Intel Slugs It Out: Fool by Numbers
By Anders Bylund
April 18, 2007
Recommended (11)
Problems
Problems worthy
of attack
prove their worth
by hitting back.
-- Piet Hein
We're in the middle of National Poetry Month, and this pithy grook should ring true to microprocessor investors everywhere. On April 17, processor pontificate Intel (Nasdaq: INTC) helped kick-start the new earnings season by reporting first-quarter earnings for the period ended March 31.
- Increasing profits in the face of lower revenues and slimmer gross margins is a neat trick, accomplished by cutting deep in the operational fat. Intel has reduced its workforce by 11,500 heads, or 11.1% of the Q1 2006 staff.
- Margins, of course, are suffering from the long-running price war with smaller rival AMD (NYSE: AMD). Those lower selling prices also hurt revenues and explain the year-over-year drop in net sales.
- Despite the pricing pressures, Intel's share buyback program is still chugging along, albeit at a reduced pace compared to last year. The bottom line is that Intel can afford to drag this battle out for about as long as its shareholders will stand for it and for the lost potential revenues it represents.
(Figures in millions, except per-share data)
Income Statement Highlights
|
Q1 2007
|
Q1 2006
|
Change
|
|
Sales
|
$8,852
|
$8,940
|
(1.0%)
|
|
Net Profit
|
$1,610
|
$1,357
|
18.6%
|
|
EPS
|
$0.27
|
$0.23
|
17.4%
|
|
Diluted Shares
|
5874
|
5954
|
(1.3%)
|
Get back to basics with the income statement.
Margin Checkup
|
Q1 2007
|
Q1 2006
|
Change*
|
|
Gross Margin
|
50.1%
|
56.3%
|
(6.2)
|
|
Operating Margin
|
18.9%
|
19.2%
|
(0.3)
|
|
Net Margin
|
18.2%
|
15.2%
|
3.0
|
*Expressed in percentage points.
Margins are the earnings engine.
Balance Sheet Highlights
|
Assets
|
Q1 2007
|
Q1 2006
|
Change
|
|
Cash + ST Invest.
|
$7,689
|
$7,854
|
(2.1%)
|
|
Accounts Rec.
|
$2,780
|
$3,912
|
(28.9%)
|
|
Inventory
|
$4,366
|
$3,567
|
22.4%
|
|
Liabilities
|
Q1 2007
|
Q1 2006
|
Change
|
|
Accounts Payable
|
$5,876
|
$7,096
|
(17.2%)
|
|
Long-Term Debt
|
$1,848
|
$2,040
|
(9.4%)
|
The balance sheet reflects the company's health.
Cash Flow Highlights
|
Q1 2007
|
Q1 2006
|
Change
|
|
Capital Expenditures
|
$1,361
|
$1,758
|
(22.6%)
|
|
Owner Earnings
|
$1,575
|
$813
|
93.7%
|
Free cash flow is a Fool's best friend.
Related Foolishness:
Intel is a Motley Fool Inside Value recommendation. AMD is left out in the cold by all of our newsletter analyst teams. Perhaps you'd like to know why? Sign up for a free 30-day trial to any of our market-beating services today.
Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.
At the time of publication, Anders Bylund was a stoic AMD shareholder but had no other position in any company mentioned. Fool rules are here.
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