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Intel shows strong year-over-year performance for Q2

Over the past few days, we've gotten a cartload of news from Intel on the processor front. The company introduced a new stepping of Core 2 Duo desktop processors with a 1333MHz FSB. Also on tap were leaked details of Intel's 45nm Penryn-based Xeon and Core 2 Duo mobile processors.

Today, the information coming out of Intel is of a financial nature. The Santa Clara-based chip giant reported Q2 revenue of $8.7 billion USD. Operating income came in at $1.35 billion USD while net income was $1.3 billion USD.

These figures represented an 8 percent, 26 percent and 44 percent increase respectively over Intel's Q2 2006 performance. However, the results were also 2 percent, 19 percent and 22 percent respectively lower than Q1 2007.

The quarter-to-quarter performance was hampered by a lower than expected gross margin, lower average selling prices (ASPs) for microprocessors, lower than expected demand for NOR flash products and slower sales of motherboards.

"Intel's operational execution continued to strengthen, resulting in an outstanding product roadmap and solid year-over-year revenue growth," said Intel President and CEO Paul Otellini. "We're pleased that our efforts to streamline the company are delivering profit growth in excess of revenue growth."

Intel is projecting revenue of between $9.0 billion USD to $9.6 billion USD for Q3 2007. The company also expects a gross margin of 52 percent and will spend roughly $2.75 billion USD on research and development.

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By gigahertz20 on 7/18/2007 3:19:43 PM , Rating: 1
Well if they reported strong revenue my Intel stock sure didn't show it today, I lost 5.28% on it today, the biggest percentage decrease I've seen it do since I bought it in July 06. It hurts to lose $2 grand in 1 day :(

RE: Stock
By swatX on 7/18/2007 3:25:54 PM , Rating: 2
it will go up for sure.

RE: Stock
By Lonyo on 7/18/2007 3:26:04 PM , Rating: 2
Why do you have $40k in Intel....?
Diversification FTW.

RE: Stock
By Master Kenobi on 7/18/2007 3:28:58 PM , Rating: 1
40k is small change.

RE: Stock
By darkpaw on 7/18/2007 3:30:51 PM , Rating: 2
Not for 90%+ of Americans.

RE: Stock
By TomZ on 7/18/2007 3:32:49 PM , Rating: 4
He's talking dollars, not Yen like you are. :o)

Bragging FTW!

RE: Stock
By Amiga500 on 7/18/2007 3:43:22 PM , Rating: 5
Adventure... excitement... uhh, a fortune... a jedi craves not these things :-D

RE: Stock
By Master Kenobi on 7/18/2007 3:46:12 PM , Rating: 3
The Jedi can finance their initiatives. Proper investing FTW.

RE: Stock
By Exodus220 on 7/19/2007 1:27:39 AM , Rating: 2
He is talking about fantasy trading. He is taking a high school economics class and chose to invest his imaginary $40k in Intel because he likes computers. It is just play Monopoly the game.

RE: Stock
By TomZ on 7/18/2007 3:29:35 PM , Rating: 2
1. Analysts may have expected better numbers, or have some concerns about something in the numbers.

2. You haven't lost anything today, unless you sold. You don't "make" or "lose" money on a stock until you actually sell it. Sometimes people lose sight of this basic fact.

RE: Stock
By Phynaz on 7/18/2007 3:33:33 PM , Rating: 2
The market didn't like them missing on gross margin.

RE: Stock
By lotharamious on 7/18/2007 3:39:15 PM , Rating: 4
Who cares if it went down 5% today? Since you bought it, Intel has gone up $6 per share. My guess is you have about 1500 shares (roughly $40k@$25 per share). And if you bought it at about $19 a share, that means you've made about $9k(1500 * $6 increase per share) since July. So even though losing 2k in a day sucks, you're still up $9000.

Also, it has only been since this month that Intel has been over 26 bucks a share. It spiked several weeks ago.

RE: Stock
By deeznuts on 7/18/2007 3:42:27 PM , Rating: 3
Because, they had a decrease in quarter to quarter performance. Also, I work at an investment firm, and we had discussed BEFORE their earnings call yesterday, Intel. My boss said, "always be weary of increased earnings but not a similar corresponding increase in revenue, or even declining revenue."

These earnings are a result of their trimming operations and other cost cutting measures, which you can't keep doing. Firms and analysts I'm sure would have liked to see a bigger revenue increase, as well as better margins.

RE: Stock
By Phynaz on 7/18/2007 3:47:32 PM , Rating: 3
Of course there was QOQ decline, the CPU market is cyclical.

Your boss is wary of increased sustainable efficientcies?

You and your boss must both work in the mail room.

RE: Stock
By TomZ on 7/18/2007 3:54:40 PM , Rating: 2
I couldn't agree more. I was surprised the article even mentioned QOQ results, since they are generally meaningless.

