Wednesday, April 19, 2006

Intel is an ailing animal

INTEL 1Q06 highlights: Revenue dropped 15% from 4Q05. Revenue will drop another 10% in 2Q06. Inventory will go up. Gross margin will be 49%, down 10%.

All Intel can hope now is that AMD will screw up. Looking at its 1Q06 report, it's very very sick.

In just one quarter: Server and desktop revenue dropped by $1 billion (from $4.929B to $3.892 B), inventory is piling up to the neck and is snow balling to even bigger in 2Q06; Cash is reduced to $7.8 billion, debt is at $2.6 billion; Current ratio dropped from 2.3 to 1.83 .

Compared to AMD, Intel is declining at extreme speed. AMD has cash of $2.6 billion, debt $0.6 billion. Current ratio 2.16 .

More alarmingly, Intel has 103,000 employees and AMD only has 10% of that.

Intel may try to bite, but its teeth are rotten and loose.

I feel sorry for Intel. All AMD needs to do now is unleashing its hounds.

Read AMD's comments about Intel's here.

Highlights of INTEL's 1Q06

----------------------------------------------------------------------
GAAP Results (including the effects of share-based compensation)
----------------------------------------------------------------------
Q1 2006 vs. Q1 2005 vs. Q4 2005
----------------------------------------------------------------------
Revenue $8.9 billion -5% -12%
----------------------------------------------------------------------
Operating Income $1.7 billion -44% -49%
----------------------------------------------------------------------
Net Income $1.3 billion -38% -45%
----------------------------------------------------------------------
EPS 23 cents -34% -43%
----------------------------------------------------------------------

OPERATING SEGMENT INFORMATION: Q1 2006 Q4 2005 Q1 2005
---------------------------------------------------------------------

Digital Enterprise Group
Microprocessor revenue 3,892 4,929 4,944

---------------------------------------------------------------------


*I noticed that Joe Osha didn't get a chance to ask question during Intel's CC, funny.

11 Comments:

Blogger Sharikou, Ph. D said...

Intel is not telling a convincing tale here.

From its 1Q06 report:

"2006 Revenue: Expected to be approximately 3 percent lower than prior-year revenue of $38.8 billion, subject to a wide range of potential variability.
"


1Q06 was $8.9, 2Q06 will be $8.3 (mid point of $8.0 to $8.6)

$37.6 - $8.9 - $8.3 = $20.4

So Q3 and Q4 will have to make an average of $10.2 billion revenue. Let's say $9.6 for Q3 and $10.8 for Q4.

So from Q2 to Q3, INTEL will grow 15.6% q/q?

Then from Q3 to Q4, it will again grow 12.5% q/q?

9:37 PM, April 19, 2006  
Blogger Sharikou, Ph. D said...

Paul O didn't get it. Lesser Intel ASP drop means more AMD unit share gain!!!!

"Mark Edelstone - Morgan Stanley

I think AMD disclosed their units were down 6%. I was just trying to reconcile the comments on the share issue in the quarter.

Paul Otellini

Well, if you go back to what they said, they said they believe they gained revenue share. They didn’t say anything about unit share, to my knowledge. We’ve done the math. We know what we shipped and we did the math on what they shipped. By the way, just on your number, you may be assuming too aggressive of an ASP decline for Intel in your comments there. We said slight."

10:11 PM, April 19, 2006  
Blogger Sharikou, Ph. D said...

We normalize everything to Intel's 4Q05 units. Assume Intel ASP dropped by X.

In 4Q05, AMD had 21.4% of the PC market, Intel had 77%

AMD 4Q05: 21.4/77 = 0.278
OTHER 4Q05: 1.6/77= 0.02
AMD 1Q06: 0.278/1.07 = 0.26
INTC 1Q06: 0.85/(1-X)

AMD 1Q06 unit share:
0.26/(0.26 + 0.02 + 0.85/(1-X))

Intel claimed that ASP drop was less than 5%.

