Bloomberg Technology Special: Intel CEO Pat Gelsinger

Bloomberg Audio Studios, podcasts, radio news from Mahard. 0:00:09.440 --> 0:00:11.680 We're Innovation, Money and Power. 0:00:11.480 --> 0:00:13.840 Collie in Silicon Vallet NBN. 0:00:14.200 --> 0:00:18.720 This is Bloomberg Technology with Caroline Hyde and Ed Ludlow. 0:00:32.840 --> 0:00:35.840 Live from San Francisco. To our TV and radio audiences 0:00:35.880 --> 0:00:40.080 around the world. Welcome to a special edition of Bloomberg Technology. 0:00:40.080 --> 0:00:40.800 I'm Ed Ludlow. 0:00:40.840 --> 0:00:44.640 In just a few moments, Intel CEO Pat Gelsinger will 0:00:44.760 --> 0:00:48.400 join us for a live interview following their latest earnings report, 0:00:48.440 --> 0:00:53.360 the company giving a fourth quarter revenue forecast slightly above estimates, 0:00:53.360 --> 0:00:58.000 but sparking optimism that Intel is capable of reclaiming some 0:00:58.160 --> 0:01:00.400 lost market share in keycages. 0:01:00.840 --> 0:01:02.440 The shares are really surging. 0:01:02.480 --> 0:01:05.160 But it's also important to note two other giants of 0:01:05.200 --> 0:01:09.000 the technology world have also reported numbers this evening. Apple, 0:01:09.120 --> 0:01:11.880 the world's most valuable company, down two percentage points in 0:01:11.920 --> 0:01:15.160 after hours. It grew in every geography around the world, 0:01:15.400 --> 0:01:19.800 apart from in Greater China. iPhone revenue overall beat there's 0:01:19.880 --> 0:01:22.959 much to unpick there. Amazon gave a strong forecast for 0:01:23.000 --> 0:01:25.399 the final three months of this year, whether it's on 0:01:25.440 --> 0:01:28.520 an operating income basis or a revenue basis, and a 0:01:28.560 --> 0:01:32.200 return to growth in its cloud unit AWS. There is 0:01:32.240 --> 0:01:35.360 some signal that Amazon is regaining momentum. We will check 0:01:35.360 --> 0:01:37.959 in on all three names throughout the thirty minutes, but 0:01:38.040 --> 0:01:41.120 a focus right now is in Intel. It had a 0:01:41.120 --> 0:01:44.280 painful third quarter gone and it's given us a signal 0:01:44.440 --> 0:01:46.440 about what might come next. Let's first of all, go 0:01:46.600 --> 0:01:50.680 to Bloomberg's senior executive editor, Tom Giles, who leads technology 0:01:50.720 --> 0:01:51.800 coverage in the newsroom. 0:01:52.280 --> 0:01:53.200 Where to start. 0:01:53.240 --> 0:01:56.520 You know, Intel has moved on really from a painful 0:01:56.560 --> 0:01:59.280 third quarter and tried to tell us that it's regaining 0:01:59.320 --> 0:02:00.520 footing going fullwood. 0:02:00.760 --> 0:02:01.320 Take it from that. 0:02:01.440 --> 0:02:05.880 Tull slightly Slightly is the key here. A lot of 0:02:05.880 --> 0:02:08.000 what they did in the most recent quarter was they 0:02:08.040 --> 0:02:13.120 slash costs, slashed expenses, They cut headcount. They have taken 0:02:13.200 --> 0:02:16.920 a step back on investor payouts, so a lot of 0:02:16.919 --> 0:02:20.440 this is about retrenching. They did give a forecast for 0:02:20.520 --> 0:02:25.840 the fourth quarter that slightly exceeded analysts expectations. That was 0:02:25.960 --> 0:02:29.360 enough to get the stock moving. It's definitely up and 0:02:29.480 --> 0:02:32.200 after hours, but I look at the report and I 0:02:32.360 --> 0:02:35.480 see that they are not out of the woods yet 0:02:35.520 --> 0:02:38.919 by any stretch of the imagination. I look at their 0:02:39.520 --> 0:02:42.919 orders for AI chips. There's still not a lot of 0:02:42.960 --> 