The Six Five team breaks down Intel’s Q1 earnings. They beat expectations as the PC demand surges.
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Transcript:
Daniel Newman: Let’s go to Intel, Pat, and you and I could either, or if you want to jump in first on this one, just because I don’t want to hog the show.
Patrick Moorhead: No, I can jump right in. I mean, they had stronger than expected start to 2021. They exceeded their January guidance by over a billion dollars in EPS by 29 cents. One of the things that I think weighed on the stock were the numbers for data center that were markedly down. Now, if people paid attention to the earlier call, they would have recognized that… First of all, the company doesn’t break out DCG and CCG. But if you look at the overall number, Intel had this baked in, and there was also two or three financial analysts who go and do their spreadsheets. They do break it out.
And there’s this $500 million allocation that was discussed that, I believe those financial analysts put it in the wrong bucket. So, what they concluded, the DCG missed their numbers, and it’s weighing heavy on the stock. I’m always looking at ASPs, Daniel. I mean, at the end of the day, what communicates the strength of your product line are ASPs, and both DCG and CCG were down, CCG to me, I think, we’re driven primarily by Intel going after the low end of the market that is exploding with COVID, whether it be Chromebooks or low-end notebooks. DCG to me was a similar mix shift. But I also think, and we’ll see when AMD releases theirs, a potentially weighing competition came in and is finally starting to impact DCG.
Daniel Newman: There’s a lot to cover here too, Pat, and six topics, five minutes, this one could be a 45-minute conversation, but you mentioned a great point with the ASPs. A couple of things that caught my attention. One was the continued strength of client and notebooks in general, 54% up on the notebook business, 38% across the whole PC space. Like you said, a lot of lower end. And a lot of people are kind of holding that against the company. But I look at that as wins are wins. Growth is growth. That’s the most chips in a single quarter for notebooks, I believe, ever for Intel. So that was good. You hit it head on with the DCG number, Pat. You also have to remember last year, there was a windfall results. So everybody’s looking at that year over year number being down. But this quarter, same time last year, they had a blow out number.
It was a little bit of a unicorn type of event last year. So the number isn’t as much bad. So you take that 500 million incorrect bucketed, and then you take the fact that the result a year ago was kind of abnormally good, and you say the actual number was pretty solid. We talked a lot, Pat, across this whole quarter because of Pat Gelsinger, joining IDM 2.0 Xeon third-generation launch. We’re seeing the company’s 10nm products hit the market. We’re hearing about the 7nm plans. We’re hearing about foundry services. We’re hearing about manufacturing coming back on shore. So we’ve talked a lot about it, but this, again, it kind of goes back to what I said about IBM. It’s not an overnight thing. It’s not just like you’re going to have one night and all of a sudden, Pat’s going to come in and say something great.
Not you, Pat, the other Pat. And then everything’s going to just be on track. Not how it goes. A couple of other small notes, Pat, of strength. MobileEye had a really good quarter, 48% growth. And then the last thing was IOT saw a little bit of growth too, at about 6%. So, a couple of other adjacencies, and that’s a real important thing for Intel, is that in the adjacencies that it’s growth, it’s not just data center chips and PC chips, but it’s really all of these other data centric technologies that the company is focusing on.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
