10 Partner Takeaways From Intel's First-Quarter Earnings

Intel Lays Out Layoffs And Restructuring As Company Turns To Data Center And IoT

Intel said Tuesday that it will cut 12,000 jobs globally -- about 11 percent of its workforce -- as part of an initiative to "intensify focus in high-growth areas where it is positioned for long term growth," according to a release.

After the announcement, CEO Brian Krzanich faced analysts on the Santa Clara, Calif.-based company's first-quarter earnings call to answer questions about the company's long-term goals.

Overall, Intel reported first-quarter earnings of 54 cents per share on revenue of $13.8 billion. That beat expectations of analysts surveyed by Thomson Reuters , who said Intel would report earnings of 47 cents per share on revenue of $13.84 billion for the most recent quarter.

Following are 10 takeaways from Intel's first-quarter earnings call for the company's Technology Provider partners.

10. Intel Partner: Resellers Can Keep Up By Looking Beyond The Device

How can resellers keep up with Intel's transformation from a traditionally PC-product-focused company to more of a cloud-focused, data center company?

After Tuesday's earnings call, Ira Grossman, chief technology officer of end user and mobile computing at Cleveland-based MCPc, an Intel partner, said resellers need to look "outside the device" and instead focus on solutions and services.

"From the reseller perspective, while we are seeing a decline in the traditional PC, that segment has long been redefined and must now be viewed as a thing or device -- anything that connects, computes or is used to create content," he said. "Using that definition, we have seen the number of devices increase substantially. That said, resellers must continue to look outside the device to add value and to solve customer challenges. All those devices need to be procured, maybe inventoried, provisioning, staged, kitted, deployed, secured, managed and retired."

9. Krzanich 'Very Confident' In Future Data Center Growth

Krzanich stressed that he is "very confident" in data center growth in the coming year, particularly with products like Intel's Omni-Path Fabric for high-performance computing.

"We're very confident on our data center road map, and we are still absolutely forecasting double-digit growth in that space," he said. "We're shipping an Omni-Path Fabric now. Later this year, we will have Silicon Photonics. We've got 3D XPoint starting to be sampled, and will start to ramp later this year. … We started shipping our first Xeon plus FPGA [field programmable gate array device] samples to customers, which was part of our additional gaining more footprint and more performance in certain segments of the data center."

8. Intel Unfazed By Increasingly Competitive Data Center Industry

Intel is facing increased pressure in the data center space, as Google earlier in the month revealed it has teamed up with Rackspace to develop a new server based on IBM Power chips.

Krzanich said that despite competition from ARM server vendors and the IBM-Google partnership, Intel retains "a strong competitive leadership" in the market.

"What we are trying to do is really provide top-of-rack to bottom-of-rack solutions that bring, that work together and bring performance across the whole rack," he said. "So we believe we are uniquely positioned to provide that whole-rack viewpoint and have everything work together, and come together to bring, really, performance that is just unbelievable. And that's what's key to really keeping our position is to own that, is to understand that whole rack from top to bottom."

7. Intel 'Working' To Get Back On The Tick-Tock Cycle

Intel in July revealed it would delay the release of its Cannonlake chips manufactured on the 10-nanometer process to the second half of 2017, marking a crack in Intel's scheduling system of shrinking its transistors every two years, dubbed "Moore's Law," as chips become more intricate and complex to build.

Krzanich addressed that broken tick-tock cadence Tuesday, stating that Intel is "striving to get back to two years."

"As far as Moore's Law, we are always constantly striving to get back to two years," he said. "We're giving you a timing that's for 10 nanometers that's more like 2.5 years. We haven't talked about 7 nanometers -- partly, it's still in definition and alignment, so we're not sure. But I can truly tell you we are constantly working to get back to two years."

6. Intel Bullish On Memory Solutions Group

According to Intel, strong unit growth for its Memory business was offset by pricing declines leading to revenue that was 6 percent lower year over year in the first quarter.