0:02:45.160 momentum there. They're not going to meet that five hundred 0:02:45.200 --> 0:02:49.000 million dollar threshold that they had talked about. We are 0:02:49.040 --> 0:02:52.800 still wondering about whether there's going to be interest after 0:02:52.800 --> 0:02:56.960 the election from an outside company. Bloomberg has reported on 0:02:57.080 --> 0:03:02.280 Qualcomm and their potential interest in an Intel deal. We've 0:03:02.320 --> 0:03:05.080 also reported that they're going to put that off until 0:03:05.120 --> 0:03:07.400 after the election, maybe not see a lot of movement 0:03:07.400 --> 0:03:10.760 there until after the new year. This was an investors 0:03:10.760 --> 0:03:13.919 are breathing a sigh of relief. But Gelsinger still has 0:03:13.960 --> 0:03:16.440 a lot of explaining to do and a lot of 0:03:16.480 --> 0:03:18.880 expectations that he still needs to live up. 0:03:18.800 --> 0:03:21.480 To, and we will get the opportunity to put those 0:03:21.560 --> 0:03:24.160 questions to him. Bloomberg, Tom Giles, thank you, stay with us. 0:03:24.200 --> 0:03:26.760 I want to bring in Bloomberg's Ian King, who's led 0:03:26.800 --> 0:03:30.200 semiconductor coverage in the Bloomberg newsroom since nineteen ninety. 0:03:29.880 --> 0:03:31.880 Eight and for a lot of that time. 0:03:32.240 --> 0:03:35.119 In all seriousness, Intel has led in certain products, right 0:03:35.560 --> 0:03:38.760 chips that go into PCs in some sense data center. 0:03:39.400 --> 0:03:43.360 But the quarter that just happened, their third quarter was painful. 0:03:43.640 --> 0:03:49.080 Billions of dollars of impairment charges, headcount reduction. Take that 0:03:49.160 --> 0:03:51.960 and explain why it's so important for this chip company 0:03:52.000 --> 0:03:53.360 to have taken those actions. 0:03:53.560 --> 0:03:55.880 Yeah, I mean Pat Gelsing has spelt it out. He said, 0:03:55.920 --> 0:04:00.200 we are resizing the company for the size of revenue 0:04:00.600 --> 0:04:03.720 that we expect going forward. And going forward we expect 0:04:03.840 --> 0:04:06.720 maybe three to five percent growth. If we push it, 0:04:06.760 --> 0:04:09.160 maybe we'll get into the sort of seven percent range. 0:04:09.200 --> 0:04:13.440 So that is a long way off what Intel's direct 0:04:13.520 --> 0:04:16.880 compares are doing right now, particularly in that AI chip market. 0:04:17.000 --> 0:04:19.320 Ian one more to you please. You spoke to Pat 0:04:19.360 --> 0:04:23.240 Gelsinger on the phone very quickly. Their business is split 0:04:23.279 --> 0:04:25.320 in two. There's the chips that they make that go 0:04:25.400 --> 0:04:30.240 into Pcason data centers. Then there's the manufacturing business. Gelsinger 0:04:30.279 --> 0:04:33.440 explained to you sort of the plan to run them 0:04:33.440 --> 0:04:36.200 as distinct divisions, but within one whole company. 0:04:36.400 --> 0:04:40.120 Yeah, he's talking about them being sort of better to 0:04:40.200 --> 0:04:44.119 be split but still together, which he was asked about 0:04:44.160 --> 0:04:46.240 again on the call, And people are still kind of 0:04:46.279 --> 0:04:48.920 struggling with this. It's like, well, how come if you're 0:04:48.920 --> 0:04:50.760 splitting them up, you're not going to go the whole 0:04:50.880 --> 0:04:54.120 way and split up the company and His point is like, no, no, 0:04:54.160 --> 0:04:56.680 we need to manage the overall finances and guess what, 0:04:56.960 --> 0:04:59.000 the majority of work that's going to be done in 0:04:59.040 --> 0:05:01.960 those factories is go to be our chips for the 0:05:02.000 --> 0:05:02.960 next couple of years. 