Intel's (INTC) 2011 earnings, Q1 outlook, and executive reshuffle

January 22, 2012 - BUSINESS WIRE -- Intel Corporation (NASDAQ:INTC) reported full-year revenue of $54 billion, operating income of $17.5 billion, net income of $12.9 billion and EPS of $2.39 -- all records for the semiconductor company. The company generated approximately $21 billion in cash from operations, paid dividends of $4.1 billion and used $14.1 billion to repurchase 642 million shares of stock.

Intel had initially downgraded its Q4 2011 expectations in light of the supply chain disruptions caused by Thailand's floods, as well as general economic conditions. For the fourth quarter, Intel posted revenue of $13.9 billion, operating income of $4.6 billion, net income of $3.4 billion and EPS of 64 cents. The company generated approximately $6.6 billion in cash from operations, paid dividends of $1.1 billion and used $4.1 billion to repurchase 174 million shares of stock.

Intel grew revenue by more than $10 billion, noted Paul Otellini, Intel president and CEO, fresh off a keynote appearance at International CES 2012. "We're excited about the global growth opportunities presented by Ultrabook systems, the data center, security and the introduction of Intel-powered smartphones and tablets" in 2012. Also read: Intel Press Briefing and Keynote at CES 2012 by Dick James

Full-year 2012 (GAAP, unless otherwise stated), Intel had a 64% gross margin (65% Non-GAAP), excluding amortization of acquisition-related intangibles. The chip maker spent $18.3 billion (plus/minus $200 million) on R&D ($10.1 billion) and MG&A. Full-year capital spending hit $12.5 billion, plus/minus $400 million. In 2012, amortization of acquisition-related intangibles was approximately $300 million. Depreciation: $6.5 billion, plus or minus $100 million. INTC's tax rate was about 29%.

Table 1. INTC's non-GAAP financial performance.
Annual 2011 2010 vs. 2010
Revenue $54.2 billion $43.6 billion up 24%
Gross Margin 63.6% 65.5% down 1.9 pts.
Operating Income $18.4 billion $15.7 billion up 18%
Net Income $13.7 billion $11.5 billion up 19%
Earnings Per Share $2.53 $2.02 up 25%
Non-GAAP results exclude certain acquisition accounting impacts and expenses related to acquisitions and the related income tax effects of these charges. Also, McAfee Inc. and Intel Mobile Communications contributed revenue of approximately $3.6 billion in 2011 and were not included in the results for 2010.

Table 2. INTC GAAP financial Comparison.
Annual 2011 2010 2011 vs. 2010
Revenue $54.0 billion $43.6 billion up 24%
Gross Margin 62.5% 65.3% down 2.8 pts.
Operating Income $17.5 billion $15.6 billion up 12%
Net Income $12.9 billion $11.5 billion up 13%
Earnings Per Share $2.39 $2.01 up 19%

Intel's Q1 2012 outlook (GAAP, unless otherwise stated) includes $12.8 billion, plus or minus $500 million in revenue, 63% gross margin and 64% Non-GAAP (excluding amortization of acquisition-related intangibles). R&D and MG&A spending will total approximately $4.4 billion. Amortization of acquisition-related intangibles will be approximately $75 million. Depreciation: approximately $1.5 billion. Intel plans to report its earnings for Q1 2012 on April 17.

"The strength of this revenue guidance is somewhat puzzling as we do not believe 4Q11 CPU shipments were far below consumption, given trends toward ocean freight in mid 2011 and the cannibalistic impacts from smartphones and tablets. Indeed, visibility into 4Q12 revenues is low for everyone, and we wonder why Intel's guidance is so aggressive here given macro overhangs, ramping sales of smartphones and tablets, and continuing investor doubts about PC unit growth rates. Stepping back, we do think Intel has sustainable competitive advantages in manufacturing, and its execution is top notch with a robust product roadmap, process leadership, technology leadership (high-K, 3D transistors), and scale advantages. This is somewhat tempered by ongoing growth of tablets and smartphones, with some Windows on ARM (WoA) risks, too," announced FBR Capital Markets.

"We continue to model only modest PC growth which drives our outlook for only 4% revenue growth in 2012. We applaud Intel for its execution and strong cash flows but need greater confidence on the company's growth drivers to believe shares will outperform other semi names at this point in the cycle," input Barclays Capital. "Note that while Intel suggested that [wafer fab equipment] WFE as a percent of capex would decline in 2012, this still points to WFE spend of at least $7B, suggesting their WFE spend should head higher year over year," the Barclays analysts added.

Following its record 2011 results, Intel announced several top-level changes at the company, with a new COO, chief product officer, and group heads, among other changes:

Andy Bryant will move from vice chairman of the board to full-time executive chairman at the company’s Annual Stockholders’ Meeting in May. Intel promoted Brian Krzanich to chief operating officer, reporting to Paul Otellini. Krzanich had previously been a senior vice president in charge of Intel’s worldwide manufacturing. In his new role, Krzanich will continue to oversee manufacturing and also take on responsibility for internal IT and human resources, functions that previously reported into Bryant.

