October 31, 2024 • 21 mins
Intel shares surged after the company gave a fourth-quarter revenue forecast slightly above estimates, sparking optimism that it’s capable of reclaiming some lost market share. Apple reported weaker sales in China than anticipated last quarter, raising fresh concerns about one of its most important regions. For instant reaction and analysis to the latest big tech earnings drop, hosts Tim Stenovec and Emily Graffeo speak with Bloomberg Technology co-host Ed Ludlow.
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Speaker 1 (00:02):
Bloomberg Audio, studios, podcasts, radio news.
Speaker 2 (00:07):
Shares of Intel are just surging as we speak right now.
Taking a look at shares in the after hours, they
were up as much as fifteen percent. This after the
company gave a fourth quarter revenue forecast slightly above estimates.
It sparked optimism that it's capable of reclaiming some lost
market share. Shares are just absolutely surging right now. Remember
(00:27):
shares down going into this print, close to sixty percent.
We got with us Ed Ludlow joining us from our
San Francisco bureau. I know he's looking closely at these
results because he's got a chat with Pat Gelsinger coming
up at six pm Wall Street Time, a special edition
of Bloomberg Technology on Bloomberg TV, Bloomberg Radio, YouTube, and
Bloomberg Originals. We'll get to that in just a minute. First, though,
(00:52):
Ed expectations were pretty low going into this print.
Speaker 1 (00:56):
Yeah, and there's a lot to unpick here.
Speaker 3 (00:57):
It's not straightforward because in the core to gone, Intel,
which was previously like one of the world's leading chip makers,
has given us a mixed bag. Its data centerships business
did better than expected, but it's PC business where it
has historically been the leader did worse. The answer to
that is customers had inventories and they worked through backlogs.
(01:20):
And when we speak to Pat later, I think there's
a discussion to be had about the future of Intel
and the PC market. But the most important thing to
note is the stock is up significantly and after hours,
and that is in spite of almost three billion dollars
of impairment charges that Intel took relating to headcount reduction
canceled projects. And what's so interesting about that is if
(01:41):
you look at the estimates going into this quarter, and
lists on Wall Street had not factored that in.
Speaker 1 (01:47):
So it's a surprise, a negative surprise.
Speaker 3 (01:50):
And even so the stock is up significantly because, as
you point out, the top line of the story is
maybe there's some hope here for Intel.
Speaker 2 (01:57):
It is there. There's also a headline ed and I'm
just getting caught up. I know you've made some time
to look at this, but there's the news is coming
fast and furious. They're reducing headcount by sixteen five hundred employees.
Is that on top of the other headcount productions this year.
Speaker 3 (02:12):
This is a confirmation of the previously stated plan for
headcount reduction, and that the literal update is that the
Audit Committee of Intel, a section of its board, has
approved that plan. So the number is final sixteen thy
five hundred staff to be cut. And again I go
(02:32):
back to the impairment charges. If you look at the
adjusted loss per share in the quarter gone much much
wider than anyone on the Wall Street had anticipated. And
a part of that was that the impairment charges it
disclosed relative to headcount reduction, but there's other things in there.
They just hadn't factored that in for this quarter. Intel
wasn't able to guide for it into this quarter. So
(02:55):
it's a timing and an accounting issue, which you know
sometimes can be a bit dry.
Speaker 1 (03:00):
There's much more to discuss.
Speaker 2 (03:01):
Okay, well' speina, much more to discuss. The Intel CEO
Pat Gelsinger, who you're going to speak with a little
later today, saying in a statement that he intends to
keep the company together. Yeah, he says that distinct, but
better together is the strategy. The context for this is
is reporting from earlier this year that said they were
exploring a separation of parts of the company.
Speaker 1 (03:23):
So it's complicated.
Speaker 3 (03:25):
And first off, the headlines from Pat Gelsinger were a
part of a brief conversation that our colleague and King
had with him on the phone. And the context is, yes,
Intel is a chip company. It offers chip products processes
that go into computers and data centers and other business areas.
(03:45):
But it also has a manufacturing business, which historically the
reason that Intel was so good at chips is it
built them or manufactured them for itself. As many of
your listeners have learned in the last two or three years,
there's a company in Taiwan called TSMC that has basically
taken over the vast majority of cutting edge chip manufacturing
(04:05):
on a contract basis for everyone else, and Intel had
really fallen behind. But Intel's ambition is to have a
company where it has its own products, it manufactures its
own products, but it also wants to manufacture chips with others,
just like TSMC does. And that's a long answer, but
the short of it is, this is Pat Gelsinger saying, yes,
we're going to run the company that way to separate divisions,
(04:28):
but no, we're not going to sell off one part
to a third party or be acquired by a third party.
That's kind of reading between the lines because he was
not explicit.
Speaker 4 (04:38):
Ed. You have to wonder how much patience investors have
right now to see this turnaround play out, because, like
Tim had mentioned, Intel stock is down almost sixty percent
year to date. So what do we know right now
about just how urgent the need for the turnaround is.
(04:58):
When you think about the share price.
Speaker 3 (05:01):
I mean, do we have to wait for those listening
on radio. I'm looking at a chart and the line
goes straight up in the air with a thirteen percent
next to it, And if you're watching on YouTube, maybe
we can put the chart up. And it's an astonishing
market reaction because of the pain of the quarter gone
that I just told you, and what Intel told us
for the final three months of this year is here's
(05:22):
a range of revenues we think we're going to have.
