Intel Earnings Release

7/21 - Intel did not have alot of good news to report at its latest earnings call, Wednesday. But then, it wasn't expected to.

Possibly the most telling figure was Intel's operating income, which peaked recently around the 4th quarter of '05, at over 3 billion, and has since then fallen to less than a billion.

Intel's former microarchitecture, called Netburst, was predicated on its ability to ramp up to very high clock speeds. The chips, however, hit a thermal wall, with the result that they could not clock, under normal conditions, at over 4GHz. So Intel had to scramble for a new microarchitecture to replace Netburst. This resulted in the Core microarchitecture, which is debuting now.

New microarchitectures take time, however. In the meantime, there was only so much Netburst could do to hold the wolves at bay. The financial statistics for this last phase of Netburst seem to have peaked in the 4th quarter of '05. Things have been in precipitate decline ever since.

Now, the new microarchitecture is here, and Intel has some catching up to do.

There were a couple of bright spots in the last quarter. Intel had experienced problems with its chipsets thoughout 2005. The company appears to have put its chipset problems behind it.

Intel currently combines 65nm process technology with 300mm wafers of silicon. However, Intel also manufactures 90nm (not 65nm) chips on 300mm wafers. These 90nm chips are chipsets, rather than microprocessors.

Intel's chipset sales were up, and if chipsets are any indication, Intel should do better next quarter.

Another bright spot was Intel's Mobility Group, which makes notebook chips and chipsets.

The problem is that Intel's Digital Enterprise Group is about twice the size of the Mobility Group, and it did not do well at all. The reason, more than anything else, probably has to do with AMD's Opteron server processor. Intel's Netburst based server processors are front-side bus (FSB) bottlenecked, which hampers their performance compared to Opterons.

Intel has since then addressed the volume server market with the introduction of the Xeon 5100 family of chips (Woodcrest), which is based on Intel's new Core microarchitecture.

Intel has yet to address the higher end Xeon multi-processor (MP) server market. A new chip is expected next month (Tulsa, or Xeon 7100 series). However, it is not based on the Core microarchitecture. How it will stack up against Opteron is anyone's guess.

When times are bad, it's time to trim the fat. Intel sold its application and communication processor business to Marvell last quarter. In addition, lots of people at Intel are about to lose their jobs, unfortunately. The sale and the layoffs are just the beginning. An efficiency review at Intel is only about half done.

Intel's recovery shall be slow. They have solid new products. They also have alot of old inventory that they need to work through.

Sources: Earnings Release, Earnings call Webcast, Financial slides

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