Dadi Perlmutter is being promoted to chief product officer. Perlmutter will continue to lead the Intel Architecture Group and continue reporting to Otellini.

Stacy Smith, senior vice president and chief financial officer, will now report directly to Otellini.

Bill Holt, senior vice president and head of Technology Development, will also now report directly to Otellini. He, too, had reported to Bryant. Holt and Krzanich will continue to co-manage the Technology and Manufacturing Group, allowing Intel to maintain the critical, close collaboration between semiconductor process technology development and manufacturing.

Kirk Skaugen, Intel vice president and head of Intel’s data center business, will become the new head of the PC Client Group (PCCG), succeeding Intel Vice President Mooly Eden, and reporting to Perlmutter. After 9 years in the United States, Eden is moving back to Israel at his request and will assume the position of president and general manager, Intel Israel, reporting to Perlmutter. While in the United States, Eden led Intel’s mobile PC business before being promoted to run PCCG, Intel’s largest product group, in 2009.

Diane Bryant, Intel vice president and CIO, will lead the data center business and succeed Skaugen as general manager of that group. She will report to Perlmutter. Kim Stevenson, vice president of IT Global Operations and Services, will succeed Diane Bryant as CIO and report to Krzanich.

Q4 and 2011 Key Financial Information (GAAP)


Q4 Business unit revenue:
PC Client Group revenue of $9 billion, up 17% year-over-year.
Data Center Group revenue of $2.7 billion, up 8% year-over-year.
Other Intel architecture group revenue of $1.1 billion, up 35% year-over-year.
Intel Atom microprocessor and chipset revenue of $167 million, down 57% year-over-year.
McAfee Inc. and Intel Mobile Communications contributed revenue of approximately $1 billion.

Full Year Business unit revenue:
PC Client Group had revenue of $35.4 billion, up 17% from 2010.
Data Center Group had revenue of $10.1 billion, up 17% from 2010.
Other Intel architecture group had revenue of $5.0 billion, up 64% from 2010.
Intel Atom microprocessor and chipset revenue of $1.2 billion, down 25% from 2010.
McAfee Inc. and Intel Mobile Communications contributed revenue of $3.6 billion.

All INTC's Q4 and 2011 numbers can be found at on our Financial Content page. A detailed discussion of these and other factors that could affect Intel’s results is included in Intel’s SEC filings, including the report on Form 10-Q for the quarter ended Oct. 1, 2011.

Intel (NASDAQ: INTC) is a world leader in computing innovation. Website: http://www.intc.com/.

Samsung plans record investments in 2012

January 17, 2012 -- Samsung Group, which includes Samsung Electronics Co, is raising its 2012 investment to a record $41.4 billion (47.8 trillion won), the company said in a statement (in Korean). Miyoung Kim, Reuters, says that this record amount underscores "the widening gulf between the dominant South Korean conglomerate and its faltering competitors." The money will be divided up for facilities, R&D, strategic acquisitions, and staffing.

Samsung Group did not provide a breakdown of the 47.8 trillion won investment for Reuters. Kim expects that Samsung is spending on its logic chips and organic light emitting diode (OLED) displays, hoping to see success like that of its flash chips, computer memory chips and LCD flat-screens. Turner Investments recently noted that Samsung's position as one of the top 3 media tablet makers will put it in a strong position, next to Apple and Amazon.com, in this emerging growth market. Also read: 7 semiconductor and display suppliers to benefit from tablet wars

Samsung's capital spending will rise 11% year-over-year to 31 trillion won. 80% of the capex will come from Samsung Electronics and its display unit. Reuters' Kim expects a 7.5 trillion won investment in system chips (mobile processors and sensors) to exceed spending on memory chips for the first time, and by about 1 trillion won. OLED investment could hit 7 trillion won. Lesser amounts will go to LCDs, rechargeable batteries and LEDs, Reuters reports. Worldwide, Korea is the only region expected to show growth in semiconductor fab equipment spending in 2012, mainly due to expected spending by Samsung, says SEMI. Also read: Semiconductor fab capex forecast for 2012

Samsung also said that it will add a record 26,000 employees this year, despite "worldwide economic difficulties and uncertainties." Samsung now employs around 350,000 workers. Samsung's Q4 2011 earnings are estimated (prelim.) at about 47 trillion won, with a record 5.2 trillion won profit.

The Wall Street Journal and other outlets quoted Samsung Electronics as planning a $1billion bond sale from its US unit, the first bond sale in many years.

Samsung Group comprises around 80 companies. Its business portfolios expand from financial, construction and shipbuilding to medical services and consumer electronics and total revenues account for some 20% of South Korea's 1,200 trillion won GDP.
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