“We’re not perfect across all products or all SKUs”
A strategic pivot by Intel away from consumer CPUs and toward “Big Data”-focussed buyers continues to pay off, with over 50 percent of revenue coming from its “data-centric” collection of businesses for the first time, CEO Bob Swan said late Thursday.
Data Center Group (DCG) revenues hit a new record of $7.2 billion, powered heavily by demand from cloud customers. Cloud revenue was up 48 percent year-on-year.
CFO George Davis told analysts that Intel is expecting “an exceptionally strong Q1 as cloud customers continue to build capacity and adopt our highest-performing products.
The news came as Intel reported all-time record high revenues of $72.0 billion for 2019, despite rattling OEM partners with the persistent of CPU supply constraints across the PC segment: an issue the company has repeatedly apologised publicly for.
Addressing that lingering issue, CEO Bob Swan told analysts on a conference call that the company had record levels of capex in 2018 and 2019 had allowed Intel to increase its second half 2019 PC CPU supply by double digits relative to the first half.
Swan noted: “Demand has continued to outpace PC supply and supply remains tight in our PC business. We’re continuing to add capacity so we’re not constrained in our customers’ growth. Across our 14-nanometer and 10-nanometer nodes, we’re adding 25 percent wafer capacity this year, to deliver a high single-digit increase in PC unit volume. This will enable us to meet market demand, deliver our 2020 financial plan and increase inventory to more normalized levels. Our near-term challenge is working with our customers to support their desired product mix.”
He added: “We are maniacal about eliminating [supply constraints] so that we can meet customer demand and they don’t have to worry about it.”
Yet a back-and-forth with one analyst on the conference call emphasised what a challenging balance the company needs to strike in predicting demand, keeping OEMs happy and not oversupplying a volatile market, sending prices down as a result. And CFO George Davis suggested challenges would remain.
He told Bernstein’s Stacy Rasgon: “Network and IoT are bigger and bigger parts of our business that we think we’re very well-positioned. So when we think about PC volume up or down over time we got this bigger growing aspect of our business that places demand on our manufacturing footprint…”
“We’re in pretty good shape on server”
Davis was pushed on whether capacity constraints were now extending to servers, responding that “we’re in pretty good shape on server.”
“And I think that going with 19 percent growth in the fourth quarter depleted our inventory levels, so we’re not — we have that kind of spike in demand, we’re not perfect across all products or all SKUs. But server, CPUs, we really prioritize that and try to put ourselves in a position where we’re not constrained and we’re in pretty good shape; few challenges here and there, but server CPU supply is pretty good.”
Intel generated a record $33.1 billion cash from operations in 2019.