0:05:03.120 --> 0:05:06.520 That's the Bloomberg News reporting on the numbers that Intel posted. 0:05:06.560 --> 0:05:08.640 You see them on the screen there, thanks to Bloomberg, 0:05:08.720 --> 0:05:12.000 Zy and King. Let's get reaction from the investment community. 0:05:12.120 --> 0:05:16.359 Joanne Feine is Advisor's capital management partner and portfolio manager 0:05:16.520 --> 0:05:19.920 actually currently with no exposure to Intel, but you're someone 0:05:19.920 --> 0:05:24.280 who's covered semiconductors semi capital equipment for many years at 0:05:24.360 --> 0:05:27.880 multiple firms. Just your reaction to the Intel print and 0:05:27.920 --> 0:05:29.560 what they told us about their progress. 0:05:31.279 --> 0:05:34.600 You know, they made a lot of progress, and that's 0:05:34.720 --> 0:05:37.160 an important step forward. They had a lot of cost 0:05:37.200 --> 0:05:38.960 cutting to do. They seem like they got a lot 0:05:38.960 --> 0:05:40.760 of it done last quarter, which is why we're seeing 0:05:40.800 --> 0:05:43.200 such a big charge, which had a large impact on 0:05:43.240 --> 0:05:46.240 that adjusted EPs. But you know, as Ian just said 0:05:46.279 --> 0:05:49.640 that they have a long way to go because they 0:05:50.320 --> 0:05:53.400 are taking a huge hit on their gross margin by outsourcing, 0:05:53.480 --> 0:05:56.799 and that reflects the lack of execution in the past 0:05:56.880 --> 0:05:58.479 on the manufacturing side. 0:05:58.839 --> 0:06:00.680 And it isn't just to an end. 0:06:00.839 --> 0:06:03.120 We didn't get good news about that this quarter. It's 0:06:03.160 --> 0:06:06.919 in fact really not going to play through until twenty 0:06:06.960 --> 0:06:09.600 twenty six when they rant Panther Lake in real volume. 0:06:10.400 --> 0:06:14.680 And even then, on the call, Pat Gelsinger said that 0:06:14.880 --> 0:06:18.360 seventy percent will be in house, but thirty percent will not, 0:06:18.400 --> 0:06:20.720 And I think that's a smart business decision. They have 0:06:20.800 --> 0:06:23.920 to be a reliable provider of that chip, and if 0:06:23.960 --> 0:06:26.920 there's any kind of hiccup in the yields they're going 0:06:26.960 --> 0:06:28.960 to get on Panther Lake, they had better have another 0:06:29.000 --> 0:06:31.920 source so they can meet their customer demands. But you know, 0:06:31.960 --> 0:06:34.760 the gross margin is everything. They've gone from over sixty 0:06:34.760 --> 0:06:38.400 percent down to under forty percent. Yes, and that's because 0:06:38.400 --> 0:06:40.440 they haven't executed. 0:06:40.480 --> 0:06:40.680 Now. 0:06:40.880 --> 0:06:43.520 I've always said that if somebody can write the ship, 0:06:43.520 --> 0:06:45.960 it's Pat Gelsinger, a former Intel guy and back at 0:06:45.960 --> 0:06:48.919 the Helm, and he's made incredible progress. He and Dave's 0:06:48.920 --> 0:06:51.599 Inzer have made incredible progress here this last. 0:06:51.440 --> 0:06:54.960 Quarter, and the stock is markedly higher and after hours. 