Intel has big news planned for next week, but yesterday had to defend its lower than expected sales and gross margin figures for the quarter. The company also hinted at a major reorganization.
To be sure, Intel met analyst’s estimates with earnings of 23 cents a share on sales of $8.93 billion, but admitted its outlook for the second quarter of between $8.0 billion and $8.6 billion is below normal seasonal patterns.
Intel said its first-quarter gross margins were 55.1 percent, versus a January expectation of about 59 percent. The Santa Clara, CA-based chip giant blamed lower microprocessor revenue and higher inventory write-downs.
CEO Paul Otellini said in conference call with analysts that the first half of 2006 is “a time to reset our business.”
On a more upbeat note, Otellini also said Intel will roll out its most compelling product line in years over the second half of 2006. And as those products ship, Otellini said he expects Intel to take back server share from AMD Intel chief financial officer Andy Bryant said the forthcoming review of company operations would not have to lead to firings. He said to meet its financial goals there would have to be “some kind of headcount reduction by attrition and conserving around the edges. It doesn’t require a layoff, but discipline around not hiring people.” Meanwhile, Otellini confirmed Intel will debut a business brand platform Monday. The company has a media event planned for then in San Francisco but has been cryptic on details. Intel said earlier it planned to launch a business brand around the middle of 2006 along the lines of its Centrino (for mobile) and new Viiv consumer brands. Otellini said Intel’s forthcoming Conroe processor features “the most significant performance gain since we introduced the Pentium after the 486 — and it lowers power.” He said he expects Intel to see an “an immediate up tick” in sales associated with the new business platform brand to enterprise customers and gamers looking for “heat-seeking performance” once the new systems are available. “The key question will be whether Intel can recreate for enterprise clients the excitement it generated a few years ago when it tied Centrino with Wi-Fi and mobility,” Nathan Brookwood, analyst with Insight64, told internetnews.com. “Intel needs to do something in order to stave off AMD’s imminent encroachment of enterprise desktops,” continued Brookwood. CFO Bryant blamed surprisingly weak sales in Europe for much of Intel’s drop off in sales.
He added Intel will be making adjustments to get its inventory under control and take “a comprehensive analysis of our company with a goal of overall efficiency.”
which has been steadily chipping away at Intel’s share the past year.
An invitation sent to internetnews.com said “Intel is about to make the PC work harder for IT. They will wonder how they managed without it.”
Intel has Conroe (desktop) Merom (mobile) and Woodcrest (server) processors on tap for later this year which will all help power Intel’s future business brand.
“Although Centrino was a home run any way you measure it, the early assessments on Viiv in the consumer PC space have been somewhere between an infield fly and a base on balls. It wouldn’t surprise me at all if Intel’s enterprise branding exercise also struggles to get the runners home.”
After comparing AMD’s own shipment figures to its own, Bryant said Intel held its own in unit shipments, but the average selling price of its chips did dip slightly.