At the midpoint of that range, it was just slightly
ahead of consensus estimates. But the market is you know,
what's the saying, you guys that the investors vote with
their feet, right, And you know, I think that's the
read here. They look at the commentary from Intel and say,
you've done some really painful things in the quarters gone.
(05:42):
You've let go of a lot of people canceled a
lot of projects. You had a pretty rough quarter in
your PC business where you were once a leader and
you've fallen behind. But as we look to the next
three months and beyond that, there are signs that you
might be turning a corner here. And that's great because
that gives us a lot to ask Pat Gelsinger about
to today.
Speaker 2 (06:01):
Don't give away the questions, ed, I would never ask
you to do that, but what is top of mind
for you ahead of this conversation, especially given that you
got to read a little bit of what Ian's conversation
went with him earlier, and then also you get the
most recent numbers that we're talking about right now.
Speaker 3 (06:16):
Yeah, because of the analyst call as well, and you
never know what's going to come up in an analyst call.
There's definitely a technology to discussion to have here. You know,
one of the interesting parts of Qualcomm, or the report
that Qualcomm was Qualcom was interested in buying some all
of Intel, is that they had made inroads themselves into
the PC market where Intel had once been dominant. And
(06:41):
you know, a theoretical idea that came out of that is,
why would Qualcom want to buy Intel if they're doing
so well on their own, But you could flip that
on its head and say, the story of twenty twenty
four has been about the AIPC PC laptops that have
new chips in them that are not made by Intel.
So when's Intel going to come to the races on that?
And in fact, a number of our audience, but also
(07:02):
like executives in the world of tech, have asked me
to ask Pat about that issue, because if Intel's so
good at PC chips, why is it not doing the
latest thing? These are technology questions, but I think we
should probably be explicit. Was Intel or was Intel not
approached by some of its peers about an acquisition?
Speaker 1 (07:20):
Simple stuff.
Speaker 4 (07:23):
Ed In just three minutes, we should be getting Apple's
earnings reports.
Speaker 1 (07:28):
What goodness?
Speaker 4 (07:29):
What should people be watching hump for for the iPhone?
Speaker 3 (07:33):
Yeah, iPhone sixteen and China very simple, leading product, most
important market, and that's probably what it will come down to.
Speaker 4 (07:42):
Will those iPhone sixteen's are they flying off the shelves?
Speaker 3 (07:46):
So we've learned in the newsroom a really painful lesson
this year, which is treat the third party data with caution.
You guys will probably have done it on the show
right these stories about some of the market researchers, who
is you report saying the first six weeks of iPhone
sixteen sales are down relative to the first six weeks
of iPhone fifteen according to xyz data set Counterpoint research
(08:09):
is one.
Speaker 1 (08:10):
But there's also evidence that in recent.
Speaker 3 (08:12):
Quarters, Apple's actual data has proven the third party data
to be off the mark a little bit. And there's
a very interesting phenomena happening in China. Apple won't make
its latest generf generative AI tech available in China for
some time until the regulator says it's okay. But there
is evidence that the consumer in China is buying the
(08:32):
iPhone anyway in anticipation they might have access at some
point to like the latest and greatest software, which I
think is so interesting. Right, You're buying something without having
been able to experience it and like look at it
because it's not available in that market.
Speaker 2 (08:47):
Yeah, okay, So okay, let's talk a little bit about China.
Just thirty seconds here, ed because these numbers are coming
out in thirty seconds. Sure, what are the numbers we
need to see in China indicate that that Apple is
not losing market share to Samsung show me and the.
Speaker 3 (09:01):
Like numbers or commentary, so they'll report something for Gray
to China. They won't be as sort of candid about
category specific stuff, but on the call they would tell
us how they think they do or rank in that market.
Speaker 2 (09:14):
Okay, we're going to get numbers from Apple in just
about fifteen seconds. Going into today, shares for the year
up seventeen percent, so underperforming the S and P five
hundred shares today down one point eight percent. We are
getting a slew of earnings continuing and now we're getting
Apple results. Bear with me while I bring these up.
(09:36):
Fourth quarter revenue meets estimates coming in at ninety four
point nine three billion dollars. Estimates were for ninety four
point three six billion dollars. As we look at the
different parts of the reportable categories, services revenue for the
fourth quarter coming in below estimates, twenty four point nine
to seven billion. Estimates for twenty five point two seven
billion fourth quarter earnings per share coming in way below
(09:59):
estimate and are not excuse me, not below estimates below
what they were last year ninety seven cents versus one
dollar and forty six year over year fourth quarter revenue
once again beating estimates, coming in at ninety four point
nine three billion dollars. Estimates were for ninety four point
three six billion dollars. Apple also declaring a cash dividend
of twenty five cents per share.
Speaker 1 (10:19):
That's I'm not done that much.
Speaker 2 (10:21):
Okay. Let's look at fourth quarter iPhone revenue coming in
above estimates at forty six point twenty two billion.
Speaker 1 (10:28):
Estimate.
Speaker 2 (10:28):
Weres for forty five billion dollars, fourth quarter Greater China
revenue coming in just shy of estimates fifteen point zero
three billion dollars. Estimates are for fifteen point eight billion.
