Latest / Bloomberg Intelligence / Instant Reaction: Intel Gives Encouraging Forecast After PC Market Rebounds

Transcript

Instant Reaction: Intel Gives Encouraging Forecast After PC Market Rebounds · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is a breaking
• 0:10
  Speaker 1: news update from Bloomberg, instant reaction and analysis from our
• 0:15
  Speaker 1: three thousand journalists and analysts around the world. We're watching
• 0:19
  Speaker 1: a lot of different companies, but I want to home
• 0:22
  Speaker 1: in on one, and that would be Intel shares surging
• 0:24
  Speaker 1: in the after.
• 0:24
  Speaker 2: Hours, building the momentum to the upside.
• 0:27
  Speaker 1: Yeah, seven percent to the upside of right now in
• 0:29
  Speaker 1: the after hours, little bit at the beginning trepidation I
• 0:32
  Speaker 1: think for shareholders, but it could have to do also
• 0:35
  Speaker 1: with some corrected numbers that we're coming back and forth
• 0:38
  Speaker 1: over the terminal for the results. The most recent results.
• 0:42
  Speaker 1: As you mentioned, shares what up ninety percent going into
• 0:44
  Speaker 1: the print this year.
• 0:45
  Speaker 2: Well, yeah, we know, like there was the US taking
• 0:47
  Speaker 2: that position Intel specifically an equity position, and it is
• 0:51
  Speaker 2: now the third largest investor in Intelsa. That certainly has
• 0:54
  Speaker 2: given it a jolt, if you will, this year. But again,
• 0:59
  Speaker 2: I think what's interesting is the company's CFO speaking in
• 1:02
  Speaker 2: an interview. You can check out our Ian King's right
• 1:04
  Speaker 2: through on this, but Intel saying the third quarter was
• 1:07
  Speaker 2: stronger than it thought across the board. So yeah, server
• 1:12
  Speaker 2: demand was a surprise positive. It feels like there's a
• 1:14
  Speaker 2: lot of things that feel like the changes, the moves
• 1:18
  Speaker 2: by lit Bhutan, the CEO, maybe some of it's starting
• 1:21
  Speaker 2: to pay off.
• 1:22
  Speaker 3: Well.
• 1:22
  Speaker 1: I want to see what Jake Goldberg has to say
• 1:24
  Speaker 1: about all this. He's Semiconductors and Electronics senior analyst at
• 1:28
  Speaker 1: Seaport Research Partners. He joins us from San Francisco. Jay,
• 1:32
  Speaker 1: good to have you. You cover a lot of these companies,
• 1:34
  Speaker 1: including Intel. You've got a neutral rating on Intel. Just
• 1:38
  Speaker 1: give us your first reaction to this report that shows
• 1:42
  Speaker 1: an encouraging forecast after a rebound in the PC chip market.
• 1:47
  Speaker 3: Yeah. I think it's an encouraging step forward for the company.
• 1:50
  Speaker 3: They've been through some rough times, and I think the
• 1:55
  Speaker 3: driver of this quarter's results are their new products coming
• 1:58
  Speaker 3: on stream using their eighteen eight their new manufacturing process,
• 2:03
  Speaker 3: as well as some help from TSMC so a bunch
• 2:05
  Speaker 3: of new products starting to ramp into production and volume.
• 2:08
  Speaker 3: I think that's helping a lot. And I'm most encouraged
• 2:11
  Speaker 3: by sort of the gross margin outlook for next quarter.
• 2:13
  Speaker 3: I haven't run through all my numbers, but it looks
• 2:15
  Speaker 3: like it's much better than expected, which is important, not
• 2:18
  Speaker 3: just for the financial way of that, but also it's
• 2:20
  Speaker 3: a good indicator into how their manufacturing process is tracking.
• 2:24
  Speaker 1: I don't well, sorry, go ahead, I don't want to
• 2:27
  Speaker 1: get you in trouble with compliance, but can you are
• 2:30
  Speaker 1: you going to change your outlook? You're rating on the stock.
