Intel Corporation’s international developer forum (IDF) day #1 just ended. Here are some of our takeaways from analysts who attended the event.
Bank of America/Merrill Lynch:
Structural data center growth story playing out as expected
Mobile chief Mike Bell (ex Apple) discussed Intel Corporation’s progress in Android & Win8 based tablets. Intel Corporation has also launched five Android smartphones with a range of OEMs and carriers. BAML analysts played with Windows 8 tablets that are designed with 10+ hrs battery life, and seamlessly support both the traditional (desktop) and new Microsoft Corporation (NASDAQ:MSFT) Win8 interface – which ARM-based (Windows RT) tablets cannot do. They believe Intel is going after both the very high-end mkt, as well as the mid-range segment where it can leverage its Infineon baseband assets, emerging market presence (from the PC side), system design and software resources. PC slowdown on macro & pause ahead of Win8, inventory
Michael Zimmerman’s Prentice Capital is having a strong year
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Intel Corporation (NASDAQ:INTC) reiterated the reasons behind 3Q miss, incl. lower demand in China and enterprise, in addition to excess channel inventory that damped new Win8 PC builds. Per Intel Corporation (NASDAQ:INTC), tablet impact is mostly in dev mkts, while emerging mkts suffered from lower GDP revisions and/or FX fluctuations.
BAML believes that if macro remains soft there could be further near-term pressure on fab utilization, with downside risks to their Q3/Q4 GM forecast of 62.0%/59.0%.
Summary from Oppenheimer:
There were no major financial/strategic updates at the international developer forum following last week’s negative preannouncement. In retrospect, Intel Corporation (NASDAQ:INTC) appears to have misjudged 2Q consumption. PC TAM was below expectations leading to excess inventory across the channel. 3Q PC TAM has continued this bearish trend. Mgmt believes OEM/ODMs are depleting inventory ahead of Win8 launch to avoid overbuild as consumers delay PC purchases. Intel Corporation has not seen a shift to lower priced core/Atom products, but does expect to help drive lower priced Ultrabooks for holiday season. Data center remains healthy with notable strength in cloud data center and high-performance computing. Fourth generation core processors, 22nm Haswell, remain on track for 2013 launch with a clear focus on power and user interface as mgmt recognizes next-generation compute is all about mobility. Oppenheimer analysts believe the raft of new Microsoft Corporation (NASDAQ:MSFT) Windows 8 products runs the risk of confusing consumers, however, and based on today’s demos, the Win8 touch interface remains a work-in-progress.
Intel’s international developer forum (IDF) event is proving thus far to be a non-event. CEO Otellini is absent. Intel did not announce any additional handset customers. And new Ultrabook features such as voice search (Nuance) and NFCenabled payments (Mastercard (NYSE:MA)) are modestly incremental.
The company expects 20+ Microsoft Corporation (NASDAQ:MSFT) Windows 8 tablets to use the Clover Trail chipset (Atom). While positive for units, we believe Clover Trail chipsets carry lower ASPs ($45) as compared to Core processors ($100+).
Haswell is on track for the first half of 2013. The processor will reduce power by 50% while providing similar performance as Ivy Bridge. This should limit ARM from moving up into the mainstream notebook segment. Nomura also sees Intel Corporation over time gaining more traction in mobile.
INTC has increased its focus on delivering market ready reference designs to OEMS in touch-based notebooks, tablets and smartphones. We thought the Windows-8 touch-notebooks were intuitive. Jefferies Analysts are incrementally positive due to its increased focus on delivering complete reference designs to OEMs, but remain on the sidelines due to high capex levels, ASPs which appear to be ticking down for the first time in 2 years, and margins.
Some themes for international developer forum (IDF) this year include the expansion of its roadmap in mobility and cloud, ”true interactive experience”
across all devices, and developing wireless technologies for the future.
Some important capabilities Intel hopes to help enable for mobile devices include instant on, touch capability, voice
recognition capability, facial recognition, gesture recognition, full HD displays and convertible form factors (notebooks
converting to tablets etc.). We think that the voice recognition and gesture recognition ideas are particularly interesting
because they use the greater computing capabilities of modern processors to enable new ways of interacting with computers
via ”natural interactions.” Dell (NASDAQ:DELL) plans to offer beta versions of the Nuance Dragon voice recognition systems on its XPS13
Ultrabook in the December 2012 quarter.
Intel’s next 4th generation Haswell chip to be introduced in 2013 offers HD graphics support, new instructions for faster
encryption and performance and lower power options (down to 10W). Intel noted that Haswell offers low standby power
consumption that is 1/20th of the 2011 core i5 Sandy Bridge chip. These features allows for all day use and more than 10 days
of connected standby.
More than 140 Ultrabooks using Intel Corporation chips are in development currently of which more than 70 use Intel’s Ivy Bridge
chips (3rd generation).
(Disclosure: No position in any securities mentioned)