Details
Some key details included:
- Revenue from Atom CPUs and chipsets was down 27 percent quarter on quarter to $219 (3 percent of total revenue)
- Gross margin dropped to 45.6 percent from 53.1 percent the previous quarter. This was mainly due to higher factory underutilisation charges and startup costs
- Inventories were reduced by approximately $700 million
- Restructuring and asset impairment charges were $74 million, lower than the expectation of $160 million
- The net loss from equity investments and interest and other was $18 million, lower than the expectation of a $130-million loss, primarily due to a strengthening market for certain debt instruments at the end of the first quarter
- The effective tax rate was 1 percent, lower than the expectation of approximately 27 percent, driven primarily by settlement of various federal and state tax matters related to prior years and a higher percentage of profits in lower tax jurisdictions
From this it seems that the EPS of 11 cents, which was much higher than the expected 3 cents, was due as much to a broader macroeconomic improvement and clever use of the tax system as anything else. The absence of the write-off of Intel's Clearwire investment will have exaggerated the sequential improvement too.
It looks like inventories are being run down nicely, which is good news, but demand for Atom systems was surprisingly low. Perhaps that's why Otellini reportedly sought to bring attention to its CULV processors, designed to take on AMD's Yukon platform in the thin and light notebook sector, in the subsequent conference call.
The fall in revenue and lack of outlook (Intel did say that for internal purposes it was planning for revenue to be roughly the same in Q2) seems to have more than offset the above expectation profits as Intel's shares were down two percent in after hours trading at time of writing.
The flat outlook implies that, if we have hit the bottom of the PC market, we shouldn't expect a sharp increase in demand. Instead it looks more likely that any recovery will be very gradual.
