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Intel Corporation Message Board

  • sujit_98 sujit_98 Jun 5, 2013 4:14 PM Flag

    Stacy Rasgon: last Conference call

    Operator

    Our next question comes from Stacy Rasgon of Sanford Bernstein.

    Stacy Rasgon - Sanford Bernstein
    You spoke before about your increased confidence now versus last year. But if I’m just looking over the last three months, we have weaker results in Q1, which raises the operational bar for the second half, on both top line and gross margin, which suggests you’re even more confident in that back half ramp than you were three months ago, even in the wake of what looks to be pretty challenging market data. You’re also taking capex down, though, which would belie that increased confidence some.

    I was just wondering, could you help me identify the sources of that increased confidence in that back half ramp versus where you were three months ago, as well as help me rationalize that with the cut to the capex outlook.

    Stacy Smith - Chief Financial Officer, Executive Vice President
    First of all, just to make sure I’m not oversoaking things here, you really just need seasonal from where we are in order to achieve the low single digit revenue growth. So I don’t think we have a hugely high bar out there, and I went through a dissection of where I think the revenue comes from.

    In terms of the things that give me confidence, or at least I personally believe it could be better than seasonal, it’s the things we talked about, improving macroeconomic environment, the fact that we now are participating across a range of compute devices, and so the mix between those don’t impact us nearly as much.

    And then third, as Paul said, you have innovative form factors coming out in ultrabooks, in convertibles, and in detachables, that are hitting these really compelling mainstream price points that are touch enabled. And as we get into the Christmas selling season, your expectation is you will see touch-enabled ultrabooks that are $499 and $599 pretty commonly out there. $599 commonly, and $499 as kind of special SKUs.
    And then we’ll see, because of Bay Trail coming into the marketplace, you’ll see touch-enabled thin notebooks with really good performance that are hitting kind of $300 price points. And then with our Android tablets, you’ll see things that are significantly, [hey, I have that]. So we’ll be participating across a broad range of compute devices as we get into the back half of this year.

    Stacy Rasgon - Sanford Bernstein
    For my follow up, I wanted to dig a little bit into the trajectory of your fab output. It sounds to me like your current [time] to loading is similar to what you had last quarter, which I think was full fabs on the second half. It almost sounds like you may be running close to full right now.

    What does that mean for your expectations for how much your fab output may grow in 2014, year over year. I would think you anticipate running full in 2014, and we were pretty lean in the first part of 2013. Would double digit upside be the right way to think about that in terms of fab output? And how much of that increase might be inventory replenishment versus demand upside?

    Stacy Smith - Chief Financial Officer, Executive Vice President
    I think it’s early to talk about 2014 at this point. We have the ability to respond to lots of different volume scenarios for 2014. If it’s large, we can put on more capacity. If it ends up being closer to a bust, we can play the playbook we played…

    Paul Otellini - President, Chief Executive Officer, Director
    We’ve also got the technology transition to the 14 nanometers. [unintelligible] a first order, all of our spending is focused on 14 nanometers , which gives us a fairly significant ramp capability. If demand for older products exceeds what we could build on 14, we could still build 22 for quite some time. So I really think it depends on whatever demand scenario you see out there. In any event, the most important thing for us is to make that transition to 14 and continue to have the leading edge.

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    • Stacy Rasgon - Sanford Bernstein
      And I understand that. Just mathematically, though, if I’m running full in 2014 and I was pretty empty in the first part of 2013, even if you’re not adding a tremendous amount of capacity, doesn’t that imply a very significant uptick in your fab output in ‘14 versus ’13, if ’13 is flattish to ’12, and in ’12 we already had too much? Mathematically, what does it imply if you’re running full in 2014 even if you don’t add anything?

      Paul Otellini - President, Chief Executive Officer, Director
      We haven’t talked about 2014.

      Stacy Smith - Chief Financial Officer, Executive Vice President
      Yeah, and I think what you’re equation misses there is that we roll forward capacity. So we take capacity offline. Think of the change in capex at a first approximation of we took older generation technology offline a little faster than we thought. And we offset stuff that we were going to buy to make the transition and to build towards that 14 nanometer peak. We don’t actually have to choose the 14 nanometer peak today. We can continue to refresh capital.

      Stacy Rasgon - Sanford Bernstein
      I understand. I’m just saying if you’re running full in 2014, and you’re not full for ’13, how much would your output [go up]? Forgetting transitions and 14 nanometers and capex, just on a rough basis, how much are we talking about in terms of increase?

      Stacy Smith - Chief Financial Officer, Executive Vice President
      If we’re running full in 2014. I mean, I’m not sure how to answer that question, because I don’t yet know how much capacity we’re going to put in place for ’14.

      Mark Henninger - Investor Relations
      And Stacy, I think at that point we’ll want to move on to the next questioner. I’ll be happy to follow up with you a little bit later.

 
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