Published On: Sat, Jan 28th, 2017

Analysis: Intel Corporation Posts A Record Year With Its Q4 2016 Quarterly Earnings – NVMe Solutions and IoT Segments See Double Digit Growth

In a jubilant moment, Intel has published a record year and a good entertain with income of $16.4 Billion, net income of $3.6 billion and an EPS of 73 cents per share. Non-GAAP net income was $3.9 Billion with an EPS of 79 cents – that was simply some-more than analysts expectations. The association paid $1.2 Billion value of dividends and used $533 million to repurchase 15 million shares of stock. Intel (NASDAQ: INTC) were trade during $37.98 a share during a time of writing, adult from $35.54 a cocktail final quarter, display collateral gains of 6.8%.

Analysts approaching Intel to post gain of 74 cents a share and 15.752 billion in income (on a Non-GAAP basis), according to a accord guess from Thomson Reuters. Intel had an positively good year, with full-year income clocking in during $59.4 Billion, on a net income of $10.3 Billion and an EPS of $2.12 (GAAP basis). The Santa Clara chip-maker paid dividends of $4.9 Billion this year and used $2.6 Billion to squeeze 81 million shares of stock.

Q4 Key Business Unit Trends

  • Revenue expansion in 2016 driven by strength opposite a business including full-year income expansion in Client Computing, Data Center, and Internet of Things
  • Record annual money upsurge from operations of $21.8 billion
  • Solid gain with GAAP net income of $10.3 billion; non-GAAP net income of $13.2 billion
  • Client Computing Group income of $9.1 billion, adult 4 percent year-over-year
  • Data Center Group income of $4.7 billion, adult 8 percent year-over-year
  • Internet of Things Group income of $726 million, adult 16 percent year-over-year
  • Non-Volatile Memory Solution Group income of $816 million, adult 25 percent year-over-year
  • Intel Security Group income of $550 million, adult 7 percent year-over-year
  • Programmable Solutions Group income $420 million

The company’s non-volatile memory resolution organisation has seen really considerable expansion and is something value mentioning here. Optane memory will be alighting this year as good so we can design this trend to continue during a blazing quick pace. To those who do not know, Intel introduced a code new tier of memory (that lies somewhere between an SSD and RAM) that is not flighty and will be accessible to consumers this year. An honest discuss goes out to a IoT organisation that saw a income boost of 16% year over year.

Our Take On Intel: A Record Year and Advisory For Status Quo Disruption in Q2 2017

Disclaimer: we possess no batch in Intel and/or competing companies and have no skeleton to do so for a foreseeable future. The research and forecasts given here are supposing “as is”.

Intel (NASDAQ: INTC) batch was confronting some rhythmical perspective in a weeks before a gain due to a unchanging tide of leaks and news about AMD Ryzen and a ever timorous (read: red shifting) PC market. In what appears to be a pointy contrariety to that statement, Intel has managed to not usually post a record year though kick analysts estimates for a quarterly results. In a arise of this development, Intel batch perceived a well-deserved strike adult to $38 cost levels. Not usually that though a company’s Q1 2017 superintendence is usually as rosy, with all spick and span.

This competence be a ease before a storm, however, since while a company’s opening was stellar (as usual) and while we design it to accommodate a Q1 2017 superintendence easily, it is going to be confronting poignant standing quo intrusion starting Q2 2017. AMD Ryzen will be releasing between a 27th February-3rd Mar time support according to a slip-up by a association and will offer rival opening to Intel’s discriminate side. The stress of this should be straightforwardly apparent since Intel has been vital in a practical corner for a past few years due to AMD counterparts being totally outclassed in terms of performance; this dominance is approaching to shortly come to a close.

We have seen third celebration benchmarks of AMD Ryzen engineering samples that went toe to toe with Intel’s $1000 8-core CPU – and this is a chip that is approaching to be labelled around a $550 symbol or under. The Ryzen 4-cores would proportionally be means to offer identical rival opening to Intel solutions. We can contend with finish certainty that Intel’s CPU marketplace share for a mainstream (DIY) PC Market is going to decrease in a entertain after Q1 2017 as Ryzen adoption kicks in.

Intel can respond to this in usually dual ways:

  1. Slash prices opposite a house to make a processors rival on a price/performance basement or
  2. Do zero and assign a business what is radically an substantial ‘quality premium’.

The second lane would be a really unsure pierce for multiple reasons. Firstly, a price/performance cause of Ryzen would be a really appealing understanding for any PC enthusiast. Secondly, a AMD charity has reduce attached-implicit-costs as well.

