Until, as history repeatedly shows, they have an inevitable quiet period & they have the liability of idle amortised plant.
It looks like intel are about to demonstrate why others have rejected in house fabs - their sales revenues & margins are in decline while amd's are booming.
I don't think intel has ever had to eat the cost of idle plants. Neither did AMD before spinning off global foundries. Problem was the sheer cost of even producing a new node.
There has always been enough demand for both companies. AMD has been growing again because they had almost no marketshare 5 years ago, meanwhile both companies sell pretty much every chip they can produce. If intel started expanding fabs to meet demand years ago like they should've been doing they would probably be growing as well, but they got greedy and wanted to keep up the 60%+ margins.
Stock down almost 10 oercent after hours because Wall Street hates investments in r&d, manufacturing, and lower margin businesses. Only the complacent maximize short term profit growth!
This is the big challenge for Gellsinger — will Wall Street let him save Intel? I’d say it’s 50-50
Yes, they've been focused on the next few quarters for the past two decades. That has worked pretty well for them because of the x86 cash cow. They got caught with their complacency showing in the mid 00s (you can see the dip), but they were able to bounce back thanks to their manufacturing and economies of scale advantages. Those advantages are gone. Their main advantages now are (1) still lots of money and (2) chip shortage.
It sure sounds like Gelsinger understands the peril and isn't suffering from the complacency of the past. I hope he can keep Team Complacency at bay and save Intel. Comments like yours are evidence of the challenge.
Intel's profits are not plateauing, nor declining, and this is the trend that has continued for over two decades. That demonstrates that, just maybe, their thinking has indeed been 'long term'.
Or possibly, those profits are entirely imaginary and internet pundits know better than Intel's own staff.
Intel's own staff know and knew better than Team Complacency that Intel was (and is) in trouble.
Gelsinger seems to have the right idea for turning things around. He's got a shot -- the timing of the chip shortage has worked out very nicely for Intel, Intel is still making plenty of money, the US government seems very supportive, etc.
Wall Street often rewards R&D when the company shows results. Look at Tesla's valuation, and that they spend a greater percent of revenue on R&D than other autos, by far. Intel has a history of large and expensive failures. This isn't necessarily a bad thing as they are a company that takes a lot of risks as part of their culture, but their success rate and follow-through rate can use some improvement.
- Larrabee, one of the dumbest ideas in semiconductor history (x86 cores as a GPU?!), not only cost a fortune, but delayed their next-gen process, according to a co-worker who was on the team.
Hey, Optane could have been a success, if they stuck with it. It was already a technical success, but it didn't reach the scale to become profitable. I find it ironic on Intel's part that they are dumping a great tech, which potentially could have become the replacement for all current NAND flash SSDs, just because it didn't pay off right away. They are selling basically the foundry for making the Optane which now seems at odds with the current push to get *more* foundry work (granted, immediate revenue from clients).
How well is that paying off for GloFlo? They could have been on the leading edge with TSMC right now if they had stuck it out. Right now they benefit from the shortages, but long-term, how much more profitable they could be!
More precisely, Optane could maybe have been a success if they treated it as building out an ecosystem. That means providing support for it in EVERY SoC they ship.
Instead, like every innovation of their's over the past fifteen years, they treated is as something they could charge an arm and a leg for, and get those suckers in Enterprise to pay for it.
And so things played out exactly as expected. Minority feature, barely no-one experimented with it, no innovative use cases (like putting it into laptops, that can then hibernate and recover from hibernation very aggressively -- think the speed of an iPad going to sleep and waking).
Same thing with AVX512 -- keep it limited to the high end, no-one bothers to write code for it, end result is no-one even gives a damn whether or not it's present in Alder Lake. Very different story from the rollouts of everything from MMX up to AVX2, back in the days when Intel understood the value of giving up rents today for the sake of building the ecosystem.
they "rewarded" tesla with a low valuation until it blew up last year, what are you talking about? it was 10 years of constant complaints about their R&D spending and lack of profit.
"Wall Street hates investments in r&d, manufacturing, and lower margin businesses"
What about TSM that's spending 100bn in 3 years? It's a wallstreet darling now. what about those bunch of SaaS names that burns lots of money yet trades at 10x sales??
"will Wall Street let him save Intel? "
Wall Street is not an obstacle to INTC. Gellsinger can still save INTC if the stock price goes to $1. Similarly stock price can go to $150, but Gellsinger still fails to execute and fall further behind
"Stock is down 10%" is a fact. "because Wall Street hates investments in r&d, manufacturing" is your theory.