0:06:54.960 --> 0:06:56.600 In a minute, I'm going to ask Ian about that 0:06:56.680 --> 0:06:59.359 kind of history of Intel and its leadership in the 0:06:59.360 --> 0:07:03.880 field of semi conductors. AI accelerators. Those are the GPUs, 0:07:03.960 --> 0:07:06.760 the high performance chips that we've all been talking about, 0:07:06.960 --> 0:07:09.359 because they go into data centers and they use to 0:07:09.440 --> 0:07:12.640 train AI models. And what Intel told us is that 0:07:12.720 --> 0:07:16.960 their version of that Goudy is not getting traction nowhere 0:07:17.000 --> 0:07:20.200 near the traction frankly that in video and AMD to 0:07:20.240 --> 0:07:23.120 a lesser extent of getting What did you make of that, Joan. 0:07:24.000 --> 0:07:26.800 Yeah, they're a distant follower and it's going to take 0:07:26.840 --> 0:07:29.840 them a lot to really make any inroads there. And 0:07:29.880 --> 0:07:33.200 it isn't just in video and AMD's new products, but 0:07:33.200 --> 0:07:36.560 it's also custom silicon that are coming out of the 0:07:37.040 --> 0:07:40.840 cloud guys themselves, like Google for example, working with Broadcom, 0:07:41.440 --> 0:07:45.520 Open Ai also evidently working with Broadcom. So there's a 0:07:45.560 --> 0:07:48.960 lot of players already there that have really outstanding products 0:07:49.600 --> 0:07:52.400 and you can see that in their soft guidance for 0:07:52.440 --> 0:07:55.560 twenty twenty five. They're targeting three to five percent revenue growth. 0:07:55.600 --> 0:07:57.760 That's what they're managing the business to and that really 0:07:57.840 --> 0:08:01.200 does reflect the different opportunity Intel has. It isn't just 0:08:01.280 --> 0:08:06.480 the AI accelerators, it's also that they've lost so much 0:08:06.520 --> 0:08:10.200 market share in server to AMD Okay. They used to 0:08:10.240 --> 0:08:13.520 be ninety seven percent. Now they're just around forty percent. 0:08:14.760 --> 0:08:17.080 Those are one of the questions that we'll get to you, Dranfeeni, 0:08:17.160 --> 0:08:18.480 stay with us for a moment. I want to go 0:08:18.480 --> 0:08:22.520 back to Bloomberg's Ian King. Historically, Intel was the leader 0:08:22.840 --> 0:08:26.000 in the product categories, but also in its margins. It 0:08:26.080 --> 0:08:28.880 was a company that had sixty percent margins or above. 0:08:29.360 --> 0:08:30.840 That is not the case anymore. 0:08:31.280 --> 0:08:35.520 Why Historically, what the massive advantage that they had was 0:08:35.559 --> 0:08:38.040 the best factories in the industry. Right These factories coust 0:08:38.120 --> 0:08:41.040 multiple tens of billions of dollars to put in the ground. 0:08:41.240 --> 0:08:43.520 But if they're good and if they give you better products, 0:08:43.760 --> 0:08:47.760 that's an asset. Right now, that is the reverse where 0:08:47.800 --> 0:08:50.720 they are not the best and they are weighing on 0:08:51.000 --> 0:08:52.880 the margins. And as we talked about it, and that 0:08:52.960 --> 0:08:55.960 was all of the questions they got, when are these advancements? 0:08:56.280 --> 0:08:59.319 Were the answers, well, two years. 0:08:59.280 --> 0:09:01.720 And what do you mean by So there's this foundry business, 0:09:01.760 --> 0:09:04.440 and part of it is serving Intel. They're their own 0:09:04.480 --> 0:09:07.840 biggest customer in the first instance, but they've named some 0:09:07.880 --> 0:09:10.479 pretty impressive people out there that they hope to manufacture 0:09:10.559 --> 0:09:13.920 chips for. There seems to be now a timeline building 0:09:13.960 --> 0:09:15.120 and when that might happen. 0:09:15.360 --> 0:09:19.000 Yeah, I mean the optimistic view is like, now we've 0:09:19.040 --> 0:09:22.960 made our factories great again. Now they're good. That'll help 0:09:23.000 --> 0:09:25.720 our products and it will also help us attract outside money. 