DailyTech - Intel Reports Q4 Earnings, Investors Unimpressed

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Hardware Intel Reports Q4 Earnings, Investors Unimpressed
Brandon Hill (Blog) - January 16, 2008 11:01 AM

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42 comment(s) - last by clnee55.. on Jan 20 at 8:54 PM

Intel Q4 increases year-over-year weren't enough to impress investors

Intel was on a roll during latter half of 2007. During Q3 2007, Intel reported a 15 percent increase in revenue to $10.1 billion USD, a 64 percent increase in operating income to $2.2 billion USD and a 43 percent increase in net income to $1.9 billion USD.

Intel mirrored those gains again with some pretty competitive numbers during Q4 2007. Revenue, operating income and net income increased to $10.7 billion USD, $3 billion USD and $2.3 billion USD respectively. Intel's Q4 2007 earnings represented a 10.5 percent, 105 percent and 51 percent increase respectively over its Q4 2006 results.

"2007 was a breakthrough year for innovation at Intel. We realized the benefits of our investments in new products and our efforts to drive efficiencies," said Intel president and CEO Paul Otellini. "Our customers embraced the Intel Core microarchitecture, extending our competitive leadership and driving a significant gain in operating results. We enter 2008 with the best combination of products, silicon technology and manufacturing leadership in our history."

Despite Intel's gains from Q4 2007, investors still hammered the company for missing analysts' estimates for the company. Intel's revenues of $10.7 billion USD and earnings per share (EPS) of 38 cents were below analysts' estimates of $10.84 billion USD and 40 cents.

Investors also weren't encouraged by Intel's Q1 2008 forecast. Intel projects that revenue for the quarter will come in at between $9.4 billion USD and $10 billion USD with gross margins coming in at 56 percent plus or minus 2 points.

Intel's stock tumbled 12 percent following the Q4 earnings report.

Intel had its fair share of news in the past few weeks. The company recently launched 16 new processors, severed its ties with the OLPC project and came under fire from the European Union for antitrust allegations.

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Stupid Analysts

By Master Kenobi

(blog) on 1/16/2008 11:12:26 AM , Rating: 3

quote:
Intel's revenues of $10.7 billion USD and earnings per share (EPS) of 38 cents were below analysts' estimates of $10.84 billion USD and 40 cents.

The fact is that these analysts are humans. They make predictions in advance based on models and formulas. So what if a company barely missed it. Oh noes, I didn't earn what the anaylst at Wall Street said I would, well I will sell this and try a different one.

Shame nobody has tried to sue Wall Street for these constant predictions that regularly seem to set the bar for a company and when it's not met, the companies pay the price. Sounds pretty unfair for some analyst to tell these excutives what their revenue bar is. Then again, the investors that listen to these analysts are just as dumb. Everyone still seems to subscribe to the get rich quick philosophy on wall street.

RE: Stupid Analysts

By Frallan on 1/16/2008 11:44:06 AM , Rating: 1

Well I think you are right to blast the analysts :0)

However i would like to know how much of the increase (in all posts) was from exchange rations. The dollar is down to almost 50 cents on a Euro now. Which means that the real win might be Way lower then it seems measured in USD.

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RE: Stupid Analysts

By Adonlude on 1/16/2008 1:39:15 PM , Rating: 2

I read that 2.5c of EPS loss was attributed to expected losses in dumping their NOR memory business. I tend to think of one time charges such as this as being not quite as bad as acutally having lower earnings due to normal operation. It seems the market doesn't really agree.

Ive been in Intel at $24 for quite awhile. Sold half my stake at $27 and just bought it back at $20. I think they will make it back into the mid 20's within a year.

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RE: Stupid Analysts

By TomZ on 1/16/2008 1:10:51 PM , Rating: 2

Look at it another way - if the analysts were always right, there would be far fewer real investment opportunities. The fact that they are wrong nearly as often as they are right gives lots of people the ability to make money off of their mistakes.

For example, some might have the opinion that right now Intel is oversold - so that might be a buying opportunity - created largely because the analysts had too high of expectations.