Wall Street is happy to invest such money in Apple or TSMC (huge R&D investment), Tesla (manufacturing), Amazon (low margin).
Perhaps the problem is not with Wall Street but with Intel? Here's another theory: "because Intel gave the same song and dance about next year it will be awesome, super CPUs, super GPUs, super new process, just you wait" that they have been giving since Broadwell delays. And while fans may still be fooled, professional investors have lost patience with a company whose primary competence right now appears to be slideware about what they will be doing ten years from now".
Until the last few years Apple was consistently undervalued by Wall Street, but Steve Jobs had total immunity to Wall Street pressure because he literally saved the company and had total loyalty from employees and his hand picked board. That's a very unusual situation.
Bezos and Musk are also very unusual -- founders who managed to do whatever they wanted. Often Wall Street didn't like it, but it didn't matter.
As a more established firm, with founders long departed, Intel fell under more traditional Wall Street control. They had a board and CEO focused on quarterly profit. They curtailed investment in fabs, laid off experienced engineers, and famously refused to fab the iPhone SOC. Those moves pumped up the bottom line in the short term, executives got their bonuses. And now here we are.
As a long term "intel investor" I don't have R&D. I love it. But history has proven that R&D can fail, and risk of this failure (ie. billions of invested, almost nothing comes out) has to be priced into the expected value of the stock.
I'll say it again, Intel isn't losing. 6.8B Net...ROFLMAO...Yeah, Wake me when AMD can make that in a year (2? ;)). Is that a record? Must be close, and while AMD is supposedly destroying them...LOL. If AMD wants to make more NET INCOME, stop making console socs for peanuts and wasting dies that could all be SERVER/HEDT etc for thousands each instead of $10-15 profits on each soc (both use about the same amount of silicon roughly, so make the expensive stuff!! FFS!).
ignore thejian, the only time i see him post on here, are in posts like this, and most of them, are anti amd in some way. its quite comic how dumb his posts are.
I am honestly somewhat surprised by the price movement on Intel, seems very short-sighted (though I guess Wall Street only looks a quarter or two ahead). I think Gelsinger has a real shot at saving the company, but indeed if Wall Street keeps dumping the stock, Gelsinger may lose financial motivation to continue leading the company, and will just quit, since his stock option reward is, AFAIK, based in part on stock performance.
The problem with Intel has been that, for the past 20 years, they've had complete loser CEOs (read: non-electrical engineers). I don't know who in their right mind would allow someone to lead a 100K employee, $80B revenue company that doesn't have a foundational understanding of the underlying technology involved. However, like Jensen Huang and Lisa Su, Intel finally has an electrical engineer running the company. Per Wiki, Gelsinger was previously Intel's CTO and designed the 80486 CPU, which evolved into the Pentium CPU, which IMO are the sort of qualifications you'd want in a CEO, not someone that was a CFO or COO. When you have finance or managerial folk running the company, you wind up in scenarios where you're only accomplishment is bribing Dell to not buy competitor chips and getting sued for billions of dollars, or failing to reach 10nm and having no contingency plan for 5+ years.
Gelsinger, on the other hand, is finally making all the right moves. He's dissociated the chip design business from the foundry business, and opened up the foundry business to take orders from other companies. Anyone that thinks that having a foundry is bad business is delusional. TSMC makes double the profit on the same revenue as Intel. And Intel, who indeed has been non-competitive, still managed to earn more profit on their revenue than Nvidia or AMD, who are 4x/8x smaller (and have 6x/3x higher valuations, respectively). I would expect it to be harder to maintain profitably as you grow in size.
The problem that AMD had when it had Global Foundries was that AMD, like Intel up until recently, only used their own fab to produce their designs. As a result, the entire success of the company depended on having the most advanced process, and the moment you fall behind, you end up on a sinking ship. Since Intel, as AMD, are now allowing TSMC to produce their chips, Intel can now have both aspects of their business be successful without depending on their fab having the most bleeding edge process. As we all know from last year, any fab will have an endless supply of orders regardless of node size for the foreseeable future. This uncoupling means their foundry business can take all the time it needs to ensure fabrication at any given new node size will be successful without imposing risks or delays to the roadmap of their chip design business, which ultimately means that with proper investment, there's no reason to think Intel won't be capable of retaking fabrication leadership, or at least be competitive, once their new plants come online. And if/when they end up being competitive enough at a given node, their design business can reap those benefits and produce even better margins.