Speaker 4 (10:38):
Dollars, and their fourth quarter Wearables, Home and Accessories slightly
missing estimates nine billion dollars. The MAC revenue seven point
seventy four billion, right in line with estimates, and iPad
revenue slightly below estimates six point ninety five billion versus
estimates of seven billion. The red headline crossing the Bloomberg
terminal is that the Apple fourth quarter Greater China revenue
(11:02):
missed estimates. It's fifteen point oh three billion versus estimates
of fifteen point eight billion.
Speaker 2 (11:07):
Yeah, that was a that's a pretty significant miss right there.
Seeing shares bounce around a little. They were higher when
these numbers came out. Now they're down about one point
three percent. Some of these certainly worth repeating. Fourth quarter
iPhone revenue coming in above estimates at forty six point
two to two billion dollars, fourth quarter revenue coming in
at ninety four billion, ninety four point ninety three billion
(11:29):
dollars above estimates, but fourth quarter Greater China revenue coming
in below estimates. I do want to go back to
Ed Ludlow, who's standing by in San Francisco. He's only
had two minutes to look at these numbers China. That
certainly seems like a story here.
Speaker 3 (11:41):
Ed, Yeah, I mean you want wonderful summary. I mean, all,
how do you follow that? But I think that that's
the simple calculus. Overall iPhone revenue beat right, Greater China
slightly missed. It's not until the analyst call that you
get the commentary. It's usually from the CFO rather than
Tim Kirk that says, actually, by category or products are
(12:03):
be it iPhone, mac wearables, here's how we did, and
in that explanation we will find out did iPhone grow
in China or not? It's interesting, you know the miss
is it's a miss, you know, it's slight. The only
other thing that I point out is that you have
to read between the lines a bit. And the Apple
(12:23):
once again has a new record high of number of
installed devices around the world. That's the number of people
with an Apple hardware product or device somewhere in the world.
Speaker 1 (12:34):
It's growing. But where in particular, which product line. That's
kind of the question next.
Speaker 2 (12:38):
But that's an important number because increasingly, as people hold
onto these devices for longer, the more of them that
are out there, the more people are spending on services
like Apple TV plus, Apple Music, iCloud and the like.
I know, I'm certainly not buying new devices right now,
but I'm still spending each month quite a bit on
Apple and Apple loves that it's a high margin business.
Speaker 1 (12:58):
Yeah, the timing of this very interesting.
Speaker 3 (13:00):
So in the release they talk about the rollout of
Apple Intelligence, which is staggered. As Mark German has reported
here at Bloomberg News. Apple Intelligence is the company's proprietary
AI or generative AI offering. It's a suite of software
tools in iOS that can do various things. This past week,
I was offered to upgrade MYOS to eighteen point one.
(13:23):
Then I was put on a wait list for Apple Intelligence.
That's all lot preamble to say, we don't know anything
from this release. And you noted that services missed right,
that all this work they put in AI and all
of the delay translates to consumers spending more money within
the iOS or Apple ecosystem. And I know that many
analysts investors are going to be listening carefully for that.
Speaker 2 (13:45):
Let's go through some of these numbers again. If you're
just joining us. Apple shares down about one point seven
percent in the after hours. They reported just about four
minutes ago, five minutes ago, our fourth quarter revenue came
in above estimates at ninety four point ninety three billion dollars.
Quarter iPhone revenue came in above estimates at forty six
point two two billion dollars. That's a billion dollars more
(14:06):
than what analysts were expecting. Fourth quarter greater China revenue,
though coming in below estimates, Does that mean the iPhone
sixteen is a huge success ad.
Speaker 3 (14:15):
You have to read between the lines again until an
executive says it definitively on the call, you don't know.
But there were other areas that were a bit of
a surprise, right. iPad was a surprising miss despite having
released new generations.
Speaker 1 (14:29):
So take that.
Speaker 3 (14:30):
MAC revenue came in at one hundred million more than
the same period a year ago, or maybe sequentially in
line with expectations, so that's not giving a surprise contribution.
What's left we know revenue services revenue missed, maybe iPhone.
Speaker 2 (14:44):
Piecing it together, well, how much of the iPhone sixteen
was sold in this most recent quarter? Like, do we that? No,
we do in terms of availability.
Speaker 3 (14:53):
So in terms of availability, I'm trying to go through
the tank, you and the thing to look at the
inventory number because that's the next place that I can.
I can't find it yet because to me with another one,
and I'll try catch.
Speaker 2 (15:03):
Out, Okay, So I'll give you some time to look
for that. The reason I always am interested in that
is because they announced this thing in September, goes on
sale a few weeks later. The quarter ends after only
a couple weeks after that, iPhone goes on sale. In
some years Emily, they haven't even been able to put
the new phone on sale before the quarter of learning.
So it's just a question of okay, how many people
(15:25):
were buying the old iPhone versus the new iPhone right
here as an indication of how well is that new
model selling.
Speaker 4 (15:32):
I'll also add Tim that we are seeing Apple stock
extending some losses. You know, nothing huge here, and it is.
It has only been six minutes since Arnais came out,
but we do now see shares of Apple down about
one point seven percent, despite the fact that fourth quarter
revenue met estimates and was still up six percent year
(15:53):
over year, and also that service revenue up twelve percent
year over year but did slightly miss estimates.