When asked about this decline, Krzanich responded that he is still bullish on memory solutions, including Intel's 3-D NAND technology.

"What we are seeing, if you take a look at the units, units grew quite nicely year over year and quarter over quarter for the memory group," he said. "We are seeing aggressive pricing in this space. The memory segment, the NAND segment especially, tends to go on these cycles where there's overcapacity in the industry and aggressive pricing, and then it shifts back to more normal pricing, and then tight pricing, which is always very positive. … So we are still confident that this business will continue to grow."

5. Intel To Invest More In IoT And Data Center

Krzanich outlined Intel's future investments, which include memory, the Internet of Things and data center.

Intel on Tuesday posted strong first-quarter results for its data center segment, which grew 9 percent over the same quarter last year, as well as its Internet of Things segment, which grew 22 percent over the same quarter last year.

"If you take a look at it, 2016 to 2015 in the areas of memory with our NAND technology, IoT, data center, even before this action, we were investing more in 2016 than in 2015 in those areas," he said. "Even with the cuts, even with the dollar figures that [CFO] Stacy [Smith] has read out on the savings, it's allowing us to invest even more in those segments."

4. Opportunities Within The Client Computing Segment

Forecasts for the PC market may be grim -- but Krzanich stressed that Intel has identified certain pockets of growth within the Client Computing segment that the company can tap into -- including 2-in-1s and the enthusiast segment.

"I always want to make sure it's not just about cutting costs necessarily in the Client area," he said. "We think that we can become more focused. There are areas in the Client space that are growing -- 2-in-1s are growing at double-digit rates year over year. Our gaming PCs are growing at double-digit rates year over year. Set-top boxes are growing, and we're gaining share in the set-top box space. So we are doing very well in segments that are growing in the Client space and the PC space. And we are going to continue to double down, focus on those."

3. Intel Lowers PC Market Expectations For 2016

Intel during Tuesday's earnings call lowered its PC market expectations, saying it expects the market to decline in the high single digits in 2016 -- faster than earlier expectations.

But Krzanich said that Intel is projecting overall growth in other segments for the year, which he said will offset the weakness of the PC market.

"We are now expecting that the PC market is down in the high single digits, and when we started the year we were in the mid-single-digits decline," he said. "What we're projecting for the year is overall growth, and we think we'll see growth in the data center, growth in IoT, growth in memory that's offsetting some. ... And so you take that, and that's offsetting some of the weakness that we're seeing in the PC market."

2. Chief Financial Officer Stacy Smith's Role Change

Intel also said Tuesday that CFO Stacy Smith will move to a new role, leading sales, manufacturing and operations. Intel said it would begin a formal search for his successor.

Krzanich said the role change will be an "orderly transition" and will give Smith a chance to see other parts of the company.

"Stacy and I have been working for several months, actually several quarters, on what does he do next, how do we grow his both exposure to other parts of the company, but also let the rest of the company see his leadership style," said Krzanich. "And so what we wanted to do is as soon as we'd made the decision to go ahead and start a search and start looking for a CFO replacement, we wanted to be completely transparent, be very open about that and let everyone know."

1. Krzanich Discusses Intel Management Changes

Krzanich addressed Intel's slew of management changes over the past year, which includes two top executives who are departing the company: Kirk Skaugen, Intel's senior vice president for its Client Computing Group, and Doug Davis, general manager of Intel's Internet of Things Group.

"There have really only been three leadership changes, if we just take the last couple of quarters," said Krzanich on the call. "We had Doug Davis, he's simply retiring. Those are personal reasons. It has nothing to do with his leadership or direction of the company. It's IoT. We've talked about IoT as one of our growth segments that grew 22 percent this quarter. … Performance in the group is strong. And he's staying until we find a successor, roughly the end of the year, we think, something like that. Kirk chose to leave for some outside opportunities."