• 2:34
  Speaker 3: So I just upgraded it about a month ago from
• 2:37
  Speaker 3: sell to neutral. And my concern here is more that
• 2:41
  Speaker 3: big picture question you all were talking about earlier. As
• 2:46
  Speaker 3: much as this quarter is good progress and we're seeing
• 2:48
  Speaker 3: sort of tactically they're moving in the right direction, the
• 2:51
  Speaker 3: looming question over the company is what are they going
• 2:53
  Speaker 3: to do with the fabs. Last quarter, CEO of Bhutan said,
• 2:57
  Speaker 3: if they don't get a customer for Intel Foundry Journal
• 3:00
  Speaker 3: customer for Foundry, they're going to stop doing advanced manufacturing.
• 3:05
  Speaker 3: And I think that's one of these tough analyst calls
• 3:07
  Speaker 3: because in the near term, if they stop doing that's
• 3:10
  Speaker 3: it removes a lot of expense numbers go way up,
• 3:12
  Speaker 3: stock goes up. It's a near term easy thing to do,
• 3:16
  Speaker 3: but long term it's probably really bad for the company,
• 3:18
  Speaker 3: and it's just hard to square that sort of long
• 3:19
  Speaker 3: term forecast multi year forecast. So I'm still on the fence.
• 3:25
  Speaker 2: Hey, one thing I want to just point out, Jay,
• 3:27
  Speaker 2: is that it looks like they're talking about seeing a
• 3:30
  Speaker 2: fourth quarter adjusted gross margin of thirty six point five percent.
• 3:35
  Speaker 2: Third quarter adjusted gross margin was forty percent against an
• 3:39
  Speaker 2: estimate of thirty six point one percent. Is that the
• 3:41
  Speaker 2: number you were looking for?
• 3:43
  Speaker 3: Yeah, but there's a lot of adjustments in there, so
• 3:45
  Speaker 3: I haven't worked them all.
• 3:46
  Speaker 2: Okay, Okay, Hey listen, listen. This is a company that's
• 3:50
  Speaker 2: been around for a long time. You know, you're entrenched
• 3:54
  Speaker 2: in how you were, what you were. Different executives coming
• 3:58
  Speaker 2: in to try and write this ship. You know, it's
• 4:01
  Speaker 2: a big ship to turn while also facing lots of
• 4:04
  Speaker 2: growing competition. Do you feel like it is in the
• 4:08
  Speaker 2: right direction.
• 4:10
  Speaker 3: I think it's too soon to tell. I really hope
• 4:12
  Speaker 3: it's in the movement in the right direction, but it's
• 4:14
  Speaker 3: too soon to tell. Like, what are they going to
• 4:16
  Speaker 3: do with those fabs? Right? And you know, I've been
• 4:19
  Speaker 3: saying for years that Intel's biggest challenge is not external
• 4:22
  Speaker 3: competitors or customers. It's their biggest challenge is internal and
• 4:25
  Speaker 3: fixing their culture. So that on that mark, I think
• 4:28
  Speaker 3: this is a step forward. Lipoo, who has put it.
• 4:32
  Speaker 3: You know, he has a plan and he's chipping away
• 4:35
  Speaker 3: at this sort of internal problem. But they really have
• 4:37
  Speaker 3: to readjust their worldview internally and understand that they're not
• 4:40
  Speaker 3: the dominant player that they were for twenty years. They're
• 4:43
  Speaker 3: they're the upstart now and they got to act like it.
• 4:46
  Speaker 1: Jay, we spent a good portion of our program earlier
• 4:48
  Speaker 1: talking about economic statecraft and the new role of the
• 4:51
  Speaker 1: US government is taking in companies, the reporting around potentially
• 4:56
  Speaker 1: investing in some of these quantum companies.
• 4:59
  Speaker 3: We of course have of.
• 5:00
  Speaker 1: The Intel, among the US government being among the biggest
• 5:03
  Speaker 1: shareholders in Intel, US Steel, the Golden share there the
• 5:08
  Speaker 1: critical minerals and mining companies that have taken investment or
• 5:12
  Speaker 1: had interest expressed in them. From an Intel perspective, how
• 5:16
  Speaker 1: does the US government investment change Intel.
• 5:21
  Speaker 3: I think it is going to encourage other US chip
• 5:24
  Speaker 3: companies to consider working with Intel Foundry, right because you know,
• 5:30
  Speaker 3: Nvidia has already invested in it, SoftBank's invested in Intel.
