Desultory figures from Intel as Otellini makes his last call After 39 years at Chipzilla and over 80 earnings calls Paul Otellini has just finished his final one before stepping down in May. He didn't so much leave with a bang as a whimper. The company booked $12.6bn in revenue for Q1 2013, down nearly a billion from the last quarter, and profits dropped 25 per cent to $2bn, over half …
The company has managed to save over a billion dollars in capital expenditure by getting rid of older manufacturing equipment in preparation for the shift to 14nm production, Smith said. Intel is also using the extra fab space to ensure it has a chip to sell in every market.
* How does getting rid of older kit reduce capital expenditure except through accounting wizardry
* What kit is being used to make and sell those cheap chips "in every market" if the old kit has been disposed of?
Sounds frighteningly like desperate measures being employed to keep the expensive but underused new kit in production. I suppose we can expect big write downs over coming quarters if business does not pick up significantly.
Nevertheless, USD 12 billion profit a quarter is still fucking impressive.
I would imagine that they mean they are selling older equipment that they don't need but is still extremely valuable in order to offset the cost of buying newer 14nm equipment. As for a finger in every pie, one would have to assume that they're not totally selling up their older lines?
* How does getting rid of older kit reduce capital expenditure except through accounting wizardry
- Getting rid of old kit means reduced maintenance hence reduced expenditure. Fabs are expensive to maintain.
* What kit is being used to make and sell those cheap chips "in every market" if the old kit has been disposed of?
- Every die shrink needs new fabrication equipment. By now moving to a smaller die again, the fabs from a few generations past can be disposed of. Ties back into your first question.
Getting rid of old kit means reduced maintenance hence reduced expenditure.
Maintenance isn't capital expenditure.
Every die shrink needs new fabrication equipment. By now moving to a smaller die again, the fabs from a few generations past can be disposed of.
So the older equipment is being sacrificed to boost use of while lowering margins of the newer stuff? That would explain the figures somewhat: more Atoms, fewer Xeons, i7s, etc. Shortening the lifespan of fabs which get increasingly expensive to make does not sound like good sense to me. Expect more news on Intel's work as a contract manufacturer to increase use of that very expensive production capacity with Global Foundries II no longer unthinkable.
My guess:
I'm sure there are some accounting tricks as well, but I think the economics of CPU manufacturing now provides less facilities, slower transitions to smaller process nodes and such a high entry cost that Intel can now use equipment while it delivers high profit chips and sell it while there is still significant value in the equipment.
Historically, Intel used to build new fabs to support new processes. If you have a look at there manufacturing sites, they still have 200mm 130nm production facilities. In addition, the older processes were used for things such as flash memory, support chip sets and peripherals which now either require the up-to-date processes for performance reasons or have been integrated into Intel's CPU's.
The combination of the cost of 14/22/28/32/40 nm process nodes combined with the demand for these facilities for manufacturing competing CPU's/SoC's based on 32/30/45nm CPU designs, it makes more sense to sell the older equipment and re-use space than it does to build new facilities from scratch.
"In a prepared statement the company said that the search for his successor is still going on and the board "hoped" to have an announcement on the subject..."
Intel seriously needs a "Louis V. Gerstner, Jr" at this time. Otherwise it is going to be the next HP/Dell/Microsoft; alive but on life-support system.
You forgot .. "and the world needs a new Jesus Christ!"
I have do ask, do you honestly believe that garb you have just written? If so, snort a line of this new wonder drug, its called reality. Every company you have just mentioned there is in the Fortune 500. They may not be ahead of the game in every respect anymore and dictate every new technology, but all of are still AMAZINGLY profitable, you probably have a device or software made by at least 1 of them within 20 feet of you.
And before anybody says they are dying and their profits are drying up - BS. They are simply trying to adapt to global changes, adaption takes time.
@AC 12:01 GMT
" Every company you have just mentioned there is in the Fortune 500. They may not be ahead of the game in every respect anymore and dictate every new technology, but all of are still AMAZINGLY profitable"
And that is the reason one played music-chair with its CEOs, the other is trying to be a private company and, well, we know what is the state of Ballmer and his tablets, phones and the Win8 situation! Their "AMAZINGLY" profitability would be huge for people who are at the bottom of the food-chain but it is not amazing for the people who actually sit at the top of that chain and who have access to data that shows how the company will do in next 5-10 years. Paul Otellini's departure is not all that sudden. Intel did try to recruit someone from HP as a CEO about 2 years ago. (http://online.wsj.com/article/SB10001424052748703292304576212752076672480.html)
@AC 12:01 GMT
"They are simply trying to adapt to global changes, adaption takes time."
And that requires fresh and different blood at the top-level. And hence I said that Intel seriously requires a "Louis V. Gerstner, Jr" (I hope you have read the book). This even the Intel management might be aware of otherwise they would not have tried to hire someone from outside 2 years ago and probably are still trying to do (http://www.forbes.com/sites/ericsavitz/2013/02/13/intel-reportedly-hires-spencer-stuart-next-ceo-from-outside/)
Just read the book mentioned in the title and you will see the parallels. When IBM hired Louis Gerstner the company was not on death-bed, infact it was still profitable but its profits were certainly declining (which is akin to putting on life-support for such huge companies). This is what is happening at Intel right now and they will require similar feat managed by IBM 20 years ago.
I think Intel will be looking for someone like Sushil Jha (ex Motorola Mobility CEO) or Jon Rubinstein (ex Palm CEO). Just a thought.
This post has been deleted by its author
* How does getting rid of older kit reduce capital expenditure except through accounting wizardry
Shutting down an N-1 production line is the shutdown of a *program*, not merely de-commissioning as-deployed assets. That program had a budget which programmed replacement activity, not simply maintenance, and the early termination of the program early returned capital budget allocations as part of the savings. No 'wizardry', just very ordinary consequences of similarly ordinary operations changes. Put the pitchforks down, lads.
Oh, bad choice of quote there. The Spectrum was Z80 based wasn't it? the Z80 was Intel-inspired (in this case, by the 8080) . Someone else improved significantly upon the 8080/8085 and the competitor ended up taking over much of the market from the original Intel product. Not for the last time either.
Longer quote: "Never in the history of the company has our ability to participate across the spectrum of computing been greater,"
What utter tosh.
In recent years, Intel are the x86 company.
x86 is only relevant in kit that needs to run Windows. When there's no need for Windows, there's no need for x86. Look around you for evidence.
Intel have spent fortunes in recent decades trying to get somewhere, anywhere, outside the x86 market. Everything from iapx432 to I2O to WiMax to IA64 and much much more (motherboard graphics?). All vanished without trace (or are on life support in the case of IA64).
They even sold their ARM-focused business unit.
In recent years, Intel have also bought Wind River (who?) and Virtutech (who?) and McAfee (why?). Actually I do know who WRS and Virtutech are, and why they matter, but how many other people know or care about VxWorks or SIMICS, and what have Intel done to capitalise from their purchases?
Intel have got nowhere outside x86, and unless a miracle occurs, history says they never will.
As goes the x86 market, so goes Intel.
For the foreseeable future, it only goes down.
The Register 
Biting the hand that feeds IT
Copyright. All rights reserved © 1998–2024