I think, though, there is a bit of truth though in that Intel did prop up their profit a bit through some basic belt-tightening (layoffs, restructuring). This part is not really sustainable, compared to the types of effeciency gains you're referring to, which would be more sustainable. I think Intel's actions were warranted considering the market conditions - the current price war with AMD and Intel's work to regain lost market share.

One thing I can say for sure - as long as AMD is around, Intel's historically high gross margins aren't going to be seen again any time soon. That ship has sailed.

RE: Stock
By cheburashka on 7/18/2007 4:32:24 PM , Rating: 2
as long as AMD is around, Intel's historically high gross margins aren't going to be seen again any time soon. That ship has sailed.

Strange statement considering both companies have been around nearly the same amount of time. Where was AMD while the ship was loading?
Intel did prop up their profit a bit through some basic belt-tightening (layoffs, restructuring).

Restructuring costs money, layoffs cost money. How does that help prop up a profit near term? Intel has stated it is saving $2b in 2007 and $3b in 2008. They must have improved some huge inefficiencies to get that kind of savings. The size of those numbers make it sound like it's sustainable to me.

RE: Stock
By TomZ on 7/18/2007 4:51:12 PM , Rating: 2
Strange statement considering both companies have been around nearly the same amount of time. Where was AMD while the ship was loading?

Profit margins where higher prior to the current pricing war. Intel was able to hold their prices and margins during most of the time period when AMD was ahead of them in terms of product. But it cost Intel valuable market share, and today's lower prices (and margins) reflect Intel's efforts to regain that lost market share.

I think you answered your own questions regarding the restructuring. You said Intel is saving $2B in 2007 - how much of that savings was in this quarter?

RE: Stock
By Viditor on 7/18/2007 10:19:30 PM , Rating: 2
It's the Margin and most importantly the statement by Andy Bryant that the price war must continue. Remember that at the last CC, Intel indicated that they expected the price war to taper off during this year...that appears to not be the case.

While Intel is still predicting a 51% GM for the year ("plus or minus a few points"), this is going to require a monster Q3 and Q4. Many investors are becoming skeptical of this prediction...
For Intel's predictions to come true, AMD will have to have another delay or not be able to ship in any volume on the K10.

RE: Stock
By slayerized on 7/18/2007 11:19:40 PM , Rating: 2
Intel indicated that they expected the price war to taper off during this year...that appears to not be the case.

I think the price war is already appearing to taper off this year. Although Intel has price cuts coming up, they control the upper end of the segment. Most of the price war is now in the sub $100 market. Again, this is just my opinion.

For Intel's predictions to come true, AMD will have to have another delay or not be able to ship in any volume on the K10.

I partially agree and disagree to this statement. Let me explain why; K10s launch even if its on time will be end of August/September. Volume shipments will begin sometime in September. They pretty much lose much of Q3 there. My personal opinion is that it takes at least 2Qs for any sort of new product to propagate into the earnings report. I think Intel may probably be right on the GMs for the year.

RE: Stock
By deeznuts on 7/18/2007 11:24:05 PM , Rating: 1
Of course there was QOQ decline, the CPU market is cyclical.

Your boss is wary of increased sustainable efficientcies?

You and your boss must both work in the mail room.

Nice insult for a topic you clearly have idea about. Of course the CPU market is cyclical, that's why his comment regarding being wary of income growth over revenue growth was based on Q2 from last year. Increased sustainable efficiencies are great. However, the point of the remark was that if you don't increse margins/revenue, guess what? You have slower earnings growth and therefore the possibility of share depreciation.

Increased sustainable efficiencies, i.e. cost cutting, has been priced in. Intel's moves on that front were well known for months, and priced in. Yesterday/today's news shows costs were cut (44% jump in earnings, only 8% jump in revenue). Therefore, unless Intel finds a way fast to increase margins, the slow revenue growth will catch up with them.

Look at all the news releases
"Intel earnings grow, BUT ..."
"Lackluster Intel earnings"

Proceed with caution is what my boss said, and this was BEFORE the earnings call. Please read "Investing for Dummies" before you comment again. It'll save me time to correct the stupidity on a tech news site. Investors like yourself that focus on immediately yesterday, today and tomorrow is how Wall Street and Financial firms make money. Somebody has to lose the money successful investors gain

RE: Stock
By Phynaz on 7/18/2007 11:59:36 PM , Rating: 2
You've proven yourself an idiot again.
The stock market is a zero sum. Somebody doesn't have to lose for somebody else to win.

RE: Stock
By kkwst2 on 7/19/2007 2:28:14 AM , Rating: 1
Don't you think you should proof your post before you call someone out?

You just contradicted yourself, no? Do you mean it's NOT zero sum? I think that could be debated, especially in short-term trading that the GP was referring to. Over time, the market goes up so everyone can win. However, over the short term, if someone makes a killing (beats the market), that means someone else is losing.

RE: Stock
By deeznuts on 7/19/2007 1:59:41 PM , Rating: 2
Phynaz, I'd respond to your half-arsed attempt at an insult but kkwst2 already took care of that and half my rebuttal for me.

