On Oct. 13, Intel (NASDAQ:INTC) held a conference call to discuss its third-quarter earnings results and fourth-quarter guidance. When all is said and done, the company delivered slightly better-than-expected results in the third quarter and guided to about what Wall Street analysts had expected it to.
Though there is certainly value in just looking at the numbers, it's always worth listening to what management has to say on those conference calls. More often than not, these calls contain valuable insights that can help investors and potential investors alike better understand how the company is doing and what its longer-term prospects look like.
To that end, here are three key points that Intel executives made during the most recent call.
Intel remains on track to shrink its mobile losses
Last year, Intel's mobile and communications group (which has since been folded into its PC client group to create the client computing group) suffered an operating loss of about $4.2 billion. This loss was partially driven by the fact that Intel provided very aggressive contra-revenue subsidies in order to offset platform bill-of-materials cost issues associated with its tablet platforms.
At the company's investor meeting last year, Intel management said that it planned to reduce this loss by around $800 million during 2015.
According to Krzanich, Intel is indeed on track to reduce those losses by $800 million for the year. In fact, he says that the reduction has been around 75% realized so far, with the remaining savings to occur in the fourth quarter.
Although the loss is still quite large, it is good to see that Intel has delivered on its forecast here.
Intel's growth segments still growing but below expectations
In a bid to offset declines in its PC processor business, Intel has routinely cited three growth businesses that it hopes will grow at a pace quick enough to offset said PC declines: data center group, Internet of Things group, and non-volatile memory group.
According to Intel, these businesses are still on track to grow at double-digit percentage rates. However, thanks to "weaker than expected macroeconomic growth," they will each grow at slower rates than the company had originally told investors to expect at its investor meeting last year.
Perhaps most disappointingly, Intel lowered its full-year revenue forecast for its highly lucrative data center group from "more than 15%" to "low double digits."
Since Krzanich expressed his optimism for this segment over the long haul, keeping in place the company's prediction of a 15% compounded annual growth rate through 2018, it will be very interesting to see what kind of growth Intel expects to see here next year -- something that will almost certainly be disclosed at its investor meeting next month.
What's going on with Intel's 14-nanometer manufacturing ramp?
In Intel's CFO commentary, the company said that during the third quarter, the company saw higher 14-nanometer platform unit costs than it had previously expected. During the call, CFO Stacy Smith elaborated further on what drove those higher than expected costs.
According to Smith, the additional bad news was driven by the fact that Intel began ramping 14-nanometer production at its Fab 24 manufacturing facility located in Lexlip, Ireland. "The first wafers out of that factory were pretty expensive, and so we saw a mixing up of costs in [the third quarter] a little bit more than we thought."
Interestingly enough, Smith also gave some insight into the manufacturing costs associated with these 14-nanometer products. He did say that 14-nanometer manufacturing costs are coming down "pretty rapidly" but that the cost to manufacture these 14-nanometer products is still higher than the costs associated with building prior-generation 22-nanometer chips.
This seems to confirm the fact that Intel is still facing yield challenges with its 14-nanometer technology (which you can read more about here).