0:09:26.040 --> 0:09:28.600 The analyst are turning around and saying, well, when and 0:09:28.640 --> 0:09:31.440 what's happening in the interim is, as Johanne said, they're 0:09:31.440 --> 0:09:34.280 still outsourcing a big chunk of their best stuff. So 0:09:34.360 --> 0:09:37.920 obviously that's horrendous margins and it has the negative impact 0:09:37.960 --> 0:09:40.040 of if you've got factories and you're not running them 0:09:40.080 --> 0:09:42.800 flat out making your best stuff, that's not a place 0:09:42.800 --> 0:09:43.679 where you want to be in this. 0:09:43.640 --> 0:09:44.880 Industry, Joanne. 0:09:44.880 --> 0:09:48.560 When I moved to California six years ago, Intel was 0:09:48.600 --> 0:09:51.840 part of the law and history of Silicon Valley. It's 0:09:51.920 --> 0:09:56.120 why people speak about them in that respect. In the 0:09:56.200 --> 0:09:58.760 court of gone, they took very painful decisions. And when 0:09:58.800 --> 0:10:01.240 I posted on social media that Pat Gelsinger was doing 0:10:01.280 --> 0:10:05.360 this special program, many voice support for him, but did say, look, 0:10:05.480 --> 0:10:08.120 there are some very difficult questions we still have. What 0:10:08.160 --> 0:10:11.240 would your difficult question be for him? 0:10:11.679 --> 0:10:13.439 How are you going to bring that gross margin up? 0:10:13.520 --> 0:10:16.280 And I guess the second one, and related is how 0:10:16.280 --> 0:10:19.760 do you convince potential foundry customers that they're going to 0:10:19.760 --> 0:10:22.719 get priority in those wafer starts when they need them? 0:10:22.720 --> 0:10:25.920 And that's always been the challenge in eras past. When 0:10:25.960 --> 0:10:29.600 Intel has talked about starting a foundry business, the concern 0:10:29.640 --> 0:10:32.840 among potential customers was, how do we know we're going 0:10:32.920 --> 0:10:35.000 to get the wafer starts that you promise us? How 0:10:35.040 --> 0:10:37.640 do we know you're not going to prioritize your own products? 0:10:38.120 --> 0:10:43.240 And then secondly, do they have the extensive libraries that 0:10:43.280 --> 0:10:46.480 they need to build chips for other companies? And that's 0:10:46.520 --> 0:10:49.320 a set of libraries that obviously have built up over many, 0:10:49.360 --> 0:10:53.079 many years and decades at TSMC and Samsung, But it's 0:10:53.120 --> 0:10:56.280 a new thing for Intel, and can they execute to 0:10:56.280 --> 0:10:58.520 build other companies' products as well as they do for 0:10:58.559 --> 0:10:58.960 their own. 0:11:00.160 --> 0:11:03.880 Amtheenia of Advisors, Capital Management, and of course Bloomberg's Ian King. 0:11:04.240 --> 0:11:07.360 Thank you to you both. Now we are joined by 0:11:07.400 --> 0:11:11.040 the Intel CEO, Pat Gelsinger, who's come straight from the 0:11:11.080 --> 0:11:14.760 company's call with analysts. Kindly, you are joining us live 0:11:14.760 --> 0:11:17.920 on Bloomberg Television and Radio, and Pat, thank you for 0:11:17.960 --> 0:11:18.800 your time. 0:11:18.920 --> 0:11:19.680 In the quarter gone. 0:11:19.679 --> 0:11:22.800 We were just talking about how you made painful decisions, 0:11:22.840 --> 0:11:26.040 and those showed up as impairment charges and were reflected 0:11:26.120 --> 0:11:28.839 on the bottom line to start, Could I ask if 0:11:28.880 --> 0:11:31.600 that's it now that those actions are taken and you 0:11:31.679 --> 0:11:34.120 now have line of sight on what you want to do, 0:11:34.240 --> 0:11:36.760 or if there will be more sort of restructure to come. 0:11:38.200 --> 0:11:41.480 Yeah, we worked very hard this quarter to get this 0:11:41.640 --> 0:11:46.720 done and the people actions, the restructuring chargers you'll largely 0:11:46.760 --> 0:11:50.320 finished this quarter, so it was a challenging quarter that way, 0:11:50.640 --> 0:11:53.959 but to also deliver better than expect the results if 0:11:53.960 --> 0:11:57.400 we eliminate those one time chargers and to take our 0:11:57.440 --> 0:11:58.720 guidance up for Q four. 0:11:59.080 --> 0:12:01.080 I'm very proud of our team being able to do 0:12:01.120 --> 0:12:02.199 both of those this quarter. 