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Event Coverage

Notes from the 2019 Intel Investor Meeting: Dramatically Growing the Addressable Market by Pursuing Data-Centric Opportunities

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Coresight Research

Key Points

Intel held its annual investor meeting at its Santa Clara, California headquarters on May 8, 2019. Key points from the meeting include:

  • Expanding the total addressable market (TAM): Intel plans to expand its total addressable market to $288 billion in 2023 from $52 billion in 2018, by expanding its focus on data-centric technologies.
  • Extending product leadership: The company aims to redefine “Intel Inside” as a platform inside all kinds of devices in computing centers, PCs, energy, manufacturing, homes and vehicles.
  • Improving execution, innovation and culture: Intel pledges to meet customer demand, recoup process leadership and deliver on schedule with predictability while operating as “one Intel,” remaining customer obsessed and practicing inclusion.
  • Disciplined investment, profitable growth: The company plans to make organic investments in research and development and capital investments for growth, make strategic investments, and return capital to shareholders while maintaining a strong credit rating and financial flexibility.

Financial targets for the next three years include low-single-digit revenue growth, 32% operating margins and EPS growth in line with revenue but free cash flow growing faster than earnings.

Intel discussed technologies such as the Internet of Things (IoT), aggregation of computing power at the edge of the network, video inference and high-performance computing as drivers for targeted areas such as retail and manufacturing.

Intel held its annual investor meeting at its Santa Clara, California headquarters on May 8, 2019. The meeting kicked off with comments from Intel CEO Bob Swan.

Highlights of general remarks by Bob Swan, CEO, on strategy

  • Make the world’s best semiconductors.
  • Lead the artificial intelligence (AI), 5G and autonomous revolutions.
  • Be the leading end-to-end platform provider for the new data world.
  • Relentlessly focus on operational excellence and efficiency.
  • Continue to hire, develop and retain the best, most diverse and inclusive talent.

Swan commented that Intel has transitioned from being a PC-centric company (in 2013) to data centric (in 2017-2021) to “powering the world” starting in 2021 and beyond.

Whereas Intel’s total addressable market totaled $52 billion in 2018, the company envisions expanding it to $288 billion in 2023, primarily in the data-centric area, as illustrated in the figure below.

Source: Company reports

 

Swan laid out Intel’s plans as follows:

  • Lead in technology inflections: AI, 5G and autonomous systems.
  • Extend product leadership: And redefine “Intel Inside” as an extreme processing unit (XPU) platform inside all kinds of devices in computing centers, PCs, energy, manufacturing, homes and vehicles.
  • Make big bets, with attractive returns: Intel will vet investments to ensure they address the leading edge of a technology inflection and allow the company to play a larger role in the success of its customers and offer a clear path to profitability or attractive returns, all subject to regular evaluation.
  • Focus on execution: Including meeting customer demand, recouping process leadership and delivering on schedule with predictability.
  • Evolve the company’s culture: To create a corporate culture based on transparency and being fearless, operating as “one Intel,” and remaining customer obsessed, while practicing inclusion.
  • Lead in corporate social responsibility (CSR) and diversity and inclusion (D&I): Intel is recruiting innovative and diverse talent, employing an innovative supply chain to support diverse-owned businesses and has closed the gap in pay for different genders.

Swan further outlined Intel‘s financial goals for the next three years:

  • Revenue growth in the low single digits to $76-78 billion, with the data-centric businesses generating growth in the high single digits and the PC-centric business flat to slightly down.
  • Gross margin declines should be offset by spending leverage and saving from exiting the 5G modem business, resulting in 32% operating margins.
  • EPS growth in line with revenues and free cash flow (FCF) growing faster than earnings.

Intel sees a path from EPS of $4.58 in 2018 to $6.00 in 2022 or 2023, as illustrated below.

Source: Company reports

 

These are the highlights of Chief Engineering Officer Dr. Murthy Renduchintala’s remarks:

Data growth and opportunity: The amount of digital data generated is expected to grow to at least 160 zettabytes (one zettabyte is 1021 bytes) in 2020-2025, from 2 zettabytes in 2005-2010, driven by the web, mobile and IoT/analytics.

Data-centric product leadership: Intel aims to make the transition from the PC-centric era to the data-centric era by focusing on workload-optimized platforms that consist of software, security, interconnection, memory, XPUs, architectures and process and packaging technology.

Product highlights: Include a processor using 10nm feature sizes codenamed “Ice Lake” to ship in June 2019 and a graphics processor/graphics processing unit using 7nm technology scheduled for launch in 2021.

These are the highlights of Executive VP and GM, Data Center Group, Navin Shenoy’s remarks:

  • The datacentric opportunity is massive: Technologies increasing demand for computing and diversifying workload needs include:
    • AI
    • Analytics
    • Highly parallel computing
    • Multi-cloud and orchestration
    • Networks
    • In-memory databases
    • Virtualization
    • Security
  • Industry megatrends leverage Intel‘s strengths: These megatrends include the growth of AI, the proliferation of cloud computing and the “cloudification” of the network and edge of the network.
  • Intel has an unparalleled array of assets to fuel growth: Products in Intel’s datacentric portfolio include Ethernet adapters, solid-state drives, persistent memory and line of processors.

Intel’s areas of focus in its IoT business include:

  • Aggregating processing at the network edge.
  • Video inference.
  • High-performance computing.

CFO George Davis offered the following financial outlook for 2019:

  • Revenues of $69 billion.
  • Operating margin of 32%.
  • EPS of $4.35.

He also offered a roadmap for the next three years:

Source: Company reports

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