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Intel (INTC)

Q1 2012 Earnings Call

April 17, 2012 5:00 pm ET


Mark Henninger -

Paul S. Otellini - Chief Executive Officer, President, Director and Member of Executive Committee

Stacy J. Smith - Chief Financial Officer, Principal Accounting Officer and Senior Vice President


John Pitzer - Crédit Suisse AG, Research Division

Stacy A. Rasgon - Sanford C. Bernstein & Co., LLC., Research Division

Shawn R. Webster - Macquarie Research

Uche X. Orji - UBS Investment Bank, Research Division

David M. Wong - Wells Fargo Securities, LLC, Research Division

JoAnne Feeney - Longbow Research LLC

Vivek Arya - BofA Merrill Lynch, Research Division

Auguste Gus Richard - Piper Jaffray Companies, Research Division

Craig Berger - FBR Capital Markets & Co., Research Division

Glen Yeung - Citigroup Inc, Research Division

Ross Seymore - Deutsche Bank AG, Research Division

Christopher B. Danely - JP Morgan Chase & Co, Research Division

James Covello - Goldman Sachs Group Inc., Research Division

Christopher J. Muse - Barclays Capital, Research Division



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Good day, ladies and gentlemen. Welcome to the Quarter 1 2012 Intel Corporation Earnings Conference Call. My name is Misty, and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Mark Henninger, Director of Investor Relations. Please proceed, sir.

Mark Henninger

Thank you, Misty, and welcome, everyone, to Intel's First Quarter 2012 Earnings Conference Call. By now, you should have received a copy of our earnings release and the CFO commentary that goes along with that. If you've not received both documents, they're currently available on our investor website, I'm joined today by Paul Otellini, our President and CEO; and Stacy Smith, our Chief Financial Officer. In a moment, we'll hear brief remarks from both of them, followed by Q&A. A brief reminder that we'll be hosting our Annual Investor Day at our headquarters in Santa Clara on Thursday, May 10, and we look forward to seeing many of you there.

Before we begin, let me remind everyone that today's discussion contains forward-looking statements based on the environment as we currently see it and, as such, does include risks and uncertainties. Please refer to our press release for more information on the specific risk factors that could cause actual results to differ materially. Also, if during this call we use any non-GAAP financial measures or references, we'll post the appropriate GAAP financial reconciliation to our website,

So with that, let me hand it over to Paul.

Paul S. Otellini

Thanks, Mark, and good afternoon, everyone. The first quarter played out much as we expected, with ongoing strong demand in emerging markets and in the enterprise being offset by continuing softness in the mature market consumer segments. PC consumption in the BRIC countries experienced solid double-digit growth over the first quarter of the year -- of last year. In addition, we see continued momentum in IP Data Center solutions, from servers to networking to storage, across both mature and emerging markets.

Our commitment to long-term research and development is paying off. We are beginning a year of major product and technology transitions that will have a very positive impact on our company and the industry. I'd like to highlight a few examples. We are ramping our 22-nanometer manufacturing process into high volume. This revolutionary technology uses our third-generation, high-k metal gate and the industry's first 3D Tri-Gate Transistors.

The move to Tri-Gate Transistors delivers roughly twice the improvement in transistor performance over conventional planar scaling when applied to low-power applications like smartphones and Ultrabooks. We combine our process technology, manufacturing and design to produce a highly leveraged business model that is becoming increasingly rare in our industry. That model allows us to do things others can't, like advancing our Atom roadmap at twice the rate of Moore's Law through 2014.

We're doing this at a time when the rest of the industry is struggling to ramp older technologies that lag our prior-generation, 32-nanometer process. Our research on 3D transistors began over 10 years ago, and advancements like this don't come easily. In fact, they're getting harder and harder to achieve, and our lead over the rest of the industry continues to grow, giving us product advantages in power, performance and cost.

Ultrabooks are reinventing computing with new form factors, high performance, better battery life, advanced security and other exciting new features. With more than 21 designs already shipping and more than 100 designs in the pipeline for 2012, we're very pleased with our progress. And yet, this is just the beginning. Earlier this month, we launched our largest advertising campaign in a decade. And over the next few months, we expect Ultrabooks to reach mainstream price points. By the holiday season, we expect the touch interfaces and innovative new hybrid designs will combine the convenience of a tablet with the performance and productivity of a notebook for truly no-compromise devices and experiences.

Global trends in data centers also continue to look favorable. We expect that by 2015, IP traffic will triple and data storage needs will grow by about 50%. This isn't just a mature market phenomenon. Data centers in China have grown at 8x the worldwide average over the last 5 years, making it the second-largest server market in the world.

The Xeon E5 processor, code-named Romley, was engineered with exactly these trends in mind, improving performance up to 80% and performance per watt more than 50% over the prior generation. One month after launch, Romley has shipped nearly twice the volume of Nehalem at the same point in its ramp.

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