Intel Corporation (INTC) Q4 2010 Earnings Call Transcript January 13, 2011 5:30 pm ET Executives Kevin Sellers – VP, Finance and Director, IR Paul Otellini – President and CEO Stacy Smith – SVP and CFO Analysts Alex Gauna – JMP Securities Craig Ellis – Caris & Company Shawn Webster – Macquarie Mark Lipacis – Morgan Stanley Kevin Cassidy – Stifel Nicolaus Patrick Wang – Wedbush Securities John Pitzer – Credit Suisse Doug Freedman – Gleacher & Company Stacy Rasgon – Sanford Bernstein Daniel Berenbaum – Auriga Brendan Furlong – Miller Tabak Romit Shah – Nomura Securities Presentation Operator
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By way of announcement, Intel will be hosting our annual investor day at our headquarters here in Santa Clara, California, on Tuesday, May 17, 2011. We look forward to seeing many of you here.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 will post the appropriate GAAP financial reconciliations to our website intc.com. So with that, let me now hand it over to Paul. Paul Otellini Thanks, Kevin. Our fourth quarter results represent the third consecutive record quarter for the Company and bring to a strong close the best year in Intel's history. Revenue was up 24% for the year, and we crossed over the $40 billion mark for the first time ever. We exceeded previous records for gross margin, operating income, and earnings per share as well. The PC market grew approximately 17% worldwide in 2010. Not only is the market expanding, but our customers and end users are embracing our performance leadership and purchasing a richer mix of our products, which led to a rise in our ASP in 2010. One of the notable standout performers in the fourth quarter was our Data Center Group. The world of PC, plus new emerging computing devices is increasing the demand for servers of all types. Our Data Center Group had yet another terrific quarter, with revenue up 15% sequentially and annual revenue up, a very strong 35%. So, what is driving this growth in servers and will it continue? Let me share with you some data that can help put the server market in perspective. In 2010, total traffic crossing the internet was roughly 245 exabytes. This is greater than all the previous years combined. Over the next five years a billion more people will join the global online community, with 15 billion new connected devices including PCs, smartphones, tablets, embedded devices and smart TVs.
We estimate this will increase the data footprint across the Internet to over 1,000 exabytes, more people, more devices, more usages. This dynamic will require high-performing servers from Intel for years to come. It is not just servers.Intel continues to grow its presence in the Data Center with processors for storage systems and networking infrastructure, with plans to refresh the entire Xeon server product line in the first half of 2011. Intel is very well positioned to benefit from the growth of the Data Center and the build out of cloud computing. Next, I want to comment on our Atom business. The industry shipped around 37 million netbook units for the year, which represents a 20% growth rate. In 2011, Intel plans to bring some unique innovations to netbooks to keep the category growing, including increased feature sets in products for mature markets, and lower price points in emerging markets that will attract first-time buyers. But Atom is much more than netbooks. We exit 2010, with excellent momentum in our embedded business, with over 4,900 total design engagements and over 1,700 design wins for Embedded Atom devices. It's notable that nearly one half of all the Atom embedded design win activity is coming from China. I mentioned this momentum to highlight that the main drivers of our success with Atom in the embedded business segment are very applicable to the smartphone, tablet and consumer electronic market segments. Software comparability, performance, power and architectural consistency really matter to our customers, and the success we're having with Atom in the embedded segments is an excellent proof point of our value proposition. Many of the wins in this space are architectural conversions against ARM and MIPS. In 2011, you will also see Atom in a wider ray of tablets running three different operating systems, Windows, Android, and MeeGo. Read the rest of this transcript for free on seekingalpha.com