is a 17W chip imagine when there are Haswell 10W Celerons. The gap between this Celeron and the proper Haswell will still be huge enough not to affect Haswell mainstream prices as the proper Haswell will still be 3 times faster due to its clockspeed.

      How long have these idiots been watching the PC industry in action, months ? Don't they know that if you have the performance lead you control everybody's margins, yours and your competitors. This is why Intel makes money and AMD doesn't. 50% margins wouldn't be bad either as Intel still made billions at this margin level in this past and would not necessarily be a bad thing as it could mean much higher volume due to Atom chips.

      'With ARM-apps processor pricing at 15-20% of x86 vs. Intel '

      Not Atoms or Celeron both of which can more than handle ARM's latest and finest. Mosesmann is absolutely the worst 'analyst' out there and if you listened to him before on NVDA last year you would have ended up with half your money in less than a year. He really does not know what he is talking about ... ever.

    • Warren East and Jen-Hsun Huang are better predictive analysts than this Mosesmann clown and they are pretty useless to start with as history has shown.

      Every thing he said above is just so plain wrong I don't know where to start. Intel is in less danger of commoditization from ARM than it is from AMD and AMD is obviously no threat. Intel can just invent an artificial sku like Celeron867 and sell it at cost and destroy A15 profits when it ventures into serious computer devices. This Celeron is a 17W chip imagine when there are Haswell 10W Celerons. The gap between this Celeron and the proper Haswell will still be huge enough not to affect Haswell mainstream prices as the proper Haswell will still be 3 times faster due to its clockspeed.

      How long have these clowns been watching the PC industry in action, months ? Don't they know that if you have the performance lead you control everybody's margins, yours and your competitors. This is why Intel makes money and AMD doesn't. 50% margins wouldn't be bad either as Intel still made billions at this margin level in this past and would not necessarily be a bad thing as it could mean much higher volume due to Atom chips.

      'With ARM-apps processor pricing at 15-20% of x86 vs. Intel '

      Not Atoms or Celeron both of which can more than handle ARM's latest and finest. Mosesmann is absolutely the worst 'analyst' out there and if you listened to him before on NVDA last year you would have ended up with half your money in less than a year. He really does not know what he is talking about ... ever.

    • Warren East and Jen-Hsun Huang are better predictive analysts than this Mosesmann clown and they are pretty useless to start with as history has shown.

      Every thing he said above is just so plain wrong I don't know where to start. Intel is in less danger of commoditization from ARM than it is from AMD and AMD is obviously no threat. Intel can just invent an artificial sku like Celeron867 and sell it at cost and destroy A15 margins when it ventures into serious computer devices. This Celeron is a 17W chip imagine when there are Haswell 10W Celerons. The gap between this Celeron and the proper Haswell will still be huge enough not to affect Haswell mainstream prices as the proper Haswell will still be 3 times faster due to its clockspeed.

      How long have these clowns been watching the PC industry in action, months ? Don't they know that if you have the performance lead you control everybody's margins, yours *and* your competitors. This is why Intel makes money and AMD doesn't. 50% margins wouldn't be bad either as Intel still made billions at this margin level in this past and would not necessarily be a bad thing as it could mean much higher volume due to Atom chips.

      'With ARM-apps processor pricing at 15-20% of x86 vs. Intel '

      Not Atoms or Celeron both of which can more than handle ARM's latest and finest. Mosesmann is absolutely the worst 'analyst' out there and if you listened to him before on NVDA last year you would have ended up with half your money in less than a year. He really does not know what he is talking about ... ever.

    • It's no surprise margins will fall as Intel moves into the mobile market which has lower margins to start with. Intel has stated margins would drop about year ago at an earnings conference call with analyst, and they also said they are willing to accept a drop in margins to capture marketshare. This is what Intel is doing now and the Arm chip makers are very nervous. What is more important is revenue and profit growth. With Intel's technology and Fabs the clear winner will be Intel.

      Sentiment: Strong Buy

    • Good God anything is possible,you could be hit by an astroid,the media will say anything to support their own agendas.

      Sentiment: Buy

 
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