Speaker 2 (16:00):
Taking a look now at our live blog. If you
have access to this on the Bloomberg terminal, do check
it out our own. Mark German, adding to what Ed
said that iprad is a surprising miss, coming out just
shy of seven billion, despite the release of that new
iPad Pro and iPad Air models earlier this year. That
new iPad Mini released this month unlikely to help materially.
Mark Kerman also writing that the Mac came in with
(16:22):
about one hundred million dollars annual revenue increase, meeting Wall
Street estimates of seven point seven billion dollars. New Max
released this week should help that product segment in the
current quarter, and I want to go back to you.
I know you've been diving into that ten Q speed
reading it. What sticks out to you from there.
Speaker 3 (16:39):
Well, not the inventries. They're basically very similar to the
same period a year ago. So I'm going to spend
a bit more time pondering that. You know, a story
of the megacaps so far in twenty twenty four has
been sweetness for shareholders and this is more dry stuff.
But you know that your audience on this show, whether
they're listening or watching, there are so many different types
(17:02):
of Apple investors out there where the role of a
dividend or shareholder returns is really important. And so whatever's
happening with any given products line or category, Remember this
Apple is a cash machine twenty seven billion dollars of
operating cash flow generated in the quarter. Hence they're able
to return relatively the same twenty nine billion dollars back
(17:23):
to investors. The differences is that in prior quarters, when
we've seen a sweetener like a divvy or a boost
into a buyback program, that's been a great thing for investors,
they've responded positively. On EM's note, just then, the stock
isn't really responding to that, right, there isn't some sort
of relief in that sense, knowing that the bar too
(17:44):
is high.
Speaker 4 (17:44):
Yeah, and you bring up a really good point that
I know you said it's dry, but it's not as
dry to me. I interview a lot of I know,
full managers.
Speaker 2 (17:52):
This is a nice little mix for you.
Speaker 4 (17:53):
You know, people always talk about cash rich companies and
how those kinds of companies are despite what the macro
economic environment is doing. If you buy a large company
that has a big, strong balance sheet, no matter what
the FED does, no matter what other earnings do, you'll
be safe. And I think that sentiment has really carried
(18:15):
these mega tex stocks this year, all the volatility.
Speaker 3 (18:19):
It's important because again there's a badge of honor for
many that comes with holding Apple stock, whether you're the
smallest retail investor or the giant on Wall Street.
Speaker 1 (18:26):
That's been the case for so long.
Speaker 3 (18:29):
But at the end of the day, you have in
the world of technology, two main operating systems for smartphones
iOS and the iPhone, and then Android, where a number
of handset makers are involved. And it comes back to
what's happened to Apple, and the cores are just gone.
It grew in every market around the world apart from
one greater China. Tim's question is did the iPhone do
(18:50):
great well? The question outstanding is as important as the
data that we've related to the audiences we don't know.
Speaker 1 (18:57):
Let us answer the question on the call.
Speaker 3 (19:00):
The iPhone grow in China and all of these things
investors take into account just as much as they do
the sweeteners that have put before them.
Speaker 2 (19:07):
All Right, We're going to hear from Apple executives on
the call a little later.
Speaker 4 (19:11):
ED.
Speaker 2 (19:12):
It's notable because it is I believe Luka Maistri's last
earnings call at Apple. He's going to be passing the
torch to his top deputy when the calendar turns to
twenty twenty five. Is that something that is meaningful to
you in terms of how this There's not a lot
(19:32):
of executive turnover at this company. These people have been
there for years. Can text you like that for us?
Speaker 3 (19:38):
On the one hand, Kevan Perek, who's you're like right,
his deputy and steps up to being CFO, is a
known quantity because he's been there and this was telegraphed.
But I've often posted in the Bloomberg Top Life blog
it's the blog we run during these big moments that
it's often my Strey rather than cook that gives you
the information that we'd consider news. It is some more
(20:00):
granular detail about performance of a specific product in a
specific market, like iPhone in China. He is widely seen
as being a master of the margin, right you think
about it, talked about cash generation but the bottom line
in general and Apple being a highly profitable company with
just insane amounts of cash on the balance sheet. You know,
(20:21):
Luke and Maistreet has been a big part of that story.
Does can Correct have the same prowess in that field?
It takes some quarters to find out, but you know,
when you're a journalists and an investor, you become familiar
with these names and you listen closely when they say
things because you know that they choose their words with purpose.
Speaker 4 (20:41):
Ed.
Speaker 2 (20:41):
We're going to give you a break in just a minute.
But last question to you is just give us the
high level view of Apple for people who are just
joining us right now.
Speaker 3 (20:52):
Yeah, in the quarter, Apple posted sales that were about
what everyone expected. They grew their sales in every geography
around world world apart from China. An iPhone which is
basically everything still for anyone that cares about Apple beat
estimates overall, but there's a lingering question about how it's
doing in China because it's such an important market. The
(21:13):
next phase, or the forward looking bit, is the work
they've done in AI. Working for them is a business
because services revenue came in a bit light.
Speaker 1 (21:23):
Now.
Speaker 3 (21:23):
Apple Intelligence is only just this week, last couple of
days been rolling out in markets like North America. It
is not available in the EU. It is not available
in China. But some explanation because we don't have it
in the release of how this amazing AI tech is
going to drive growth for them in terms of sales
and profit is probably the next logical thing to look at.