See, Intel (NASDAQ: INTC)’s  6-core and 8-cores need a HEDT platform, that is formed on a opposite hollow than a one a mainstream height is formed on. AMD’s platform, on a other palm is one on AM4, that means reduce intensity ascent costs and usually improved all-rounded compatibility. So someone upgrading from an Intel 4-core will have to compensate a reward for a CPU first, followed by a reward for a motherboard as well. The AMD route, on a other hand, will offer most improved value.

By a estimates, Intel will be means to keep a lead time for clock so a 4-core Intel processor should be faster than an AMD one. However, if AMD prices it right, a 6-core Ryzen should not usually offer improved altogether opening though a rival cost indicate as well! In possibly case, it is my faith that Intel will have to start slicing prices for a mainstream processors by shortening a reward it charges a customers. This will eat into a margins that should sojourn unchanging for Q1 2017 though will substantially decrease going foward in Q2 2017.

Intel has also mentioned that it skeleton to conflict a disappearing overarching PC marketplace by diversifying into other industries. One of these that a CEO mentioned was a self-driving car market. Intel missed a vessel on a mobile side of things, and it looks like it doesn’t wish to make a same mistake for a self-driving market. Interestingly, however, it doesn’t seem to be meddlesome in traffic with a one association that is by probably all regards a destiny personality of vehicle tech: NVIDIA. It is instead, relying on a aged indication of self-driving with companies like Mobileye – a customary that can not grasp entirely unconstrained pushing in genuine conditions.

The purpose of this advisory was to surprise any investors of a really large standing quo change that is appearing usually outward of a Q1 2017 opinion scope. This is something that could simply impact a company’s batch cost and is something value gripping in mind.

All that said, it is not doom and dejection for Intel. Far from it. The association stays a blue chip batch with well-developed fundamentals, a bloody shining RD lane record (silicon is reaching a finish of a line, and if any association can find an choice for computing, it’s Intel), and a good division to foot – and nothing of this will change anytime soon. So if we are an financier that follows a Warren Buffet proceed to investing, it’s not something value worrying about. There hasn’t been any change in fundamentals though a association will really need to get out of a comfort section once Ryzen arrives. Besides, if Intel plays a cards right, increase from Optane could annul any intensity downside on a discriminate side of things.

Intel (NASDAQ: INTC) GAAP Financial Results Q4 2016

Intel (NASDAQ: INTC) Non-GAAP Financial Results Q4 2016

Intel Corporation Q1 2017 Business Outlook

The association expects to some-more or reduction say a margins in Q1 2017, during 62% (on a GAAP basis) that is adult 1.1 points from 2016. Non GAAP domain is approaching to be prosaic during 63%. RD and MGA for a year is approaching to be approximately $20.5B and or reduction $400M. Spending is approaching to be adult by a integrate percent year over year, incompatible Intel Security Group from both years. Spending as a commission of income is approaching to be down 1 indicate from 2016.

Depreciation is foresee to be approximately $7.0B and or reduction $200M, adult $0.7B from 2016. Amortization of acquisition-related intangibles enclosed in handling responsibility is foresee to be approximately $150M, down from 2016.

Restructuring and other charges are approaching to be $2.3 billion unchanging with prior expectations. $1.9 billion of a restructuring and other charges were satisfied in 2016. The taxation rate is approaching to be 26%, adult from 2016. Non-GAAP taxation rate is approaching to be 22%.

The non-GAAP taxation rate excludes a impacts of a designed Intel Security Group divestiture. Both GAAP and non-GAAP taxation rates augmenting essentially due to one-time equipment enclosed in 2016 and aloft income in aloft taxation jurisdictions. Intel Corporation expects a GAAP EPS of $2.53 for 2017, and or reduction 5%. Non-GAAP EPS for 2017 is approaching to be $2.80, and or reduction 5%. Capital spending for 2017 is approaching to be $12.0B and or reduction $500M, adult $2.4B, from 2016, essentially driven by Non-Volatile Memory Solutions Group.

Wrapping Up

Although there are tiny concerns for investors with Ryzen on a way, chances are reasonable that in a brief to middle tenure during least, a outcome on Intel’s financial position will be negligible. As a blue chip and solid division payer, Intel is approaching to be a buttress of institutional investors portfolios for a prolonged time nonetheless (barring a outrageous change in a landscape). Position turnover of a tip 10 investors in Intel is low with all of them augmenting land solely one (Bank of America Merrill Lynch) as of a final reporting.

Largest investors in Intel

Ownership in Intel

Institutional investors of course, while a poignant partial of a marketplace are still usually partial of it. Smaller investors who have been on a gravy sight in new years might start eyeballing positions with a perspective to holding some profits. This might have some impact on a batch cost though in a midst of new marketplace sensitivity following a US choosing and other factors, by itself is doubtful to strive outrageous downward vigour on a own.

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