Intel Corp is planning $9 billion in 2011 capital spending as it comes off a record year, capped off by a boast-worthy Q4

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Post the Consumer Electronics Show (CES) and the company's Sandy Bridge announcement, Intel Thursday reported full-year 2010 revenue of $43.6 billion, up 24% on 2009 revenue. Operating income of $15.9 billion was up 179% year over year. Net income of $11.7 billion was up 167% year over year. And 2010 EPS (earnings per share) of $2.05 was up 166%. Intel pointed out that all of the noted full-year financials showed record results. Capex for the full year was $5.2 billion.

In Q4, Intel posted revenue of $11.5 billion, up 3% on Q3 and up 8% on Q4 2009. Q4 operating income of $4.3 billion was up 5% sequentially and up 74% year over year. Net income of $3.4 billion was up 15% sequentially and 48% year over year. EPS of 59 cents was up 13% sequentially and 48% year over year. Q4 revenue, operating income, net income, and EPS were also all records.

"2010 was the best year in Intel's history. We believe that 2011 will be even better," said Paul Otellini, Intel president and CEO.

In 2010, Intel's PC client group revenue was up 21%, data center group revenue was up 35%, other Intel Architecture group revenue was up 27%, and Atom microprocessor and chipset revenue of $1.6 billion was up 8%.

For Q4, Intel's PC client group revenue was flat, data center group revenue was up 15%, other Intel Architecture group revenue was flat, and Intel Atom microprocessor and chipset revenue of $391 million was flat, all sequentially. Flat growth in Q4 is being considered strong by some industry watchers who note continued consumer weakness.
On the company's financial call with analysts Otellini described the data center group a "notable standout performer" in Q4, pointing to new computing devices as demand drivers for servers of all types. He also pointed out Atom growth, claiming that many of Intel's wins are architectural conversions against ARM and MIPS. 

"In 2011, you will also see Atom in a wide array of tablets running three different operating systems: Windows, Android, and MeeGo," Otellini said. "Several of these tablets have been announced, with many more in the pipeline for this year. In 2011, you will also see Atom processors in smartphones, operating at competitive power levels with performance that will lead the industry."

Intel is estimating a 10% revenue gain for 2011 starting with flat revenue growth in Q1, better than the traditional seasonal declines. The year's growth will be supported by the planned $9 billion capex investment, R&D spending of $7.3 billion, and moves top 22 nm, executives said.

"As we approach our 22-nanometer transition, we are increasing our investments in manufacturing to capture what we believe is a significant opportunity for growth," Otellini said. "The market opportunities for our 22-nanometer products are outstanding."

To meet those opportunities, he said Intel is growing from a model of three high-volume leading-edge manufacturing fabs to four.

"Our 22-nm process will be the foundation for growing PC and server segments, as well as a broad family of Atom-based SOCs, serving smartphones, tablets, smart TVs, and other embedded devices."

Intel CFO Stacy Smith said on the call that the bulk of the $9 billion investment will go toward equipment.
"As we move into 2011, we are planning for an even better year [than 2010]," he said. "As we start the year, the product line in our Core business is outstanding as Sandy Bridge ramps into the marketplace. ... Businesses growth is a primary driver of what's taking us into a four factory model. Behind that, we're being very aggressive in moving transistors to that leading-edge process technology. We do that because we get paid for that process technology leadership. We get paid in terms of having lower costs. What was really striking in 2010, as we started the transition of graphics processors to that leading edge, we got paid in terms of the rising ASP [average selling prices] because of the performance of the products. There is very high ROI [return on investment] for us that we are uniquely situated to take advantage of because of our process technology leadership."

Intel's positive report was shadowed by outside doubts. Analysts were quick to point out a changing computing market that includes tablets and an increased saturation of smartphones, and note Intel's track record of poor performance in penetrating new markets outside of traditional PCs. Also at question to Intel's growth is Microsoft's recent announcement at CES that the Windows operating system will run both x86 and ARM CPU architectures. Still, some analysts believe Intel's estimate for a 2011 10% revenue increase may be on the conservative side. 

"Though uncertainty over a changing PC landscape may continue to be an overhang, we believe Q4 results and 2011 guidance are a positive first step," Romit Shah, a semiconductor market analyst at Nomura Securities, said in a research note this morning. "For the full year 2011, management uncharacteristically provided a revenue growth forecast of ‘approximately 10%,' meaningfully above consensus estimate of 4%. Intel expects PC unit growth, excluding tablets, to be in the low to mid-teens, suggesting ASP will decline 2 to 5%. We think that the ASP assumption is conservative for a few reasons: (1) continued strength in data center business should lift ASP, (2) Sandy Bridge should improve like-for-like pricing, and (3) decline in netbooks as a percent of total PC shipments. As such, our revised revenue growth estimate of 12% is higher than guidance, and we assume microprocessor ASP to be flat year-over-year."

FBR Capital Markets also came out with an overall positive report on Intel this morning. 

"While the firm's financial results and guidance have exceeded expectations yet again, we can still hear the chorus of naysayers sing that Intel's lack of an ARM-based CPU offering, its poor traction in smartphones, and its continuing reliance on old world IA [Intel Architecture] CPUs means that Intel's current financial performance is unsustainable. We somewhat disagree and think that Intel's business franchise will sustain for years to come (possibly losing out more to ARM-based CPUs along the way)," Craig Berger, an FRB semiconductor market analyst, said in a report this morning. However, he noted that Intel will have a "tough time breaking out given investor doubts with ‘tablet mania' ongoing and with Nvidia and Qualcomm winning the lion's share of the tablet processor sockets."

By: DocMemory
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