Speaker 2 (21:45):
D Love though, is the cohost of Bloomberg Technology on
Bloomberg TV.
Bloomberg Audio, studios, podcasts, radio news.
Speaker 2 (00:07):
Shares of Intel are just surging as we speak right now.
Taking a look at shares in the after hours, they
were up as much as fifteen percent. This after the
company gave a fourth quarter revenue forecast slightly above estimates.
It sparked optimism that it's capable of reclaiming some lost
market share. Shares are just absolutely surging right now. Remember
(00:27):
shares down going into this print, close to sixty percent.
We got with us Ed Ludlow joining us from our
San Francisco bureau. I know he's looking closely at these
results because he's got a chat with Pat Gelsinger coming
up at six pm Wall Street Time, a special edition
of Bloomberg Technology on Bloomberg TV, Bloomberg Radio, YouTube, and
Bloomberg Originals. We'll get to that in just a minute. First, though,
(00:52):
Ed expectations were pretty low going into this print.
Speaker 1 (00:56):
Yeah, and there's a lot to unpick here.
Speaker 3 (00:57):
It's not straightforward because in the core to gone, Intel,
which was previously like one of the world's leading chip makers,
has given us a mixed bag. Its data centerships business
did better than expected, but it's PC business where it
has historically been the leader did worse. The answer to
that is customers had inventories and they worked through backlogs.
(01:20):
And when we speak to Pat later, I think there's
a discussion to be had about the future of Intel
and the PC market. But the most important thing to
note is the stock is up significantly and after hours,
and that is in spite of almost three billion dollars
of impairment charges that Intel took relating to headcount reduction
canceled projects. And what's so interesting about that is if
(01:41):
you look at the estimates going into this quarter, and
lists on Wall Street had not factored that in.
Speaker 1 (01:47):
So it's a surprise, a negative surprise.
Speaker 3 (01:50):
And even so the stock is up significantly because, as
you point out, the top line of the story is
maybe there's some hope here for Intel.
Speaker 2 (01:57):
It is there. There's also a headline ed and I'm
just getting caught up. I know you've made some time
to look at this, but there's the news is coming
fast and furious. They're reducing headcount by sixteen five hundred employees.
Is that on top of the other headcount productions this year.
Speaker 3 (02:12):
This is a confirmation of the previously stated plan for
headcount reduction, and that the literal update is that the
Audit Committee of Intel, a section of its board, has
approved that plan. So the number is final sixteen thy
five hundred staff to be cut. And again I go
(02:32):
back to the impairment charges. If you look at the
adjusted loss per share in the quarter gone much much
wider than anyone on the Wall Street had anticipated. And
a part of that was that the impairment charges it
disclosed relative to headcount reduction, but there's other things in there.
They just hadn't factored that in for this quarter. Intel
wasn't able to guide for it into this quarter. So
(02:55):
it's a timing and an accounting issue, which you know
sometimes can be a bit dry.
Speaker 1 (03:00):
There's much more to discuss.
Speaker 2 (03:01):
Okay, well' speina, much more to discuss. The Intel CEO
Pat Gelsinger, who you're going to speak with a little
later today, saying in a statement that he intends to
keep the company together. Yeah, he says that distinct, but
better together is the strategy. The context for this is
is reporting from earlier this year that said they were
exploring a separation of parts of the company.
Speaker 1 (03:23):
So it's complicated.
Speaker 3 (03:25):
And first off, the headlines from Pat Gelsinger were a
part of a brief conversation that our colleague and King
had with him on the phone. And the context is, yes,
Intel is a chip company. It offers chip products processes
that go into computers and data centers and other business areas.
(03:45):
But it also has a manufacturing business, which historically the
reason that Intel was so good at chips is it
built them or manufactured them for itself. As many of
your listeners have learned in the last two or three years,
there's a company in Taiwan called TSMC that has basically
taken over the vast majority of cutting edge chip manufacturing
(04:05):
on a contract basis for everyone else, and Intel had
really fallen behind. But Intel's ambition is to have a
company where it has its own products, it manufactures its
own products, but it also wants to manufacture chips with others,
just like TSMC does. And that's a long answer, but
the short of it is, this is Pat Gelsinger saying, yes,
we're going to run the company that way to separate divisions,
(04:28):
but no, we're not going to sell off one part
to a third party or be acquired by a third party.
That's kind of reading between the lines because he was
not explicit.
Speaker 4 (04:38):
Ed. You have to wonder how much patience investors have
right now to see this turnaround play out, because, like
Tim had mentioned, Intel stock is down almost sixty percent
year to date. So what do we know right now
about just how urgent the need for the turnaround is.
(04:58):
When you think about the share price.
Speaker 3 (05:01):
I mean, do we have to wait for those listening
on radio. I'm looking at a chart and the line
goes straight up in the air with a thirteen percent
next to it, And if you're watching on YouTube, maybe
we can put the chart up. And it's an astonishing
market reaction because of the pain of the quarter gone
that I just told you, and what Intel told us
for the final three months of this year is here's
(05:22):
a range of revenues we think we're going to have.
At the midpoint of that range, it was just slightly
ahead of consensus estimates. But the market is you know,
what's the saying, you guys that the investors vote with
their feet, right, And you know, I think that's the
read here. They look at the commentary from Intel and say,
you've done some really painful things in the quarters gone.