0:12:02.280 --> 0:12:05.679 Some of the most difficult restructuring charges maybe in the 0:12:05.720 --> 0:12:09.439 history of Intel since our memory microprocessor decision almost forty 0:12:09.520 --> 0:12:12.959 years ago. Getting that done and still beating results and 0:12:13.000 --> 0:12:16.600 taking the guide up, this was a very significant quarter 0:12:16.679 --> 0:12:21.000 for our team to execute. Very proud of their discipline results. 0:12:21.960 --> 0:12:24.960 Pat the investor base of cheering you. I'm going on 0:12:25.000 --> 0:12:27.720 the reaction of your stock in after hours, but a 0:12:27.720 --> 0:12:29.760 lot of that does seem to be a focus on 0:12:29.840 --> 0:12:32.319 what you were guiding to in the final three months 0:12:32.320 --> 0:12:35.400 of this year. Away from sort of the financials and numbers, 0:12:35.440 --> 0:12:38.240 could you talk a little bit about the product business 0:12:38.280 --> 0:12:41.400 and the foundry business that gave you some confidence in 0:12:41.440 --> 0:12:42.120 that guide. 0:12:43.040 --> 0:12:45.360 Yeah, and if we take it apart a little bit, 0:12:45.400 --> 0:12:49.800 the client business, we've launched our lunar Lake product, the 0:12:49.840 --> 0:12:55.000 second generation of our AIPC and the AIPC category very solid. 0:12:55.040 --> 0:12:58.560 We'll be launching the commercial version of that into a 0:12:59.200 --> 0:13:02.720 good market, believe next year for a Windows refresh, a 0:13:02.800 --> 0:13:06.440 corporate refresh cycle, and we start to see more strength 0:13:06.480 --> 0:13:10.439 in the AIPC category overall, with strong set of use 0:13:10.520 --> 0:13:14.440 cases and ISVs bringing new software into the marketplace. So 0:13:14.679 --> 0:13:17.880 we feel good about the client business. Data center quarter 0:13:17.960 --> 0:13:20.800 on quarter a little bit better than people forecast for 0:13:20.840 --> 0:13:24.640 that business, and a stronger product line with our Xeon 0:13:24.840 --> 0:13:28.840 six products now starting to ramp, you know. And finally 0:13:28.880 --> 0:13:32.560 on the Intel foundry quarter and quarter growth in that area, 0:13:32.920 --> 0:13:37.440 and a strong pipeline of external customers. We announced Amazon 0:13:37.559 --> 0:13:41.560 and two other AT and A customers, some additional advanced 0:13:41.600 --> 0:13:45.040 packaging customers. So we're starting to see that business come 0:13:45.120 --> 0:13:48.719 to life. And that's a long term business because when 0:13:48.720 --> 0:13:52.640 people move designs, it takes several years for major designs 0:13:52.679 --> 0:13:54.800 to move into our foundry. So we've been at it 0:13:54.880 --> 0:13:57.200 now a couple of years, and we're starting to see 0:13:57.200 --> 0:14:00.600 the results of those hard work and getting back to 0:14:00.679 --> 0:14:03.960 competitive process technology with AT and A. So a very 0:14:04.000 --> 0:14:06.240 good quarter of operational results. 