Like I said, you really should stop. The market is not a zero sum game, contrary to what you just said. I never said it was, and yes, somebody DOESN'T have to lose for somebody else to win, but quite often someone DOES lose when other people win.

The only way for everyone to "win" is if additional capital which was never in the market before matches exactly all capital appreciation of all investors in the entire world.

If the total gains of all investors in any given time exceed the flow of new capital into the market, guess what? Somebody just lost. It's simple logic.

Please, I plead you, stop before you get exposed further.

RE: Stock
By TomZ on 7/19/2007 2:12:40 PM , Rating: 1
I hate to say it, but your post makes little sense, and you're flip-flopping like crazy. Earlier you said that someone has to lose in order for someone else to gain. Now you reverse that and you're saying that it is not a zero sum game. Then in the same post you go on to say that the "total gains of all investors in any given time..." which is basically saying agin that the market is zero sum.

You should try your hand in politics - you might just get elected.

RE: Stock
By deeznuts on 7/19/2007 2:06:10 PM , Rating: 2
Also, I noticed you ignored my whole post other than one line. No retort?

RE: Stock
By feelingshorter on 7/18/07, Rating: 0
RE: Stock
By TomZ on 7/18/2007 4:13:59 PM , Rating: 2
Or maybe that's just wishful thinking (for AMD fanboys). I seriously doubt Intel's stock price would decline in widespread anticipation of a suprise release of a processor from AMD.

RE: Stock
By jdun on 7/18/2007 7:10:51 PM , Rating: 2
Intel market cap is 145.60B.

AMD market cap is 8.51B.

If fact intel quarterly revenue is more then what AMD is worth. If AMD don't show better result this quarter they will be one more step toward bankruptcy.

RE: Stock
By cheetah2k on 7/18/2007 11:36:59 PM , Rating: 1
This comparrison is worthless. You're not comparing apples to apples. Intel has its hands in many more pies than AMD. Maybe if you compared Intel CPU GDP with AMD CPU GDP that would be a better look.

Also, with all AMD's partnering agreements right now, there's no chance AMD will go bankrupt - At least not in the foreseeable future.

RE: Stock
By jdun on 7/19/2007 1:03:27 AM , Rating: 2
You have no idea what you're talking about. There are larger companies then AMD in the past that have gone bankrupted. You might think AMD is special but it's not. Companies that doesn't make money will go bankrupt sooner or later. Thats how things work because money doesn't grow on tree. AMD is low on cash and has high interest payments. If they lose another 600 millions this quarter then AMD future doesn't look good. In fact a lot of investors has place bets that AMD might go bankrupt.

RE: Stock
By theapparition on 7/19/2007 8:53:47 AM , Rating: 2
Just to further clarify and support jdun's argument.......bankrupcy does not mean AMD would be out of business. Bankrupcy protection allows a person/company to legally suspend debts, to allow restructuring and repayment. Many companies have gone bankrupt and then emerged later, much healthier. But jdun's assertation is correct, if AMD continues to lose money, seeking chapter 11 protection may be their only recourse.

RE: Stock
By DagPa on 7/18/2007 8:14:48 PM , Rating: 2
One thing I noticed from the Q&A in the earnings release: Most of the increase in desktop CPU shipments actually came from emerging markets. Seems as the new middle class in China and India is becoming more and more important. This could be positive for AMD..

Disclaimer: I own Intel shares and intend to keep them until AMD gets it act together.

A question
By just4U on 7/19/2007 1:46:16 AM , Rating: 2
Amd has started to look interesting as it's stock goes down. What do some of you think? Is it worth investing in?

RE: A question
By theapparition on 7/19/2007 8:56:39 AM , Rating: 2
AMD hasn't hit bottom yet. Until they have a plan for their financial situation, I wouln't touch them.

RE: A question
By Master Kenobi on 7/19/2007 12:37:37 PM , Rating: 2

RE: A question
By TomZ on 7/19/2007 1:26:12 PM , Rating: 2
Yes, if you are a contrairian-style investor. If you see hope for earnings growth where financial analysts don't, then it would be a "buy" for you.

Personally, I'd avoid it, because I think the risks at AMD in the next couple years outweigh the upside potential. In addition, Intel seems hell-bent on pummeling AMD into the ground. They awoke the sleeping giant. Not a good position to be in.

It will
By medavid16 on 7/18/2007 4:28:04 PM , Rating: 2
No worries, it will go up.

I'm not so much into the financial aspects, but I can tell you the roadmaps Intel is treading on is designed to put AMD out of business. The lower than expected earnings is due to aggressive pricing of the new chips, which are purposeful to hurt AMD more than it would hurt Intel in the long run. So stay with the stocks my friend! =)

RE: It will
By InternetGeek on 7/18/2007 7:25:59 PM , Rating: 1
Yeah, Intel is basically forcing AMD either back to simple CPU/Chipset maker or completely out of business before AMD can compete in the business market 100% against intel with a full integrated solution.

Yes, there are AMD-based options like thesein the market, but not in the way Intel makes them: 100% Intel.

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