(05:42):
You've let go of a lot of people canceled a
lot of projects. You had a pretty rough quarter in
your PC business where you were once a leader and
you've fallen behind. But as we look to the next
three months and beyond that, there are signs that you
might be turning a corner here. And that's great because
that gives us a lot to ask Pat Gelsinger about
to today.
Speaker 2 (06:01):
Don't give away the questions, ed, I would never ask
you to do that, but what is top of mind
for you ahead of this conversation, especially given that you
got to read a little bit of what Ian's conversation
went with him earlier, and then also you get the
most recent numbers that we're talking about right now.
Speaker 3 (06:16):
Yeah, because of the analyst call as well, and you
never know what's going to come up in an analyst call.
There's definitely a technology to discussion to have here. You know,
one of the interesting parts of Qualcomm, or the report
that Qualcomm was Qualcom was interested in buying some all
of Intel, is that they had made inroads themselves into
the PC market where Intel had once been dominant. And
(06:41):
you know, a theoretical idea that came out of that is,
why would Qualcom want to buy Intel if they're doing
so well on their own, But you could flip that
on its head and say, the story of twenty twenty
four has been about the AIPC PC laptops that have
new chips in them that are not made by Intel.
So when's Intel going to come to the races on that?
And in fact, a number of our audience, but also
(07:02):
like executives in the world of tech, have asked me
to ask Pat about that issue, because if Intel's so
good at PC chips, why is it not doing the
latest thing? These are technology questions, but I think we
should probably be explicit. Was Intel or was Intel not
approached by some of its peers about an acquisition?
Speaker 1 (07:20):
Simple stuff.
Speaker 4 (07:23):
Ed In just three minutes, we should be getting Apple's
earnings reports.
Speaker 1 (07:28):
What goodness?
Speaker 4 (07:29):
What should people be watching hump for for the iPhone?
Speaker 3 (07:33):
Yeah, iPhone sixteen and China very simple, leading product, most
important market, and that's probably what it will come down to.
Speaker 4 (07:42):
Will those iPhone sixteen's are they flying off the shelves?
Speaker 3 (07:46):
So we've learned in the newsroom a really painful lesson
this year, which is treat the third party data with caution.
You guys will probably have done it on the show
right these stories about some of the market researchers, who
is you report saying the first six weeks of iPhone
sixteen sales are down relative to the first six weeks
of iPhone fifteen according to xyz data set Counterpoint research
(08:09):
is one.
Speaker 1 (08:10):
But there's also evidence that in recent.
Speaker 3 (08:12):
Quarters, Apple's actual data has proven the third party data
to be off the mark a little bit. And there's
a very interesting phenomena happening in China. Apple won't make
its latest generf generative AI tech available in China for
some time until the regulator says it's okay. But there
is evidence that the consumer in China is buying the
(08:32):
iPhone anyway in anticipation they might have access at some
point to like the latest and greatest software, which I
think is so interesting. Right, You're buying something without having
been able to experience it and like look at it
because it's not available in that market.
Speaker 2 (08:47):
Yeah, okay, So okay, let's talk a little bit about China.
Just thirty seconds here, ed because these numbers are coming
out in thirty seconds. Sure, what are the numbers we
need to see in China indicate that that Apple is
not losing market share to Samsung show me and the.
Speaker 3 (09:01):
Like numbers or commentary, so they'll report something for Gray
to China. They won't be as sort of candid about
category specific stuff, but on the call they would tell
us how they think they do or rank in that market.
Speaker 2 (09:14):
Okay, we're going to get numbers from Apple in just
about fifteen seconds. Going into today, shares for the year
up seventeen percent, so underperforming the S and P five
hundred shares today down one point eight percent. We are
getting a slew of earnings continuing and now we're getting
Apple results. Bear with me while I bring these up.
(09:36):
Fourth quarter revenue meets estimates coming in at ninety four
point nine three billion dollars. Estimates were for ninety four
point three six billion dollars. As we look at the
different parts of the reportable categories, services revenue for the
fourth quarter coming in below estimates, twenty four point nine
to seven billion. Estimates for twenty five point two seven
billion fourth quarter earnings per share coming in way below
(09:59):
estimate and are not excuse me, not below estimates below
what they were last year ninety seven cents versus one
dollar and forty six year over year fourth quarter revenue
once again beating estimates, coming in at ninety four point
nine three billion dollars. Estimates were for ninety four point
three six billion dollars. Apple also declaring a cash dividend
of twenty five cents per share.
Speaker 1 (10:19):
That's I'm not done that much.
Speaker 2 (10:21):
Okay. Let's look at fourth quarter iPhone revenue coming in
above estimates at forty six point twenty two billion.
Speaker 1 (10:28):
Estimate.
Speaker 2 (10:28):
Weres for forty five billion dollars, fourth quarter Greater China
revenue coming in just shy of estimates fifteen point zero
three billion dollars. Estimates are for fifteen point eight billion.
Speaker 4 (10:38):
Dollars, and their fourth quarter Wearables, Home and Accessories slightly
missing estimates nine billion dollars. The MAC revenue seven point
seventy four billion, right in line with estimates, and iPad
revenue slightly below estimates six point ninety five billion versus
estimates of seven billion. The red headline crossing the Bloomberg
terminal is that the Apple fourth quarter Greater China revenue
(11:02):
missed estimates. It's fifteen point oh three billion versus estimates
of fifteen point eight billion.