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RE: Stupid Analysts

By Christopher1 on 1/16/2008 5:35:11 PM , Rating: 1

Wrong nearly as often as they are right? Try wrong MUCH MORE often than they are right.

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RE: Stupid Analysts

By clnee55 on 1/20/2008 8:49:45 PM , Rating: 2

Definition of Financial Analyst: He who can explain everything about financial matter, stock price...but only after it happens.

quote:
Wrong nearly as often as they are right? Try wrong MUCH MORE often than they are right.

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RE: Stupid Analysts

By deeznuts on 1/16/2008 1:11:45 PM , Rating: 5

It's not just missing analysts' predictions (which are based off of Intel's guidance). If Intel had a problem with the estimates they can issue revised guidance figures. Fact of the matter is, Intel missed estimates, ended up in the bottom half of their own guidance range (which in financial conditions as our current one is bad) and reduced outlook for this quarter and the year.

With fears of a slowdown and/or recession, this is what gets the stock hammered. The company doesn't really pay the price (investors who bought at the top usually do, though). These estimates are priced into the stock normally. So at the risk of oversimplifying, the company enjoyed a run up in stock price due to the estimates somewhat. Now it's just correcting. Of course in this market environment everything is overcorrecting.

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RE: Stupid Analysts

By amanojaku on 1/16/08, Rating: -1

RE: Stupid Analysts

By ghost101 on 1/16/2008 1:30:36 PM , Rating: 2

The 40 cents figure is referring to earnings per share rather than $1xxxxxxxxxxxxxx.40

Otherwise $10840000000.40 looks really suspicious.

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RE: Stupid Analysts

By TomZ on 1/16/2008 1:31:32 PM , Rating: 2

The "40 cents" referrs to the analysts' estimates for earnings per share.

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RE: Stupid Analysts

By amanojaku on 1/16/08, Rating: -1

RE: Stupid Analysts

By Adonlude on 1/16/2008 1:52:30 PM , Rating: 2

EPS is the simplest way to measure company earnings for the individual investor. That $20 share of Intel earned $0.38 this quarter for the company. Not to be confused with a dividend which is the amount of money the share earned for you. Intel paid an $0.11 dividend per share during the same period so of that $0.38 earnings on that $20 share, $0.11 went to you and $0.27 went into Intels coffers to pay employees and advance the company.

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RE: Stupid Analysts

By dcalfine on 1/17/08, Rating: 0

RE: Stupid Analysts

By ghost101 on 1/16/2008 1:57:24 PM , Rating: 2

Its a shame that you're completely wrong. The post almost sounded poignant.

Take a basic finance course. Seriously.

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RE: Stupid Analysts

By Adonlude on 1/16/2008 2:05:27 PM , Rating: 2

To criticize without providing the correct answer is kind of... lets see, what smart sounding vocabulary word can I use here even though doesn't really apply... how about poignant.

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RE: Stupid Analysts

By ghost101 on 1/16/2008 2:20:36 PM , Rating: 3

Well i posted after the above posters. Some have explained whats relevant to this article. But the original post demonstrated a clear lack of understanding on how shares are priced. The theories that need to be learnt for that, is beyond what a comment can do.

Hence the finance course.

My post was not meant to be taken as aggressive in anyway. It was supposed to be in a joking tone.

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RE: Stupid Analysts

By Master Kenobi

(blog) on 1/16/2008 2:30:09 PM , Rating: 2

Missing expectations by .02 per share, call me crazy but I'm looking at the "Earned .38 per share". The fact that the estimate was .02 higher and they missed it, isn't so much of a big deal. I stand by my earlier statement that many of these investors on wall street are of the "get rich quick" variety.

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RE: Stupid Analysts

By ghost101 on 1/16/2008 5:34:59 PM , Rating: 2

It is when youve incorporated that estimate into what you are willing to pay for the stock. Potentially, this could have a compounded effect on all future returns Intel may post. Past returns only have a bearing on the market capitalisation price as far as how this may affect future returns.

