Intel CFO: Tough Year in 2006, Bright Outlook for 2007

Image for FaceBook
Download Audio FileRight click here to download audio | Share The Connected Social Media Player

 

Intel CFO Andy Bryant says that 2006 was a year when chipmaker AMD won some marketing battles with better products. But that changed in the 4th quarter of the year when Intel was able to start applying pricing pressure to its rival. More to the point: Intel will retool for its new 45 nanometer manufacturing process, resulting in a new family of chips by mid 2007 that will dramatically increase efficiency. That is key, says Bryant, because it reduces the company’s costs to make more chips–a reduction beyond the reach of AMD.

Related Stories: IntelMooresLaw

Transcript:

Host: Jason Lopez – PodTech

Guest: Andy Bryant – Intel

Jason Lopez – PodTech

I am Jason Lopez of PodTech.net. Intel released its earnings figures for the last quarter of 2006. Revenue came in at $9.7 billion, 5% less than a year ago. Also profit, down 39% at $1.5 billion. On the profit side, Intel did beat estimates and the company says, “It retooled in 2006 and we should see a resurgence in 2007.” I had a chance to sit down with CFO Andy Bryant to talk about the outlook for 2007 and the figures from the latest quarter.

Andy Bryant – Intel

It’s been a difficult year. The first half of the year, and various product family — AMD had a lead over us, starting the second quarter, third quarter, we introduced better and better products, we finally had better performing products. It’s actually crossed the board. So, what does that mean? What that means is, my fourth quarter revenue came in above seasonal norms. So, while my unit demand was led as expected, my every selling prices went up. So, the fourth quarter ended on a strong note, if you look at geographies around the world. Every single region of the world; Japan, Asia Pacific, Europe, the America’s region, all grew so we have a situation right now that actually feels pretty comfortable, we’ve pretty good foundation for 2007.

Jason Lopez – PodTech

And of course you came in at the top end of the range and that of course for the analyst is very important looking at that range. Some of them complain that the range is too wide, but then when you’re coming on the top end. It’s sort of settles all the arguments.

Andy Bryant – Intel

Well certainly it’s nice to be at the top end and then another end. We try to put a range where our most likely outcome is the mid point. One of the reasons, range is wide is quite frankly, if you miss on the bottom at the range, you track shareholder lawsuits and you end up spinning into our shareholders dollars in court, instead of actually just trying to run the business. So, that’s why the range is probably wider than some of them were like, make sense to run the business. In reality, to be at the top of the range is highly unusual, so if you look at the quarter versus our expectations, it was a pretty strong quarter.

Jason Lopez – PodTech

Now, let’s talk about profit. How do you explain some of the figures that came in, which sort of missed compared to last year, but of course beat some of the analyst expectations? I wonder, how you can explain some of those figures?

Andy Bryant – Intel

Well the numbers versus last year were down which was, as always a disappointment was expected. The reason our numbers were down in the fourth quarter, remember as I explained in the first half of the year, when we had — and we had some products that were better than ours, it can be heavily on price. So we lowered the pricing in that part of the year.

We’re now starting to recover, but what you really seeing is the cumulative effect of the year reflected in the fourth quarter. So, you see some good news there, you can’t wish you were better, it’s certainly better than anybody expected, it’s better than we expected, better than we forecast, better than most of the analysts expected. So, that’s so positive, now you had to build in that momentum for to be worth something up.

Jason Lopez – PodTech

How much leverage do you think Intel can get on the pricing war now with AMD over the next year, how long can that continue to take?

Andy Bryant – Intel

Well that’s hard to know. Right now, I do have superior products, better performing products, almost across the board. If you look at the plans we have for 2007, even though its hard for most people to related to this thing called the 45-nanometer manufacturing process, it makes your products run faster. It makes them running cool. So, if it’s in a laptop — your battery will last longer. So that process comes out in the second half of this year. (Inaudible) with that will come more efficiently designed products, so we have a lot of things coming in the second half of this — 2007, just like we had the second half of 2006. So, we think we’re positioned, if we can execute our plans to finish take, what we built in 2006 is a good foundation and make it even better next year.

Jason Lopez – PodTech

Yeah, 5.5 billions slated for capital investment, I imagine a lot of that is earmarked for 45-nanometer process of manufacturing.

Andy Bryant – Intel

By far, the biggest chunk is going under the equipping the factory, so in 2006, we built a factory in Arizona, we mostly built one in Israel. In 2007, we’ll buy the equipment to put in there. So, our spending is heavily targeted to those new manufacturing processes. And again, what a new manufacturing process does, makes your product work better, it also makes it cheaper, so you gain both the cost advantage and the performance advantage.

Jason Lopez – PodTech

How much of a game changer will 45-nanometer be?

Andy Bryant – Intel

Exactly now it is 45-nanometer, so now you have — you’ve asked me a very big question which I don’t know if you realized, it’s something called Moore’s Law. So, think about Moore’s Law which says “Every 18 months you double the amount of transitions on a product or whatever,” and you say, “That doesn’t mean much to me,” let me communicate it in a way that, a finance person knows and understands. Every two years, these processes allow us to get twice as much output out of every factory. So, if you start to — your cost per year gets cut in half, every two years because of these new processes and the product (Inaudible) besides.

So, if you think of a factory that cost $3 billion to build, by doing one of these processes, I don’t have to build the next factory, I can get out of the factory I have tremendous advantage.

Jason Lopez – PodTech

That’s Andy Bryant, CFO of Intel talking about the latest figures from Intel’s fourth quarter earnings. I’m Jason Lopez for PodTech.net.

Copyright ©2006 PodTech.net. All rights reserved. Privacy policy

Share
No comments yet.

TOP