Speaker 2 (11:07):
Yeah, that was a that's a pretty significant miss right there.
Seeing shares bounce around a little. They were higher when
these numbers came out. Now they're down about one point
three percent. Some of these certainly worth repeating. Fourth quarter
iPhone revenue coming in above estimates at forty six point
two to two billion dollars, fourth quarter revenue coming in
at ninety four billion, ninety four point ninety three billion
(11:29):
dollars above estimates, but fourth quarter Greater China revenue coming
in below estimates. I do want to go back to
Ed Ludlow, who's standing by in San Francisco. He's only
had two minutes to look at these numbers China. That
certainly seems like a story here.
Speaker 3 (11:41):
Ed, Yeah, I mean you want wonderful summary. I mean, all,
how do you follow that? But I think that that's
the simple calculus. Overall iPhone revenue beat right, Greater China
slightly missed. It's not until the analyst call that you
get the commentary. It's usually from the CFO rather than
Tim Kirk that says, actually, by category or products are
(12:03):
be it iPhone, mac wearables, here's how we did, and
in that explanation we will find out did iPhone grow
in China or not? It's interesting, you know the miss
is it's a miss, you know, it's slight. The only
other thing that I point out is that you have
to read between the lines a bit. And the Apple
(12:23):
once again has a new record high of number of
installed devices around the world. That's the number of people
with an Apple hardware product or device somewhere in the world.
Speaker 1 (12:34):
It's growing. But where in particular, which product line. That's
kind of the question next.
Speaker 2 (12:38):
But that's an important number because increasingly, as people hold
onto these devices for longer, the more of them that
are out there, the more people are spending on services
like Apple TV plus, Apple Music, iCloud and the like.
I know, I'm certainly not buying new devices right now,
but I'm still spending each month quite a bit on
Apple and Apple loves that it's a high margin business.
Speaker 1 (12:58):
Yeah, the timing of this very interesting.
Speaker 3 (13:00):
So in the release they talk about the rollout of
Apple Intelligence, which is staggered. As Mark German has reported
here at Bloomberg News. Apple Intelligence is the company's proprietary
AI or generative AI offering. It's a suite of software
tools in iOS that can do various things. This past week,
I was offered to upgrade MYOS to eighteen point one.
(13:23):
Then I was put on a wait list for Apple Intelligence.
That's all lot preamble to say, we don't know anything
from this release. And you noted that services missed right,
that all this work they put in AI and all
of the delay translates to consumers spending more money within
the iOS or Apple ecosystem. And I know that many
analysts investors are going to be listening carefully for that.
Speaker 2 (13:45):
Let's go through some of these numbers again. If you're
just joining us. Apple shares down about one point seven
percent in the after hours. They reported just about four
minutes ago, five minutes ago, our fourth quarter revenue came
in above estimates at ninety four point ninety three billion dollars.
Quarter iPhone revenue came in above estimates at forty six
point two two billion dollars. That's a billion dollars more
(14:06):
than what analysts were expecting. Fourth quarter greater China revenue,
though coming in below estimates, Does that mean the iPhone
sixteen is a huge success ad.
Speaker 3 (14:15):
You have to read between the lines again until an
executive says it definitively on the call, you don't know.
But there were other areas that were a bit of
a surprise, right. iPad was a surprising miss despite having
released new generations.
Speaker 1 (14:29):
So take that.
Speaker 3 (14:30):
MAC revenue came in at one hundred million more than
the same period a year ago, or maybe sequentially in
line with expectations, so that's not giving a surprise contribution.
What's left we know revenue services revenue missed, maybe iPhone.
Speaker 2 (14:44):
Piecing it together, well, how much of the iPhone sixteen
was sold in this most recent quarter? Like, do we that? No,
we do in terms of availability.
Speaker 3 (14:53):
So in terms of availability, I'm trying to go through
the tank, you and the thing to look at the
inventory number because that's the next place that I can.
I can't find it yet because to me with another one,
and I'll try catch.
Speaker 2 (15:03):
Out, Okay, So I'll give you some time to look
for that. The reason I always am interested in that
is because they announced this thing in September, goes on
sale a few weeks later. The quarter ends after only
a couple weeks after that, iPhone goes on sale. In
some years Emily, they haven't even been able to put
the new phone on sale before the quarter of learning.
So it's just a question of okay, how many people
(15:25):
were buying the old iPhone versus the new iPhone right
here as an indication of how well is that new
model selling.
Speaker 4 (15:32):
I'll also add Tim that we are seeing Apple stock
extending some losses. You know, nothing huge here, and it is.
It has only been six minutes since Arnais came out,
but we do now see shares of Apple down about
one point seven percent, despite the fact that fourth quarter
revenue met estimates and was still up six percent year
(15:53):
over year, and also that service revenue up twelve percent
year over year but did slightly miss estimates.
Speaker 2 (16:00):
Taking a look now at our live blog. If you
have access to this on the Bloomberg terminal, do check
it out our own. Mark German, adding to what Ed
said that iprad is a surprising miss, coming out just
shy of seven billion, despite the release of that new
iPad Pro and iPad Air models earlier this year. That
new iPad Mini released this month unlikely to help materially.