0:14:07.200 --> 0:14:09.200 Pat we have a question from our audience, and that 0:14:09.320 --> 0:14:12.680 question comes from Clem DeLong, who's the CEO and founder 0:14:12.679 --> 0:14:15.320 of Hugging Face, and he makes the point that on 0:14:15.360 --> 0:14:19.760 his platform there are many more smaller models now available 0:14:20.120 --> 0:14:22.160 and it's leading him to have a question for you 0:14:22.600 --> 0:14:26.720 about Intel's place in the on device trend we're seeing 0:14:26.720 --> 0:14:29.320 with AI and how you're going to enable more on 0:14:29.400 --> 0:14:30.560 device AI use. 0:14:31.840 --> 0:14:34.840 Well, thank you, Clem, A great question, and a Hugging 0:14:34.840 --> 0:14:37.320 Face a great company, and you know, as you think 0:14:37.320 --> 0:14:39.800 about these models, you know we do see it moving 0:14:39.800 --> 0:14:43.400 from the training phase of you know, trillions of parameters 0:14:43.560 --> 0:14:46.760 to the inferencing phase, and exactly like the questioner says, 0:14:46.840 --> 0:14:49.840 in that inferencing phase, more of that will happen on 0:14:50.000 --> 0:14:53.240 prem for data center customers, and many of those smaller 0:14:53.320 --> 0:14:57.400 models will be retrained with enterprise's own data. 0:14:57.520 --> 0:14:58.280 A lot of those. 0:14:58.120 --> 0:15:02.200 Will just run on zeon need a special accelerator, or 0:15:02.200 --> 0:15:06.600 it'll be zeon plus an accelerator, but also then the 0:15:06.760 --> 0:15:10.000 edge use cases and AIPC use cases. 0:15:10.440 --> 0:15:10.520 Ed. 0:15:10.640 --> 0:15:13.240 I call it the three laws of the edge, right, 0:15:13.280 --> 0:15:14.920 the laws of physics, right, the. 0:15:15.080 --> 0:15:15.680 Speed of light. 0:15:15.720 --> 0:15:17.680 If I have to go to the cloud, I had time. 0:15:18.000 --> 0:15:21.040 Your second law is the law of economics, right, it's 0:15:21.120 --> 0:15:24.360 cheaper to run on my device. And finally the laws 0:15:24.400 --> 0:15:27.680 of the land. My data on my device in my 0:15:27.800 --> 0:15:30.400 data center. So we see it moving from a cloud 0:15:30.520 --> 0:15:33.960 training world to an edge and on prem world for 0:15:34.040 --> 0:15:35.160 inferencing for the future. 0:15:36.600 --> 0:15:39.400 I therefore have to ask you about GOUDI. Your AI 0:15:39.520 --> 0:15:42.160 accelerator did not get the traction that you'd hoped and 0:15:42.200 --> 0:15:45.320 you won't be making the outline target of five hundred 0:15:45.360 --> 0:15:48.520 million dollars in sales for this fiscal year or calendar year. 0:15:49.040 --> 0:15:52.320 Why is it a use case issue that the data 0:15:52.360 --> 0:15:55.160 center operators aren't looking at it or something else. 0:15:56.320 --> 0:15:56.520 Yeah. 0:15:56.600 --> 0:15:59.240 Two factors that we pointed out. One is is that 0:15:59.320 --> 0:16:01.800 now we have Gouty three coming out, so there's more 0:16:02.000 --> 0:16:06.160 enthusiasm for the next generation product that we're just starting 0:16:06.200 --> 0:16:09.400 to ramp now. The second one is the software and 0:16:09.560 --> 0:16:12.760 the software use cases the AI world has moved very 0:16:12.880 --> 0:16:17.480 rapidly and innovating very quickly, and the robustness and the 0:16:17.480 --> 0:16:20.960 completeness of the Gouty software stack hasn't been as great. 