Assume X = 4%

We have
0.26/(0.28 + 0.885)= 22.3%

Therefore, AMD gained 1% unit share in 1Q06.

11:02 PM, April 19, 2006  
Anonymous Anonymous said...

no wonder intel is creating the Conroe hype... they really need ppl to buy their "super duper wonder machine" to make a comeback... or we've just entered the AMD reign.

11:31 PM, April 19, 2006  
Anonymous Anonymous said...

did you see this part about Dell?

From CNET:

"..It is because they are focused on Intel while other competitors have adopted AMD and been able to hit lower price points..."

I think 2006 Q4, Intel and Dell will have a meltdown.

2:41 AM, April 20, 2006  
Anonymous Jeach! said...

Doesn't the Sarbanes-Oxley act prevent CEO's and CFO's of corporations from making such contradictions in their financial statements?

As your numbers have shown, you don't have to have a big IQ in order to figure out that his "3 percent lower" claim are lies!

Proof of lies should be punishable.

They have anounced cut-backs while last quarter they were talking about increased CAPEX.

Assuming these lowered trends are maintained... how long do you think it will be before they run out of cash?

7:02 AM, April 20, 2006  
Anonymous the architect said...

jeach! said: Doesn't the Sarbanes-Oxley act prevent CEO's and CFO's of corporations from making such contradictions in their financial statements?

Sarbanes-Oxley is only there to use a government hammer if the corporates stop their payoffs. It's just another part in the vast machine of regulatory socialism. You know, what Americans call capitalism.

7:59 AM, April 20, 2006  
Anonymous the architect said...

I will say at this juncture that Intel has been the walking dead for a long time. There are two factors at play:

(1) When the 'architecture of Intel's destruction' was given to Microsoft and Bill decided to implement it. For example, the AMD anti-trust lawsuit has been carefully setup for over three years. Think "yellow cake" baked right.

(2) The rot. Intel's culture took a major nosedive circle Pentium 4. All the dumb people got together and fired all the smart people. There are effectively zero smart people left at Intel. The only thing fun going on Intel these days is the BLOW. Well maybe all those yellow books they have scattered everywhere... "The B Players Guide to Surfing Big Companies Into the Ground". I hear if you get a lot of people in a big meeting room, all with the book, holding hands, you can summon the spirit of Carly for guidance...

8:13 AM, April 20, 2006  
Anonymous Anonymous said...

Interesting article reporting on how Q1 PC Shipments actually increased...

http://www.dailytech.com/article.aspx?newsid=1871

9:51 AM, April 20, 2006  
Blogger Sharikou, Ph. D said...

Based on AMD's statement that it will out innovated INTEL again. I think we should write off Intel off the book. We shall see operating losses for Intel from 3Q06 onward. Right now, the Wall Street crooks are busy fooling the public so they can unload their shares. Expect bag holders such as Goldman Sachs and B of A to pump Intel out of thin air.

10:22 AM, April 20, 2006  
Anonymous the architect said...

Sharikou said: "Right now, the Wall Street crooks are busy fooling the public so they can unload their shares. Expect bag holders such as Goldman Sachs and B of A to pump Intel out of thin air."

Yep. Intel is going to be pumped and dumped, destroying many small investors.

The big media gameshow Intel is putting on right now (incl. the unbelievable benchmark results that got incredible press) is part of management's game plan to help the people that matter cut their losses.

Your comments are correct about Intel. The book value should be written way down. There is no microprocessor talent left at Intel. We have a company that can do process shrinks, apparently, but nothing much else. And as the process shrinks are mainly just buying equipment from other companies, this is not worth much.

Now if the management at Intel were smart, they would look into making a bigger sideshow. Something like starting a RAM division to sell FB-DIMM, DDR2, etc. This move would at least buy more time for the big investors to get out.

4:09 PM, April 20, 2006  

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