Mark Kerman also writing that the Mac came in with
(16:22):
about one hundred million dollars annual revenue increase, meeting Wall
Street estimates of seven point seven billion dollars. New Max
released this week should help that product segment in the
current quarter, and I want to go back to you.
I know you've been diving into that ten Q speed
reading it. What sticks out to you from there.
Speaker 3 (16:39):
Well, not the inventries. They're basically very similar to the
same period a year ago. So I'm going to spend
a bit more time pondering that. You know, a story
of the megacaps so far in twenty twenty four has
been sweetness for shareholders and this is more dry stuff.
But you know that your audience on this show, whether
they're listening or watching, there are so many different types
(17:02):
of Apple investors out there where the role of a
dividend or shareholder returns is really important. And so whatever's
happening with any given products line or category, Remember this
Apple is a cash machine twenty seven billion dollars of
operating cash flow generated in the quarter. Hence they're able
to return relatively the same twenty nine billion dollars back
(17:23):
to investors. The differences is that in prior quarters, when
we've seen a sweetener like a divvy or a boost
into a buyback program, that's been a great thing for investors,
they've responded positively. On EM's note, just then, the stock
isn't really responding to that, right, there isn't some sort
of relief in that sense, knowing that the bar too
(17:44):
is high.
Speaker 4 (17:44):
Yeah, and you bring up a really good point that
I know you said it's dry, but it's not as
dry to me. I interview a lot of I know,
full managers.
Speaker 2 (17:52):
This is a nice little mix for you.
Speaker 4 (17:53):
You know, people always talk about cash rich companies and
how those kinds of companies are despite what the macro
economic environment is doing. If you buy a large company
that has a big, strong balance sheet, no matter what
the FED does, no matter what other earnings do, you'll
be safe. And I think that sentiment has really carried
(18:15):
these mega tex stocks this year, all the volatility.
Speaker 3 (18:19):
It's important because again there's a badge of honor for
many that comes with holding Apple stock, whether you're the
smallest retail investor or the giant on Wall Street.
Speaker 1 (18:26):
That's been the case for so long.
Speaker 3 (18:29):
But at the end of the day, you have in
the world of technology, two main operating systems for smartphones
iOS and the iPhone, and then Android, where a number
of handset makers are involved. And it comes back to
what's happened to Apple, and the cores are just gone.
It grew in every market around the world apart from
one greater China. Tim's question is did the iPhone do
(18:50):
great well? The question outstanding is as important as the
data that we've related to the audiences we don't know.
Speaker 1 (18:57):
Let us answer the question on the call.
Speaker 3 (19:00):
The iPhone grow in China and all of these things
investors take into account just as much as they do
the sweeteners that have put before them.
Speaker 2 (19:07):
All Right, We're going to hear from Apple executives on
the call a little later.
Speaker 4 (19:11):
ED.
Speaker 2 (19:12):
It's notable because it is I believe Luka Maistri's last
earnings call at Apple. He's going to be passing the
torch to his top deputy when the calendar turns to
twenty twenty five. Is that something that is meaningful to
you in terms of how this There's not a lot
(19:32):
of executive turnover at this company. These people have been
there for years. Can text you like that for us?
Speaker 3 (19:38):
On the one hand, Kevan Perek, who's you're like right,
his deputy and steps up to being CFO, is a
known quantity because he's been there and this was telegraphed.
But I've often posted in the Bloomberg Top Life blog
it's the blog we run during these big moments that
it's often my Strey rather than cook that gives you
the information that we'd consider news. It is some more
(20:00):
granular detail about performance of a specific product in a
specific market, like iPhone in China. He is widely seen
as being a master of the margin, right you think
about it, talked about cash generation but the bottom line
in general and Apple being a highly profitable company with
just insane amounts of cash on the balance sheet. You know,
(20:21):
Luke and Maistreet has been a big part of that story.
Does can Correct have the same prowess in that field?
It takes some quarters to find out, but you know,
when you're a journalists and an investor, you become familiar
with these names and you listen closely when they say
things because you know that they choose their words with purpose.
Speaker 4 (20:41):
Ed.
Speaker 2 (20:41):
We're going to give you a break in just a minute.
But last question to you is just give us the
high level view of Apple for people who are just
joining us right now.
Speaker 3 (20:52):
Yeah, in the quarter, Apple posted sales that were about
what everyone expected. They grew their sales in every geography
around world world apart from China. An iPhone which is
basically everything still for anyone that cares about Apple beat
estimates overall, but there's a lingering question about how it's
doing in China because it's such an important market. The
(21:13):
next phase, or the forward looking bit, is the work
they've done in AI. Working for them is a business
because services revenue came in a bit light.
Speaker 1 (21:23):
Now.
Speaker 3 (21:23):
Apple Intelligence is only just this week, last couple of
days been rolling out in markets like North America. It
is not available in the EU. It is not available
in China. But some explanation because we don't have it
in the release of how this amazing AI tech is
going to drive growth for them in terms of sales
and profit is probably the next logical thing to look at.
Speaker 2 (21:45):
D Love though, is the cohost of Bloomberg Technology on
Bloomberg TV.
Hosts And Creators
Tim Stenovec
Carol Massar
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