Intel put out some solid earnings results last month. We don’t need to rehash those here; instead, instead want to focus on one particular aspect of their.
Intel put out some solid earnings results last month. We don’t need to rehash those here; instead, instead want to focus on one particular aspect of their numbers – their long term gross margin guidance. In the latest quarter they reported 42.5% gross margins, but critically, they restated their goal for someday achieving gross margins in the 60% range.
Six months ago, most people, including us, dismissed that goal as fanciful at best. But now, we all have to at least consider the possibility, however slim, that they might actually achieve it. Particularly, understanding how Intel is restructuring internally in preparation for launching Intel Foundry Services (IFS) as a third-party foundry for semiconductor designers is crucial.
Editor’s Note:
Guest author Jonathan Goldberg is the founder of D2D Advisory, a multi-functional consulting firm. Jonathan has developed growth strategies and alliances for companies in the mobile, networking, gaming, and software industries.
Earlier this year, Intel announced changes to its internal accounting methods. Under the new system, Intel’s product division and fab operations will each have their separate P&L and will interact with each other on an arm’s-length basis. Previously, the two divisions blended their costs, with operations costs hidden within product margins.
While this might seem like a trivial accounting adjustment – after all, the company will still report consolidated gross margins, which remain unchanged – this subtle shift will significantly impact internal incentives. Our core thesis on Intel is that their most significant challenge lies in changing their internal culture, making this ‘small’ change potentially very impactful.
Our core thesis on Intel is that their most significant challenge lies in changing their internal culture, making this ‘small’ change potentially very impactful.