And I haven't even touched on the fact that they're finally getting into the discrete GPU market, which is clearly a nudge towards data center growth, i.e. Nvidia's play. The fact that their data center business is still growing is more important IMO than the fact that they lost some CCG revenue. Hence, at their current valuation relative to AMD, Nvidia, and even TSMC, would seem like an absolute steal.
A key reason why Intel's stock went down despite their earnings announcement is that those results were largely due to Intel using one-time tax shenanigans to arrive at those numbers. And people who know (and themselves use) these accounting tricks, that was seen for what they are. Hence, Intel's stock went down. We'll see what's what at Intel when Alder Lake comes out; if it works as hoped for, they'll make a lot of real, ongoing profit. If AL has a lot of problems, Intel will struggle for the next years.
Can someone explain how Intel's Net Income is MORE than it's Operating Income? That doesn't make sense, am I missing something? I thought Net Income was the bottom line?
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1TillMidNight - Thursday, October 21, 2021 - link
Intel never stopped making money throughout their "slump". They are more profitable than TSMC because they get all the revenue for the die they sell.msroadkill612 - Friday, October 22, 2021 - link
Until, as history repeatedly shows, they have an inevitable quiet period & they have the liability of idle amortised plant.It looks like intel are about to demonstrate why others have rejected in house fabs - their sales revenues & margins are in decline while amd's are booming.
whatthe123 - Friday, October 22, 2021 - link
I don't think intel has ever had to eat the cost of idle plants. Neither did AMD before spinning off global foundries. Problem was the sheer cost of even producing a new node.There has always been enough demand for both companies. AMD has been growing again because they had almost no marketshare 5 years ago, meanwhile both companies sell pretty much every chip they can produce. If intel started expanding fabs to meet demand years ago like they should've been doing they would probably be growing as well, but they got greedy and wanted to keep up the 60%+ margins.
shabby - Thursday, October 21, 2021 - link
Intel is doomed!Oxford Guy - Sunday, October 24, 2021 - link
Fortunately for Intel, inadequate competition still reigns.Qasar - Monday, October 25, 2021 - link
oh? how so ?Blastdoor - Friday, October 22, 2021 - link
Stock down almost 10 oercent after hours because Wall Street hates investments in r&d, manufacturing, and lower margin businesses. Only the complacent maximize short term profit growth!This is the big challenge for Gellsinger — will Wall Street let him save Intel? I’d say it’s 50-50
sgeocla - Friday, October 22, 2021 - link
> Only the complacent maximize short term profit growth!That would be Intel for most of the last decade.
edzieba - Friday, October 22, 2021 - link
Only if you count 'short term' as the last two decades (see graph above).Blastdoor - Friday, October 22, 2021 - link
So you're on Team Complacency?Yes, they've been focused on the next few quarters for the past two decades. That has worked pretty well for them because of the x86 cash cow. They got caught with their complacency showing in the mid 00s (you can see the dip), but they were able to bounce back thanks to their manufacturing and economies of scale advantages. Those advantages are gone. Their main advantages now are (1) still lots of money and (2) chip shortage.
It sure sounds like Gelsinger understands the peril and isn't suffering from the complacency of the past. I hope he can keep Team Complacency at bay and save Intel. Comments like yours are evidence of the challenge.
edzieba - Saturday, October 23, 2021 - link
Intel's profits are not plateauing, nor declining, and this is the trend that has continued for over two decades. That demonstrates that, just maybe, their thinking has indeed been 'long term'.Or possibly, those profits are entirely imaginary and internet pundits know better than Intel's own staff.
Blastdoor - Saturday, October 23, 2021 - link
Intel's own staff know and knew better than Team Complacency that Intel was (and is) in trouble.Gelsinger seems to have the right idea for turning things around. He's got a shot -- the timing of the chip shortage has worked out very nicely for Intel, Intel is still making plenty of money, the US government seems very supportive, etc.
Sivar - Friday, October 22, 2021 - link
Wall Street often rewards R&D when the company shows results. Look at Tesla's valuation, and that they spend a greater percent of revenue on R&D than other autos, by far.Intel has a history of large and expensive failures. This isn't necessarily a bad thing as they are a company that takes a lot of risks as part of their culture, but their success rate and follow-through rate can use some improvement.
- Larrabee, one of the dumbest ideas in semiconductor history (x86 cores as a GPU?!), not only cost a fortune, but delayed their next-gen process, according to a co-worker who was on the team.
