00:00 Speaker A
We have now Bob O’Donnell. He’s president and chief an an analyst at Technalysis Research. Bob, Intel reports, the stock is popping here in the after hours. What do you make of these results?
00:13 Bob O’Donnell
Well, you know, as you guys were just discussing, I mean, look, the revenue numbers for this quarter were higher than expected, and most importantly, of course, the forecast was higher. I mean, look, there have been challenges, and I understand the point that you guys were just discussing. Intel does, I believe, really want to be both a chip maker and a chip designer, and they really are trying to figure out that path. Look, Lip Boo’s only been in there for a quarter. The kind of changes they need to make are more than a quarter long, right? I mean, this is a multi-quarter, realistically, probably multi-year kind of complete turnaround story before all the benefits start to show up. A couple interesting things.
01:05 Speaker A
Let me ask you, Bob, just to stop you there because I think you’re touching on an important point. I have lots of questions on the metrics of this print, Bob, and we’ll get into that, but you’re touching on an important point, which I do think there is this broader question out there, Bob, about what Intel is going to be. You know, what is the game plan here? What is the strategy, Bob? We were talking earlier to our colleague, Jen Hawley, about this, how honestly, Bob, we really don’t talk about Intel that much on the show. We talk about Nvidia, AMD, Broadcom, Micron. It feels like Intel is not in the conversation. So what is the game plan here moving forward?
02:16 Bob O’Donnell
Well, look, the game plan is they’re going to focus obviously on X86, which let’s not forget. I mean, there’s still a lot of several hundred million PCs get sold every year, lots of servers get sold every year. Intel owns the vast majority of the CPUs in those systems. And even in the Nvidia, you know, the big stacks, up at the top of the rack, there’s an Intel Xeon CPU in there. Now, as a percentage of the total bomb, it’s still pretty small now, but it’s still there is the point. So you’re going to see them build their own products, sell their own products. You’re going to see them, uh, start to try and build more products for other people. That’s the foundry side of the business. You know, the way this thing was constructed, the reason why it’s been such a challenge is they were so intertwined, the, you know, making for themselves versus trying to make for other people. And so now, as they tear those pieces apart, it’s been painful, right? Clearly, it’s been a big challenge for them to try and clarify all of that. Um, and a quick glance at the numbers, you know, they talk about intersegment elimination. That’s, you know, when Intel sells the stuff they make to themselves, right? They have to pull that out of the discussion, and ever since they’ve kind of split off the foundry business, that’s been part of the situation. They’re focusing clearly now on 14A, uh, for external customers. 18A is likely going to be mostly Intel, maybe a little bit of some of the things they announced in the past, Microsoft, Amazon, I think a little bit of DOD stuff as well. But the big focus for future customers is 14A, which is still coming. So again, back to what I said earlier, I think this is still a longer-term story, and in the interim, they have this difficult situation where they got to crank out as much X86 as they can, you know, get that PC market renewed again, get themselves stronger back in the server business. They’re shedding a lot of the other businesses. You know, they just shed their automotive business. Um, they sold off some of the Mobileye, still the majority owner in Mobileye. So they have their hands in it to some degree, but you know, they’re focusing on their core. They’re trying to figure out a better AI strategy, not with a GPU because, you know, Lip Boo said, hey, look, we’re not sure we can play that game. But there’s a lot of AI work that’s done on CPUs, a lot of it has to do with software. Intel actually is a stronger software story than a lot of people realize as well in terms of the nuts and bolts types of software that makes this stuff work.
06:15 Speaker A
When it comes to that PC business, Bob, I’m just curious, do you think we could be seeing, you know, any kind of tariff-related pulling there? What what do you think the trend looks like ahead?
06:29 Bob O’Donnell
You know, I tariff calls are impossible to make these days. Honestly, Josh. Um, so and we there was some argument that that happened this past quarter, maybe it’ll happen again next quarter. Uh, it’s really hard to say. The bottom line is, you know, people are refreshing their PCs. We are starting to see the integration of new systems with NPUs built in them. You know, initially we saw Qualcomm do that with their Snapdragon XE leads with an arm processor. Now we’ve got Intel doing that. They’ve got a stronger NPU. AMD is doing that as well. Microsoft is pushing this. You know, so I think we will start to see a bigger corporate refresh. Not to mention, by the way, the end of support for Windows 10. That’s a huge deal. All of these things, I think, help drive the story around a renewed PC business, which Intel still owns the majority of. And so they would get the most benefit from it. But look, it’s not going to be easy. Clearly, it’s going to be a longer-term story, but I think they’re trying to put the pieces in place, and I feel like Lip Boo’s got a strategy in hand, and he’s trying to make it work.