Analysts may have a complicated formula for calculating the price of Intel stocks, and future prices. Maybe plugging in this revised EPS, world economy variables and outlook for the tech sector, showed that the stock has been massively overvalued. I do not know, and you do not know. You have no evidence to make your claim.

If you feel the drop is unwarranted, then go ahead and buy Intel shares/options. Get a job as a trader at an ibank and try to make your bank millions. However, if you did the latter you wouldnt necessarily hold on to your belief so strongly. Evidence may force you to reconsider, it may even stregthen what you already think. But then, itll be on your head. At the end of the day the people that matter (the people who trade shares) are held accountable. They have no incentive to react like this without justification.

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RE: Stupid Analysts

By EricMartello on 1/16/2008 5:55:09 PM , Rating: 2

Sounds to me like you are saying there might be some inherent...RISK...when you purchase stock in a company as an investment. Yeah, it would be nice if you could cover your ass 100% regardless of whether the company performs to expectations or not.

The simple fact of the matter is, many people on Wall Street trading stocks are jaded and quite out of touch with anything beyond their own little world. I fully agree that most of them are greed-driven, and want to make as much money as possible in the shortest amount of time. In fact, if that is NOT your goal you will probably fail on Wall Street.

As far as risk goes...if you can't take the heat then don't play the game. There are much safer ways to make money, albeit you won't make as much.

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RE: Stupid Analysts

By Ringold on 1/17/2008 9:53:28 AM , Rating: 2

There are hordes of investors with time horizons on the scale of months, even 2-3 years. They're not all just day-traders.. They're the ones on the other side of some of this trading, picking up shares of all variety of beaten-up companies (like some financials) that may be down further in the short term but unless the universe implodes will be higher a year or so from now.

And then there are billions of dollars that just flow in to S&P500 and similar index funds, wanting to reap that relatively reliable, safe 10% long term annnualized gain, with a time horizon of potentially 20-50 or more years.

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RE: Stupid Analysts

By EricMartello on 1/18/2008 2:45:26 AM , Rating: 2

That's usually how it works...the more patient you are when it comes to investing, the more you can reduce your risk. My personal view is that you can always make money, there are many ways to do that - time is one thing you can't buy. I'm all about the risk and I have no qualms about staking a lot of money on a project I believe will be successful.

That's just me, some people are more conservative...my point is that nobody wants to lose money on an investment, but it's always a possibility no matter how safe and sure you believe an investment to be. If it were predictable, there would be no market, as someone else already pointed out.

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RE: Stupid Analysts

By clnee55 on 1/20/2008 8:52:15 PM , Rating: 2

Investors are the wrong word for the get rich quick. The correct word is "gambler"

quote:
I stand by my earlier statement that many of these investors on wall street are of the "get rich quick" variety.

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RE: Stupid Analysts

By ghost101 on 1/16/2008 2:27:48 PM , Rating: 2

As for the word poignant. In the context of my post i was simply alluding to the fact that this is just a gut reaction rather than actually having any real solid grounding for his argument.

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RE: Stupid Analysts

By Hydrofirex on 1/16/2008 7:15:22 PM , Rating: 3

I'm surprised someone who works at this site would disparage the use of sophisticated technology and science to decrease uncertainty and help people understand the world. There's definitely a subjective side to this, but economics and finance (and therefore statistics and Calculus) are technical fields every bit as fascinating as your traditional applied sciences. These estimates aren't arbitrary like you suggest!

Also, if you really want to get mad at anyone I would suggest going after the accountants and the SEC. If accounting principles were more stringent, and financial reporting methodologies were more standardized the information that is out there would be a lot more consistent and concise. You also have to imagine that since there is this lead-way built into accounting it's extra-bad when a company can't find a way to.... count in a way that has it hit or beat estimates. In it's own way, even though I realize it sounds a bit crazy, it's actually a pretty effective test for how a firm is doing since in almost all cases a company is going to want to beat these predictions if there is any way they can make it seem like they did.

