3 Questions for Intel Corporation on January 26
On January 26, microprocessor giant Intel (NASDAQ: INTC) will report its financial results and provide financial guidance for the coming quarter and, likely, the entirety of 2017.
Although the company is planning to host its financial analyst day shortly thereafter, on February 9, during which the company will go into deeper dives into each of its business units, there are still several questions I'd like to hear answered during the company's upcoming earnings call. Here are three.
Will the memory business be profitable this year?
Over the course of 2016, Intel's non-volatile memory business -- which builds and sells products based mainly on NAND flash and will soon begin shipping products based on its 3D XPoint technology -- has lost a bunch of money.
A NAND flash-based solid-state drive. Image source: Intel.
The losses Intel has racked up here during the first three quarters of 2016 are $453 million, with more losses likely on the way during the fourth quarter.
I'd like to see Intel management answer the following question: When will the memory business stop losing money and begin turning an operating profit?
Indeed, if Intel just brought this business up to break even, it would add $453 million in operating profit.
To put this into perspective, current estimates peg Intel's operating profit for 2016 at roughly $16.3 billion. An additional $453 million would represent approximately 2.8% operating profit growth alone, all else equal. A move into solid profitability would help even more.
Update on manufacturing technology
It has been a while since Intel has updated investors on its chip manufacturing technologies, and some information about the strategy and recent developments on the earnings call would be most welcome.
A wafer of chips manufactured in Intel's 14nm-plus technology. Image source: Intel.
I'd like to see the company provide some insight into its manufacturing strategy for both personal computer products as well as its data center products. What manufacturing technologies does the company intend to use for what product lines/segments over the next couple of years?
Some preliminary insight on the earnings call followed by a deeper dive at the company's investor meeting would be quite reasonable.
Data center growth rate?
For a while now, Intel's publicly stated long-term growth rate expectations for its Data Center Group (DCG), the company's second largest business unit by revenue, is 15%. However, the company is expected to miss this target in 2016 because of a slowdown in sales of enterprise servers.
Image source: Intel.
Since Intel is likely going to give its revenue growth forecast for 2017 on the call, it would be helpful if the company also provided its growth expectations for DCG in 2017 and, if it has changed, over the next five years or so.
Then, during the company's investor meeting in February, Intel can go into more of the details, such as growth rate by sub-segment within the data center segment (enterprise servers, cloud, networking, and so on). It could also go into more detail on operating margin expectations, and its view of the competitive landscape longer term.
There are definitely some things best saved for the investor meeting since earnings calls are generally about an hour long, but getting the expected long-term DCG growth rate out there as soon as possible -- if it has changed -- would be a good thing.
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Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.