Intel's yearly revenue has topped $50bn for the first time, driven by strong sales to web technology companies looking to expand their massive datacentres, among other factors.
Paul Otellini has hailed a record-breaking year for Intel, with revenue topping $50bn for the first time. Photo credit: Stephen Shankland/CNET News
On Thursday, the Santa Clara-based chipmaker reported record-setting revenue of $54bn (£35bn) in the full fiscal year for 2011, and $13.9bn in the fourth quarter. Operating income was $4.6bn in the quarter, compared with $4.8bn for the third quarter and $17.5bn for the entire year. The growth came from sales of chips used in high-end datacentre kit and from its push for Sandy Bridge-based ultrabooks, as well as from standard microprocessors.
"Our 2011 revenue and earnings were the best in Intel's history," Intel's chief executive Paul Otellini said on an earnings conference call, before running over the chip specialist's main efforts during the year.
"We reinvented transistor with our 3-D tri-gate technology," he said. "We unveiled a new generation of personal computers, the ultrabook. We closed two large acquisitions — McAfee and Infineon Wireless Solutions — [and] we broke ground on the world's first 14nm fabs".
Intel's PC Client Group generated the largest slice of revenue over the year, with $35.4bn in sales, a rise of 17 percent. The group handles platforms for notebooks and desktops as well as for ultrabooks, the new class of thin, lightweight laptops that Intel began promoting during 2011. Ultrabooks are based on Intel's consumer range of 32nm Sandy Bridge processors, which provide integrated graphics and relatively low power consumption.
There was a strong showing in the Other Intel Architecture group, which saw revenue rise 64 percent to $5bn, for its mobile phone components, embedded technology and tablet products, among other areas. However, sales of Intel's low-powered Atom microprocessor and chipset were down 25 percent to $1.2bn.
Earnings from security company McAfee, which Intel bought for $7.68bn in August 2010, have been combined with those from the Mobile Communications Group. No full-year figures were released, but the fourth-quarter saw $1bn in revenue between them.
Intel's Data Center Group, which specialises in selling high-end processors to the enterprise, passed the $10bn barrier on yearly revenue for the first time, with growth spurred by shipments of the Romley Xeon E5 processor.
"I think this product [the Xeon E5] is probably the most well-rounded product we've produced in this genre so far," Otellini said. "I think people will embrace this machine for high-capacity needs."
Noting that "the datacentre business we have today is not
your grandmother's server business that we had for many years", Otellini said the
rise of large web companies has led to an increasingly "lumpy" sales
pattern for Intel. Companies such as Facebook, Google or Amazon lead demand, but do so by making huge batch purchases rather than a steady stream. When they turn on a datacentre they decide to buy "x 100,000 units", according to Otellini.
"As a result, we're seeing a change to the historical linearity that we saw in this... business for many years," he said. "You should probably get used to a little bit more lumpiness here."
"Despite this reduction in inventory levels, it is our belief that the shortage did not impact the actual sales of personal computers in the fourth quarter, with demand trends playing out as expected," Stacy Smith, Intel's chief financial officer, said on the conference call.
Zacks analyst Sejuti Banerjea noted Intel's datacentre and embedded businesses are continuing to grow. "Intel's longer-term strategy is playing out, with datacentre continuing to show additional opportunity, long-cycle wins in the embedded segment gathering momentum and emerging markets displaying strong growth trends," he wrote in a blog post.
As in previous quarters, the Asia-Pacific market made up more than half of Intel's shipments, at 58 percent of the total. Otellini noted the importance of Asian consumers, who are making a mark in PC and phone sales with their higher disposable income. China now accounts for 20 percent
of all PC demand and grew 15 percent in 2011, while Indian sales rose 22 percent and
Indonesian sales 37 percent, according to the Intel CEO.
Our 2011 revenue and earnings were the best in Intel's history.– Paul Otellini, Intel
"Emerging markets now account for two out of every three incremental units of PC demand — a shift that's rewarding Intel and the PC companies that have a long-standing deep presence in these markets," he said.
Next year, Intel will work to make inroads in the Chinese smartphone market via its partnership with Lenovo. The Asian manufacturer plans to launch the K800 smartphone, the first of several Intel-powered smartphones it is building, by summer 2012.
"China is the world's largest market for mobile phones, with more than 950 million subscribers," Otellini said. "It's also at the forefront of the smartphone boom and will be the home of the world's first 32-nanometer smartphone."
In addition, Intel is set to launch its Knights Corner many-integrated core processor in 2012, as it tries to take a larger share of the burgeoning high-performance computing market.
It also plans to release Ivy Bridge processors built on its new 22nm tri-gate process and, toward the end of the year, could start qualifying its new foundries for a yet-to-be-detailed 14nm process. Intel's capital spending for 2011 was $12.5bn, up 25 percent on the previous year, as the company broke ground on expensive 14nm semiconductor foundries.
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