With that in mind: considering Intel is dominating in the market place like never before this has some interesting implications. 1) Slowing sales are probably another sign of a slowing economy in the US. 2) This probably bodes a slow-down in the larger tech sector as people have less money to spend. 3) Everything else aside, a struggling AMD that is going to have an even harder time getting it's hands on cash and is facing declining sales is an even better candidate for buy-out or bankruptcy.

You've missed the important information if you're thinking about lowly analysts!

HfX

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Not happy

By jbzx86 on 1/16/2008 11:10:06 AM , Rating: 2

Wow, I suppose you can't please everyone. They did well by my standards. And I think this will be as good as it gets if AMD is able to get its act together in time for 2009.

RE: Not happy

By Polynikes on 1/16/2008 12:05:41 PM , Rating: 2

Seriously, enjoy it while you can guys, at some point AMD's gonna become competitive again, and you'll be WISHING for those numbers.

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RE: Not happy

By amanojaku on 1/16/2008 1:31:37 PM , Rating: 2

I hope so, because I'm slowly loosing confidence in AMD. It's releases after the Athlon have been mediocre, while Intel continues to blow me away withe the Core architecture. If Fusion and Bulldozer don't live up to the hype (and steal more benchmark crowns) I might be building my first Intel rig ever.

Did I just give praise to Intel? I feel so... dirty.

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RE: Not happy

By Adonlude on 1/16/2008 2:00:06 PM , Rating: 2

Don't feel dirty! This is a capitalist society, albeit super regulated and totally convoluted, it is mostly a capitalist ish society. This has proven time and time again to be a good thing so buy the best. The only reason you should be backing any company during good times and bad is if you have a vested interest such as a family member who spent their carreer there or if you own stock, both of which applies to me... go Intel!

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RE: Not happy

By Polynikes on 1/16/2008 2:13:10 PM , Rating: 2

I play favorites, but not based on brand; performance determines my preference.

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RE: Not happy

By clnee55 on 1/20/2008 8:54:13 PM , Rating: 2

Another wish, another hope. Good luck

quote:
Seriously, enjoy it while you can guys, at some point AMD's gonna become competitive again, and you'll be WISHING for those numbers.

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RE: Not happy

By just4U on 1/16/2008 1:33:21 PM , Rating: 2

I am very curious to see how AMD did in it's 4th quarter. Not so much on the proccessor front since I find it hard to believe they'd have sold a ton of Phenom's but more for their new GPU lineup which (like Nvidia) was flying off the shelves. Ofcourse, that's just thru the holiday season so who know's if it really had a impact at all.

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meh

By legoman666 on 1/16/2008 12:04:44 PM , Rating: 2

Another way of putting it would be; "Just about anything that could go wrong for AMD did go wrong. As a result, we sold more stuff."

"embracing the core architecture"? wtf.

RE: meh

By BSMonitor on 1/16/2008 12:48:27 PM , Rating: 1

quote:
"embracing the core architecture"? wtf.

Yeah, cause the extra $500 million AMD might have pulled in from Phenom processor revenue in 2H07 would knock Intel off a profitable quarter...

The increasing revenue trend for Intel started mid 2006. I wonder what could have happened then?

Seems pretty embracing to me.

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RE: meh

By legoman666 on 1/17/2008 7:33:10 AM , Rating: 2

not buying the phenom because it is a piece of crap is not the same thing as "embracing the core architecture."

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No good deed goes unrewarded

By Oregonian2 on 1/16/2008 1:33:03 PM , Rating: 3

Intel reports record fourth quarter sales and record fourth quarter profits. The result? Typical response - stock drops dramatically. Wasn't a good enough new record. Sigh... can't wait to see the same folk at the Olympics coming up... new world record! Too bad it wasn't really as fast as we thought he could go, so maybe he can do better next Olympics! Tarnish his gold medal too if you can!

:-) :-)

RE: No good deed goes unrewarded

By Adonlude on 1/16/2008 2:09:40 PM , Rating: 2

Its silly but in regards to earnings reports, actual profits and margins mean nothing alone. Its meeting and exceeding estimates and providing good future guidance that means everything.

