Intel Aligned With Multiple Trends

Here’s an update on Intel since my last posts on the company, available here, here (discussion of Intel’s opportunity in the Convergence Device segment) and here (discussion of the multi-core issues).

Intel (INTC) recently announced its results for the third-quarter of fiscal 2007 in October. It reported a 15% y-o-y and 16% sequential increase in revenue to $10.1 billion. Net income was $1.9 billion and EPS was 31 cents. Operating income increased 66% sequentially from $1.35 billion in Q2 to $2.2 billion. Gross margin in the quarter increased from 46.9 % in Q2 to 52.4%, driven mainly by higher microprocessor volumes, lower 45nm start-up costs and lower microprocessor unit costs.

Segment wise, mobility group saw a sequential increase of 20%. Revenue in digital enterprise group increased 12% sequentially with higher revenue for microprocessors and chipsets in the desktop, notebook, and server computing segments. Flash memory group had 12% sequential growth, primarily due to growth in revenue from higher density NAND memory.

On the product-side, Intel shipped more than 2 million quad core processors during the quarter and now offers more than 20 quad-core processor designs. Intel initiated its transition to Intel Core microprocessor architecture with the introduction of quad-core processors designed for multi-processor servers with increased performance over previous products.

Intel also launched the next generation of Intel® vPro processor technology for business PCs with better protection against hacking and viruses. It also announced that its 2008 notebook PC platform Montevina will have 25-watt dual-core processors that enable thinner and lighter designs

During the quarter, Intel’s headcount decreased by 2000 bringing the number of down to approximately 88,000. This is a sequential decrease of more than 2% and a y-o-y decrease of nearly 12%. It plans to bring down the headcount to 86,000 by the end of the year.

Intel’s dividend payments were $650 million and stock repurchases were $750 million in the quarter. Its stock is trading around $27. It recently hit a 52-week high of $27.08 on 1 Nov. Its market cap is around $156.5 billion. There is, clearly, optimism in the marketplace around Intel’s prospects on multiple different vectors: high-performance computing, convergence devices, and the next billion PC users that are expected to come into the market over the next decade or less. If they execute well, Intel should be able to reap the benefits of market momentum in each of the segments.