Intel's Q3
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Intel's Q3
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(FOOL CONFERENCE CALL SYNOPSIS)* Randy Befumo (MF Templar)
2200 Mission College Blvd. ALEXANDRIA, Va., October 15, 1996/FOOLWIRE/ --- Intel's third quarter revenue and earnings rose 23 percent to $5.14 billion and 41 percent to $1.48 from the year earlier period, respectively. Third quarter revenue rose 11 percent from $4.62 billion in the second quarter of 1996. Net income rose to $1.31 billion, up from $1.04 billion in the second quarter of 1996. Earnings per share rose 26 percent from $1.17 in this year's second quarter.
REVENUES EXCEEDED PREVIOUS GUIDANCE. Revenues were $5.14 billion, 11% above the second quarter. This exceeded expectations stated in the second quarter as well as those announced in September.
NO MORE FORWARD GUIDANCE. The company has made significant changes in their conference call procedure, deleting all forward-looking statements as well as comments about the current business environment. Intel has done this in response to the potential passage of Proposition 211. The company is also canceling its October 31st analyst meeting. The company will also no longer compare the Pentium Pro ramp-up to the Pentium ramp-up at the same period, another department from previous calls. The company would also not comment on whether or not the Pentium Pro unit volume had cross the million mark.
SEPTEMBER WAS THE PIVOTAL MONTH. As is generally the case for the third quarter, September was the pivotal month for revenues in the quarter. Central processing unit (CPU) shipments were at an all-time high and they were strong in all geographies and across all CPU product lines. Book-to-bill was above 1.0 and turns came in continuously throughout the quarter. Sales and distribution were also at an all-time high.
REVENUES BY GEOGRAPHY. From a geographic perspective, sales in America and Asia-Pacific grew significantly with Europe and Japan flat. (By comparison, sales in Europe normally drop in the third quarter.) Asia-Pacific crossed the billion dollar revenue mark for the first time, fueled by strong sales principly to feed the local consumption market.
FLASH MEMORY BUSINESS DECLINES. The flash memory business declined in the third quarter, with units slightly down and price pressure across the board. The bright side was strong sales into the GSM cellular phone segment.
GROSS MARGIN JUMP BECAUSE OF CPU VOLUME. Gross margins, at 57%, was well above the model of 50% plus or minus a couple of points. The improvement was driven by an improved mix, as nearly all of the revenue above expectations was in CPUs. Royalties were within normal ranges and they did not have any unusual benefits or costs. Processer margin percentages were constant with previous quarters, so the jump was purely mix and volume driven. Over the past two years, margins have been driven down by lower margin products like motherboards. Now this trend is reversing itself.
MOTHERBOARD BUSINESS. The strategy on motherboards is still to provide capacity to help get their technology into the market as fast as possible. Motherboards are staying a range consistent with historical patterns and CPU sales are growing.
PRICE CUTS. Intel plans on taking a price on the Pentium Pro line on November 1st, as previously announced. They will not take their typical November price cut on the Pentium line, as this was already done in August. The next price on the Pentium will be
OTHER INCOME AND BALANCE STATEMENT STUFF. Spending grew faster than expected due to increased revenues. Interest income was $91 million, in line with expectations. The tax rate was 35%. Shares outstanding declined three million to 885 million as they bought back eight million shares in the quarter. Accounts receivable were up by $588 million, reflecting strong September shipments. Inventory was down $100 million due to a good shipping quarter. * A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. |
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Copyright 1996, The Motley Fool |