April 19, 2012 — Intel Corporation (NASDAQ:INTC) posted quarterly revenue of $12.9 billion, operating income of $3.8 billion, net income of $2.7 billion and EPS of $0.53 in Q1 2012.
“In the second quarter we’ll see the first Intel-based smartphones in the market, ship products based on 22nm tri-gate technology in high volume, and accelerate the ramp of our best server product ever, providing a tremendous foundation for growth in 2012 and beyond,” said Paul Otellini, Intel president and CEO.
The debate is now whether Intel CPU units can grow high-single digits vs. +4% predicted by Barclays Capital, if there is upside to 12% for DCG, and/or Intel can see multiple expansion led by mobility and further monetizing of its manufacturing (i.e. foundry/AAPL), says C.J. Muse, Barclays Capital.
Barclays notes pros: the PC foodchain normalizing, with Intel pointing to stronger 2H led by Ivy Bridge/Ultrabooks/Win8; DCG resuming double-digit year-over-year (Y/Y) growth after the Romley transition in 1Q; a benign average selling price (ASP) environment in 2012 supported by new product introductions in the high end, offset by pressure in low end; and Intel’s 14nm ramp coming 2013. Concerns? 2Q GM guide was below expectations, likely raising concerns of impact from capacity additions.
In Q2, Ivy Bridge will ramp to nearly 25% of processor production, and Romley server shipments will also ramp, noted FBR Capital Markets. The analysts also see gross margin weakness at the chipmaker as temporary, as Intel aggressively ramps 22nm across three or four factories while yields are still immature. By 4Q12, when yields are better and overall top-line revenues are higher, FBR expects gross margins will ramp back above 65%. In conclusion, Intel’s Q1 results show revenue upside is largely offsetting gross margin downside, with Intel’s execution and product initiatives on track. Stepping back, Intel has sustainable advantages in manufacturing, its product roadmaps, process leadership, technology leadership (high-k, 3D transistors), and scale. However, tablets and smartphones are tempering growth in Intel’s core business, with some WoA risks.