• 5:33
  Speaker 3: Now do we see Apple or Amazon or Google or
• 5:36
  Speaker 3: one of these other potential Intel customers sign up to
• 5:39
  Speaker 3: work with Intel Foundry take that risk? But because it
• 5:42
  Speaker 3: could be seen as patriotic.
• 5:44
  Speaker 1: Well, that's okay, I'm glad you said that. Do they
• 5:46
  Speaker 1: do it because it's the right thing for their business,
• 5:48
  Speaker 1: because it's the best option for a foundry, or is
• 5:51
  Speaker 1: it because it shows the Trump administration that they're supporting
• 5:55
  Speaker 1: a business that the administration has invested in.
• 5:58
  Speaker 3: So I think it can be both, right. My view
• 6:01
  Speaker 3: is that these companies need to work with Intel. They
• 6:04
  Speaker 3: need to see Intel boundaries succeed because if they abandon
• 6:08
  Speaker 3: Intel foundry today and Intel abandons it, you know entirely
• 6:12
  Speaker 3: what happens in five years when they're you know, TSMC
• 6:14
  Speaker 3: has an effective monopoly today, right in five years they'll
• 6:18
  Speaker 3: have a true, actual monopoly. And that's that's going to
• 6:21
  Speaker 3: be really challenging for all these all these companies. And
• 6:23
  Speaker 3: so it's hard. You know, the way that companies work,
• 6:26
  Speaker 3: they you know, they're thinking on ninety day cycles. Somebody
• 6:29
  Speaker 3: needs to be thinking of sort of the five ten
• 6:30
  Speaker 3: year time horizon, and maybe the government is sort of
• 6:34
  Speaker 3: the forcing function that gets us there.
• 6:36
  Speaker 2: You know who thinks in more than five or ten
• 6:39
  Speaker 2: year cycles. A little country named China. They're pretty good
• 6:43
  Speaker 2: about those long term plannings. Does Evan's some fun with you,
• 6:46
  Speaker 2: Jay Well having said that though, you know, on the
• 6:49
  Speaker 2: other hand, are there companies who are saying, I don't
• 6:52
  Speaker 2: get involved with anybody who's involved in the government because
• 6:54
  Speaker 2: just like the way the US government for a long
• 6:57
  Speaker 2: time has been or you know, US investors been critical
• 7:01
  Speaker 2: of you know, sovereign held entities you know, in other countries.
• 7:05
  Speaker 2: So is there some you know, justification in that as well,
• 7:09
  Speaker 2: or should we just assume that Intel now has a massive,
• 7:14
  Speaker 2: you know, backup called the US government.
• 7:19
  Speaker 3: So I think everybody's a little bit uncomfortable with the
• 7:22
  Speaker 3: US government taking stakes in companies. Everyone I know on
• 7:25
  Speaker 3: Wall Street, everyone I know in the valley, just a
• 7:27
  Speaker 3: little bit uncomfortable about it, sort of ideologically, it's not
• 7:31
  Speaker 3: something we're used to. It's clear that, you know, the
• 7:35
  Speaker 3: US is moving towards some kind of national industrial policy.
• 7:40
  Speaker 3: This is one way to achieve that. I'm not sure
• 7:42
  Speaker 3: taking a stake in it is quite the right way
• 7:44
  Speaker 3: to do it, But you know, there are merits for
• 7:48
  Speaker 3: being a little bit more somewhere in between the government
• 7:51
  Speaker 3: controlling everything and the government doing nothing. Maybe there's a
• 7:53
  Speaker 3: happy medium we can find.
• 7:54
  Speaker 2: Hey, thirty seconds on the call, or you're sitting down
• 7:57
  Speaker 2: with Intel execs what do you want to ask them?
• 7:59
  Speaker 3: Just quite what are you doing with foundry?
• 8:03
  Speaker 2: Okay, that was.
• 8:04
  Speaker 3: Great, so appreciate it.
• 8:06
  Speaker 2: Jay Goldberg, thanks, Senior Analyst Semiconductors and Electronics at Seaport
• 8:09
  Speaker 2: Research Partners. We're looking at Intel continuing to trade higher
• 8:13
  Speaker 2: here in the aftermarket.