Intel Corporation (INTC)’s 4th Quarter 2014 Earnings Conference Call Transcript

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Below is transcript of the Intel Corporation (NASDAQ:INTC)’s 4th Quarter 2014 Earnings Conference Call, held on Thursday, January 15, 2015, at 5:00 pm EST.



Intel Corporation (NASDAQ:INTC) is an American multinational corporation headquartered in Santa Clara, California. Intel is one of the world’s largest and highest valued semiconductor chip makers, based on revenue. It is the inventor of the x86 series of microprocessors, the processors found in most personal computers.


Mark Henninger, Head of Investor Relations
Brian Krzanich, Chief Executive Office
Stacy Smith, Chief Financial Officer


Chris Danely, Citigroup
Mike McConnell, Pacific Crest Securities
Ambrish Srivastava, BMO Capital Markets
Jim Covello, Goldman Sachs
David Wong, Wells Fargo
Stacy Rasgon, Sanford C. Bernstein
Ruben Roy, Piper Jaffray
John Pitzer, Credit Suisse
Ross Seymore, Deutsche Bank
CJ Muse, Evercore ISI
Matt Ramsay, Canaccord Genuity
Vivek Arya, Bank of America Merrill Lynch


Good day, ladies and gentlemen, and welcome to the Intel Corporation, 4th Quarter, 2014, Earnings Conference Call. Thank you for your patience. We do apologize for the delay, as we were experiencing a technical issue. At this time all participants are in the listen-only mode. Later, we will conduct a questions-and-answers session and instructions will be given at that time. If anyone should require audio assistance during the conference, please press star, then zero, to reach an operator. As a reminder, today’s conference is being recorded. I would now like to turn the call over to Mark Henninger.

Mark Henninger, Head of Investor Relations
Thank you Jamie, and welcome everyone to Intel’s 4th Quarter 2014 Earnings Conference Call. By now you should have received a copy of our earnings release and the CFO commentary that goes along with it. If you have not received both documents, they are available on our investor website, I am joined, today, by Brian Krzanich, our CEO, and Stacy Smith, our Chief Financial Officer. In a moment, we’ll hear brief remarks from both of them, followed by the Q&A.

Before we begin, let me remind everyone that today’s discussion contains forward-looking statements based on the environment as we currently see it, and as such, does include risks and uncertainties. Please refer to our press release for more information on the specific risk factors that could cause actual results to differ materially. Also if during this call we use any non-GAAP financial measures or references, we’ll post the appropriate GAAP financial reconciliation to our website, With that, let me hand it over to Brian.

Brian Krzanich, Chief Executive Office
Thanks Mark. The 4th Quarter marked a strong finish to a great year. We began 2014 expecting roughly flat year over year revenue and operating income. Instead, company’s full-year revenue grew 6%, setting an all-time record of $55.9 billion. At the same time, operating income rose 25%. When I became CEO, I set two imperatives for the company. First, develop a more outside-in view of markets, to ensure we go to where the markets are heading, and second, increase our velocity, or pace of innovation, in a purposeful direction. Over the last year, we have made meaningful progress against these imperatives, which helped us meet and exceed many of our top goals. I’d like to take a moment to review the year.

In the PC Client Group, our goal was to stabilize the PC business. We expected revenue to be down by a low single digit percentage and for operating profit to be roughly flat year over year. Instead, the year closed with a 4% increase in revenue, and a 25% increase in operating profit. Our focus on re-inventing the computing experience and leaving no segment unserved, from the low end to the high end, contributed to these results. We launched Broadwell, on the world’s first 14-nanometer manufacturing processor. While we did have some start-up challenges that contributed to roughly six months delay, the yields have steadily improved. The end result is a family of Core M and Fifth Generation Core processors that are the foundation for the industry’s most compelling new designs. These designs include the thinnest, lightest, and most energy-efficient notebooks, two in ones, ultrabooks, Chromebooks and mini PCs.

We began the year with high expectations for the data center group. We said we would capitalize on the growth of the cloud and big data, by diversifying customer segments and product leadership. We initially forecasted revenue growth in the low to mid-teens, with operating profit growing faster than revenue. We exceeded those high expectations, and grew revenue 18%, while operating profit expanded by a remarkable 31%

In the Mobile and Communications Group, we set a goal to ship in 40 million tablets in 2014. This goal was intended to establish into architecture in the marketplace, and scale the supply chain, and attract developers. I am pleased to report that we shipped into 46 million tablets – becoming one of the industry’s largest merchant silicon providers in tablets. We also began shipping our second generation LTE baseband, known as 7260. We are proud that the company reached these milestones, but we have more work ahead of us. A key goal for mobility is to improve profitability. To that end, we just qualified the first SOC in our SoFIA line up. SoFIA is a low cost integrated applications processor and baseband chip. As it ramps, it will progressively reduce the bill of material costs that have adversely affected our gross margins in the mobile business. We also struck landmark agreements with Rockchip and Spreadtrum to expand the development and distribution of products to perform in the highlight. Similarly, we grew other adjacent synergies by using IT from our core products. For example, our Internet of Things group grew 19% in 2014, passing the $2 billion mark for the first time.

The recently launched RealSense 3D camera technology is another example of extending our IT. RealSense is redefining imaging in a variety of computing devices. It’s also making its way into all sorts of new and unanticipated applications, highlighting the value of taking an outside-in view, investing ahead of trend, and shaping nascent technology. Finally, you see us moving quickly into wear-ables, through our growing portfolio of collaborations with world class fashion and fitness brands, like Fossil, Oakley, Opening Ceremony and SMS Audio, along with our own products like the Basis Peak and the Curie Module, a computer the size of a button. Intel is in a very different place today than we were just 12 months ago. We are participating in a broader range of devices, but we are innovating in emerging segments. These are the trends we will build on in 2015, bringing us closer to our vision that if it’s smart and connected, it is best with Intel. Our work isn’t done, but our progress against our imperatives leaves us increasingly confident in our strategy. With that, let me turn the call over to Stacy.

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