- Itanium
- 10nm process
- Optane (we'll miss you!)
- RealSense
romrunning - Friday, October 22, 2021 - link
Hey, Optane could have been a success, if they stuck with it. It was already a technical success, but it didn't reach the scale to become profitable. I find it ironic on Intel's part that they are dumping a great tech, which potentially could have become the replacement for all current NAND flash SSDs, just because it didn't pay off right away. They are selling basically the foundry for making the Optane which now seems at odds with the current push to get *more* foundry work (granted, immediate revenue from clients).How well is that paying off for GloFlo? They could have been on the leading edge with TSMC right now if they had stuck it out. Right now they benefit from the shortages, but long-term, how much more profitable they could be!
name99 - Friday, October 22, 2021 - link
More precisely, Optane could maybe have been a success if they treated it as building out an ecosystem. That means providing support for it in EVERY SoC they ship.Instead, like every innovation of their's over the past fifteen years, they treated is as something they could charge an arm and a leg for, and get those suckers in Enterprise to pay for it.
And so things played out exactly as expected. Minority feature, barely no-one experimented with it, no innovative use cases (like putting it into laptops, that can then hibernate and recover from hibernation very aggressively -- think the speed of an iPad going to sleep and waking).
Same thing with AVX512 -- keep it limited to the high end, no-one bothers to write code for it, end result is no-one even gives a damn whether or not it's present in Alder Lake. Very different story from the rollouts of everything from MMX up to AVX2, back in the days when Intel understood the value of giving up rents today for the sake of building the ecosystem.
whatthe123 - Friday, October 22, 2021 - link
they "rewarded" tesla with a low valuation until it blew up last year, what are you talking about? it was 10 years of constant complaints about their R&D spending and lack of profit.Oxford Guy - Sunday, October 24, 2021 - link
1. Sell less for more2. Copy someone else's R&D
ammaterasu - Friday, October 22, 2021 - link
"Wall Street hates investments in r&d, manufacturing, and lower margin businesses"What about TSM that's spending 100bn in 3 years? It's a wallstreet darling now. what about those bunch of SaaS names that burns lots of money yet trades at 10x sales??
"will Wall Street let him save Intel? "
Wall Street is not an obstacle to INTC. Gellsinger can still save INTC if the stock price goes to $1. Similarly stock price can go to $150, but Gellsinger still fails to execute and fall further behind
name99 - Friday, October 22, 2021 - link
"Stock is down 10%" is a fact."because Wall Street hates investments in r&d, manufacturing" is your theory.
Wall Street is happy to invest such money in Apple or TSMC (huge R&D investment), Tesla (manufacturing), Amazon (low margin).
Perhaps the problem is not with Wall Street but with Intel? Here's another theory:
"because Intel gave the same song and dance about next year it will be awesome, super CPUs, super GPUs, super new process, just you wait" that they have been giving since Broadwell delays. And while fans may still be fooled, professional investors have lost patience with a company whose primary competence right now appears to be slideware about what they will be doing ten years from now".
Blastdoor - Saturday, October 23, 2021 - link
Until the last few years Apple was consistently undervalued by Wall Street, but Steve Jobs had total immunity to Wall Street pressure because he literally saved the company and had total loyalty from employees and his hand picked board. That's a very unusual situation.Bezos and Musk are also very unusual -- founders who managed to do whatever they wanted. Often Wall Street didn't like it, but it didn't matter.
As a more established firm, with founders long departed, Intel fell under more traditional Wall Street control. They had a board and CEO focused on quarterly profit. They curtailed investment in fabs, laid off experienced engineers, and famously refused to fab the iPhone SOC. Those moves pumped up the bottom line in the short term, executives got their bonuses. And now here we are.
