00:00 Speaker A
Thank you everyone for being here. So today we see these Intel stocks pulling back. Looking at the reaction, I’m wondering what new revelations you have in these numbers that you think are the cause of the disappointment. Given that we now have guidance on what Intel was expecting. Cody, I’ll start with you.
00:32 cody
Really, it was just the supply availability that was disappointing. They saw strong demand on the server side. Well, 2025 is too late to start wafering earlier than that. They didn’t start until Q3 and Q4. Therefore, new products will not be available until the end of the first quarter, which accounts for their disappointment with the outlook for the first quarter. But I think that sets the bottom for the year, and then as the supply improves, we’ll be better able to meet that demand as the year progresses.
01:21 Speaker A
Matt, what do you think here? Because, you know, Intel gave some signals about this in the October conference call. It is clear that the stock is simply reaching this number. So what do you think about the messaging and stock action here?
01:45 mat
Well, I don’t think it was a message issue. If anything, I think investors were very hopeful that we would start to see 18A accretion and see immediate gains in terms of revenue and gross margin, especially given the backdrop of renewed constraints and rising prices. Well, these things usually lead to higher gross profit margins rather than historic lows. Well, I think the stock price simply pre-empted management’s message.
02:30 Speaker A
Now, you know, folks, obviously the supply chain is an issue, but I think the question is, could we have handled it better? Well, Bernstein’s colleague Stacey Rasgon seems to think so. In response to this number, he said in a note that while yes, server cycles seem to be real, the company seems to have made a terrible misjudgment by being caught by surprise with its capacity footprint. Cody, do you think Intel should have done a better job?
03:08 cody
I think you should. I think it’s a valid argument that they said their customers significantly missed their own volume forecasts over the second half of the year, which caused the shortage. Um, but I think the message was clear that the demand was going to be strong, given the strength that we’ve seen through AI over the last 25 years and what we’ve heard from Nvidia and AMD. Intel basically bases its estimates on customer expectations, which at least explains the shortfall. Yeah, but I think they could have handled it better.
04:02 Speaker A
What do you think, Matt? And are you confident that they will address this issue and manage it better going forward?
04:11 mat
There was a step function change in August or September that no one saw. In other words, it was missed on both the memory side and the calculation side. Well, don’t blame themselves for not understanding where the demand is. III I think the struggle for me is just how do they model all their new products, new processes. And it’s not clear to me what’s going to change from here, in terms of gross margins, for example, and how we’re going to get back to historical levels of profitability. That’s the difficult part for me.