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Disapointing is very relative

By LTG on 1/16/2008 1:24:55 PM , Rating: 1

I understand the expectations thing, but isn't it kind of hard to grasp that making a net profit of 2.3 billion in 3 months is not good?

I'd love to fail like that for a year or so.

LTG
www.hdgreetings.com

RE: Disapointing is very relative

By TomZ on 1/16/2008 1:37:49 PM , Rating: 2

Are you trying to promote your web site, or what? Spam comments are kind of frowned upon in these parts.

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Wall street

By PurdueRy on 1/16/2008 1:36:51 PM , Rating: 3

What you guys are not realizing is that wall street is based on expectations. The value of a company's stock at this very moment typically reflects far into the future. When the future outlook changes, the stock price does as well.

So lets say I post above expected earnings(for example 40 cents a share vs 38) but I state in my earnings release that growth in earnings over the next quarter will be lower than expected or flat. The stock is likely to drop in price even though earnings were exceeded. Investors are looking for future growth potential rather than what happened in the previous quarter.

"Intel mirrored those gains" --NOT

By zpdixon on 1/17/2008 1:52:36 AM , Rating: 2

Q2->Q3 gains for revenue, op. income and net income, were +15%, +64%, +43%.
Q3->Q4 gains for revenue, op. income and net income, were +6%, +36%, +21%.

Why does DT say "Intel mirrored those gains" ? The increase was twice smaller ! The DT editor needs some math (or vocabulary) classes...

the cause & effects

By crystal clear on 1/17/2008 4:22:25 AM , Rating: 2

quote:
Intel Q4 increases year-over-year weren't enough to impress investors

Just how many have bothered to read Intel Q4 results-

INTEL POSTS RECORD QUARTERLY REVENUE
2007 Operating Income $8.2 Billion, up 45 Percent

http://media.corporate-ir.net/media_files/irol/10/...

I think one should read it to understand exactly what they have achieved this quarter.

Get your facts correct & from the right source-think You are an Intel shareholder & read the reports.

Now about the investors & financial markets in the USA,one has to take the following into consideration.

1) The economic slowdown in the USA is slowly & steadily showing its effects on the market.

2) The sub prime crises is also having its effects being felt by and large.(credit markets are very jittery)

3) The US economy is about enter into recession by the 1H 08.

4) Consumer spending is expected to fall drastically.

5) High oil prices have & are still showing its disasterous effects on the economy & will continue to do so..

6) Gold prices have shot up sky high-a safe haven in times of looming crisis or bad times.

Plus a lot of these type of economic indicators that point to bad times ahead of you.

The market is reacting to bad times ahead & not to Intel-they are extremely nervous & jittery in short.

Expect AMD share prices fall below $5 very soon once they release the 4Q results on Thursday 17th 08.

AMD will announce its Q407 earnings after market close on Thursday, January 17, 2008.

I can imagine the market response when AMD reveals its losses.

However much companies & others might downplay the looming economic crisis,be sure its coming.
They do it to avoid panic & keep investor confidence high.

Intel uses its huge revenues to buy up its own shares in the market when they find the their share prices low enough .

To summarize it -

Intel had a very good 4Q results in addition to 3 previous quaters of 2007.

The outlook for 2008 for Intel is good due to its strong product line & cost cutting measures it has & still does implement.
Thanks to a weak AMD & their product line,Intel is assured of a rapidly increasing marketshare.
Thanks to Intels 45nm technology by 1H08 more fabs are due to go into full production(45nm).
Thanks to 45nm technology the cost benefits will only increase.

The market is responding to the economic climate & not to Intel's financial performance.

As for those analyst better ignore them,soon most of them will be fired from their jobs.
Financial comapnies are themselves in a severe financial crisis-huge losses & layoffs are expected.

Sandbag em!

By JKflipflop98 on 1/17/2008 8:27:20 AM , Rating: 2

If I were Mr. Otellini, I would show the world how stupid this whole system is by announcing that Intel will only make $30 in revenue in all of '08. 15 cents of that will be profits.