Oxford Guy - Sunday, October 24, 2021 - link
Apple during the Performa era.zepi - Sunday, October 24, 2021 - link
As a long term "intel investor" I don't have R&D. I love it. But history has proven that R&D can fail, and risk of this failure (ie. billions of invested, almost nothing comes out) has to be priced into the expected value of the stock.TheJian - Friday, October 22, 2021 - link
I'll say it again, Intel isn't losing. 6.8B Net...ROFLMAO...Yeah, Wake me when AMD can make that in a year (2? ;)). Is that a record? Must be close, and while AMD is supposedly destroying them...LOL. If AMD wants to make more NET INCOME, stop making console socs for peanuts and wasting dies that could all be SERVER/HEDT etc for thousands each instead of $10-15 profits on each soc (both use about the same amount of silicon roughly, so make the expensive stuff!! FFS!).Teckk - Friday, October 22, 2021 - link
Why are you concerned so much about AMD, you mention AMD more than Intel in your comment.Qasar - Saturday, October 23, 2021 - link
ignore thejian, the only time i see him post on here, are in posts like this, and most of them, are anti amd in some way. its quite comic how dumb his posts are.Blastdoor - Friday, October 22, 2021 - link
Too bad AMD isn't their only competitor. This isn't 2006.msroadkill612 - Friday, October 22, 2021 - link
This is a very rose tinted view of what other analysts & the markets objectively view as a dismal result.Woofram - Friday, October 22, 2021 - link
I am honestly somewhat surprised by the price movement on Intel, seems very short-sighted (though I guess Wall Street only looks a quarter or two ahead). I think Gelsinger has a real shot at saving the company, but indeed if Wall Street keeps dumping the stock, Gelsinger may lose financial motivation to continue leading the company, and will just quit, since his stock option reward is, AFAIK, based in part on stock performance.The problem with Intel has been that, for the past 20 years, they've had complete loser CEOs (read: non-electrical engineers). I don't know who in their right mind would allow someone to lead a 100K employee, $80B revenue company that doesn't have a foundational understanding of the underlying technology involved. However, like Jensen Huang and Lisa Su, Intel finally has an electrical engineer running the company. Per Wiki, Gelsinger was previously Intel's CTO and designed the 80486 CPU, which evolved into the Pentium CPU, which IMO are the sort of qualifications you'd want in a CEO, not someone that was a CFO or COO. When you have finance or managerial folk running the company, you wind up in scenarios where you're only accomplishment is bribing Dell to not buy competitor chips and getting sued for billions of dollars, or failing to reach 10nm and having no contingency plan for 5+ years.
Gelsinger, on the other hand, is finally making all the right moves. He's dissociated the chip design business from the foundry business, and opened up the foundry business to take orders from other companies. Anyone that thinks that having a foundry is bad business is delusional. TSMC makes double the profit on the same revenue as Intel. And Intel, who indeed has been non-competitive, still managed to earn more profit on their revenue than Nvidia or AMD, who are 4x/8x smaller (and have 6x/3x higher valuations, respectively). I would expect it to be harder to maintain profitably as you grow in size.
The problem that AMD had when it had Global Foundries was that AMD, like Intel up until recently, only used their own fab to produce their designs. As a result, the entire success of the company depended on having the most advanced process, and the moment you fall behind, you end up on a sinking ship. Since Intel, as AMD, are now allowing TSMC to produce their chips, Intel can now have both aspects of their business be successful without depending on their fab having the most bleeding edge process. As we all know from last year, any fab will have an endless supply of orders regardless of node size for the foreseeable future. This uncoupling means their foundry business can take all the time it needs to ensure fabrication at any given new node size will be successful without imposing risks or delays to the roadmap of their chip design business, which ultimately means that with proper investment, there's no reason to think Intel won't be capable of retaking fabrication leadership, or at least be competitive, once their new plants come online. And if/when they end up being competitive enough at a given node, their design business can reap those benefits and produce even better margins.
And I haven't even touched on the fact that they're finally getting into the discrete GPU market, which is clearly a nudge towards data center growth, i.e. Nvidia's play. The fact that their data center business is still growing is more important IMO than the fact that they lost some CCG revenue. Hence, at their current valuation relative to AMD, Nvidia, and even TSMC, would seem like an absolute steal.
Oxford Guy - Sunday, October 24, 2021 - link
Having TSMC do their GPUs conveniently enables GPU prices to remain sky high.Helmery - Saturday, October 23, 2021 - link
Intel problem is about zero competition since core2duo, hence home of thousand "sleepy joe" engineers.eastcoast_pete - Saturday, October 23, 2021 - link
A key reason why Intel's stock went down despite their earnings announcement is that those results were largely due to Intel using one-time tax shenanigans to arrive at those numbers. And people who know (and themselves use) these accounting tricks, that was seen for what they are. Hence, Intel's stock went down. We'll see what's what at Intel when Alder Lake comes out; if it works as hoped for, they'll make a lot of real, ongoing profit. If AL has a lot of problems, Intel will struggle for the next years.Farfolomew - Monday, November 1, 2021 - link
Can someone explain how Intel's Net Income is MORE than it's Operating Income? That doesn't make sense, am I missing something? I thought Net Income was the bottom line?