Intel Beats...or does it
http://biz.yahoo.com/ap/080416/earns_intel.html
It's an old game: guide down and beat. Except they really didn't beat:
* EPS expectations 90 days ago: $0.32
* EPS expectations 30 days ago: $0.29
* EPS expectations 1 week ago: $0.25
* Actual EPS: $0.25
In other words, expectations were dropped 20% in the last week.
The market and Wall Street will treat Intel's results as a big positive - a sign that all is well.
* Sales: Up 9% year over year.
* Earnings: Down 12% year over year.
* Guidance that margins will improve
Why are sales strong?
1. Flat Sales Prices. With AMD falling far behind, INTC does not face pricing pressures
2. Weak dollar. Over 80% 20% of its business comes from outside the US. Re-calculating overseas sales into dollars is a guaranteed increase
3. More market share: Apple sales and AMD demise. A little market share growth helped.
4. More unit sales in the server market. Thi sone I need to understand better.
So why are earnings down 12% to $1.4B? With a 9% sales upside and strong margins and pricing, that's a 21% droop.
1. Write off. They dumped some business for $329M
2. Weak dollar and global mix. With 80% of business outside the US, dollar denominated earnings grew. I estimate an upside of $155M (10% dollar strength on 80% of pre-write off earnings)
3. Layoffs. Intel fired 10,500 workers over the last year. At $75,000 per person, that reduces costs $787M per year or ~$200M per quarter.
4. Reduced shares. There are 122M fewer shares. That added another penny to EPS.
5. Higher tax bracket. They pay 2.5% more or $30M
By my calculations, Intel's one-time loss was balanced by the other gains. So no earnings reduction should have happened. This makes no sense unless last year something juiced up the earnings and I don't see any record of that.
I must be missing something
In any case, they are happy with the lowered guidance. The tighter margins, imho, reflect layoffs (another 1,400 this quarter) and dollar exchange rates. This is temporary. By next year, same quarter, the dollar benefits will have worn off.
It's an old game: guide down and beat. Except they really didn't beat:
* EPS expectations 90 days ago: $0.32
* EPS expectations 30 days ago: $0.29
* EPS expectations 1 week ago: $0.25
* Actual EPS: $0.25
In other words, expectations were dropped 20% in the last week.
The market and Wall Street will treat Intel's results as a big positive - a sign that all is well.
* Sales: Up 9% year over year.
* Earnings: Down 12% year over year.
* Guidance that margins will improve
Why are sales strong?
1. Flat Sales Prices. With AMD falling far behind, INTC does not face pricing pressures
2. Weak dollar. Over 80% 20% of its business comes from outside the US. Re-calculating overseas sales into dollars is a guaranteed increase
3. More market share: Apple sales and AMD demise. A little market share growth helped.
4. More unit sales in the server market. Thi sone I need to understand better.
So why are earnings down 12% to $1.4B? With a 9% sales upside and strong margins and pricing, that's a 21% droop.
1. Write off. They dumped some business for $329M
2. Weak dollar and global mix. With 80% of business outside the US, dollar denominated earnings grew. I estimate an upside of $155M (10% dollar strength on 80% of pre-write off earnings)
3. Layoffs. Intel fired 10,500 workers over the last year. At $75,000 per person, that reduces costs $787M per year or ~$200M per quarter.
4. Reduced shares. There are 122M fewer shares. That added another penny to EPS.
5. Higher tax bracket. They pay 2.5% more or $30M
By my calculations, Intel's one-time loss was balanced by the other gains. So no earnings reduction should have happened. This makes no sense unless last year something juiced up the earnings and I don't see any record of that.
I must be missing something
In any case, they are happy with the lowered guidance. The tighter margins, imho, reflect layoffs (another 1,400 this quarter) and dollar exchange rates. This is temporary. By next year, same quarter, the dollar benefits will have worn off.
posted by Andrew at
2:20 AM
3 Comments:
why is media trying to show these results as positive ? Is this some kind of manipulation so that smart money can leave the floor before the bottom is dropped ?
From
WSJ
For the quarter ended March 29, the world's largest chip maker reported net income of $1.44 billion, or 25 cents a share, down from year-earlier earnings of $1.64 billion, or 28 cents a share, but in line with the average analyst estimate. The latest results included 4 cents a share in restructuring and acquisition charges. Prior-year results included a 5-cent tax benefit.
Thanks for sharing that bit about INTC. So lets re-visit th eissue of profitability.
Stripping out the one-time event last year, EPS was $0.23 and this year $0.25
Add back the writedown last quarter and the 2.5% tax rate change and EPS this quarter was $0.31
Now INTC looks like they are cooking: a 33% earnings growth on 9% sales growth.
But strip out $0.05 for the layoffs (cost savings) and ~$0.02 for the weak dollar benefits (currency gains). Core business actually did not improve.
Nevertheless, the power of the layoffs and weak dollar is significant. This does mean that Q1 2009 will be a bad quarter because they won't get these massive benefits, but that's a year away. In the meantime, let these guys shine.
teh mystery was solved
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