0:16:21.360 --> 0:16:25.720 And it's an accelerator, not a full reprogrammable GPU, so 0:16:25.760 --> 0:16:29.080 that makes some of the software porting and optimizations a 0:16:29.080 --> 0:16:32.560 bit more difficult. Obviously, as we get more of that 0:16:32.680 --> 0:16:36.960 running on Goudy, we solve the software problems. But secondly 0:16:37.000 --> 0:16:40.560 then it's also to move to a complete GPU capability, 0:16:40.680 --> 0:16:44.000 which we'll be doing out in time, and that development 0:16:44.040 --> 0:16:46.160 effort is also well underway, so we feel we have 0:16:46.200 --> 0:16:48.920 a solid position. The world is coming to more on 0:16:49.040 --> 0:16:52.880 prem and enterprise use cases. Like the last question ask 0:16:53.240 --> 0:16:57.160 and Gouty three good early indications from the marketplace and 0:16:57.200 --> 0:16:59.080 its success as we ramp it in twenty five. 0:17:00.080 --> 0:17:02.560 If you're just joining us on Bloomberg Television and Radio, 0:17:02.680 --> 0:17:07.400 we're live with the Intel CEO Pat Gelsinger. Pat Bloomberg's 0:17:07.400 --> 0:17:11.760 reported that arm and Qualcom, two of your peers, are 0:17:11.760 --> 0:17:16.400 interested in buying some or part of Intel. Can you 0:17:16.480 --> 0:17:19.520 confirm whether or not you received a formal offer from 0:17:19.520 --> 0:17:22.960 them or anyone else, and what Intel's consideration of them 0:17:22.960 --> 0:17:23.280 would be. 0:17:24.720 --> 0:17:29.000 Yeah, and Obviously, there's been rumors and churn in the industry, 0:17:29.240 --> 0:17:32.159 and I think all of that just indicates how important 0:17:32.280 --> 0:17:37.400 Intel is to the Intel into the industry structure and semiconductors, 0:17:37.400 --> 0:17:39.760 and how important those supply chains are. 0:17:40.160 --> 0:17:40.680 For the world. 0:17:41.160 --> 0:17:44.720 We don't view any of these rumors as particularly emeritus. 0:17:44.760 --> 0:17:49.399 We laid out a strategy, we reaffirmed that with our 0:17:49.440 --> 0:17:53.000 board of directors, and obviously, as we've taken these steps 0:17:53.440 --> 0:17:56.600 this quarter and restructuring and getting our costs where they 0:17:56.640 --> 0:17:59.520 need to be, we have the capacity to go on 0:17:59.560 --> 0:18:04.400 the journey that we've laid out to produce sustainable profitability 0:18:04.640 --> 0:18:08.360 and result in shareholder return. So with that, I'm committed, 0:18:08.400 --> 0:18:10.679 the team's committed, we have the board support for the 0:18:10.720 --> 0:18:13.720 strategy that we've laid out, and Q three shows that's 0:18:13.760 --> 0:18:14.800 exactly what we're going to do. 0:18:15.680 --> 0:18:19.120 But I've been trying to help our audience understand Intel's 0:18:19.160 --> 0:18:22.280 historic and current business right the products, but also foundry. 0:18:22.520 --> 0:18:24.840 And what you said was that twenty twenty six is 0:18:24.880 --> 0:18:28.600 when those third party customers start to show up. But 0:18:28.680 --> 0:18:31.640 could you just outline the path to that what you 0:18:31.680 --> 0:18:34.840 want to hold yourself to for next year in developing 0:18:34.880 --> 0:18:36.960 that business as a sort of standalone unit. 0:18:38.200 --> 0:18:41.200 Yeah, and it's a great question ed and clearly we've 0:18:41.280 --> 0:18:44.399 started to see that already emerge. And even this quarter 0:18:44.480 --> 0:18:48.960 we saw quarter and quarter growth of the external foundry business, 0:18:49.320 --> 0:18:51.600 largely driven by some of those early. 0:18:51.320 --> 0:18:52.639 Packaging design wins. 0:18:52.640 --> 0:18:55.919 So these advanced packages are sort of a faster on ramp, 0:18:56.200 --> 0:19:00.399 but ultimately it's becoming a wafer foundry for the d street. 0:19:00.560 --> 0:19:04.080 And as we said, three major design wins this quarter, 0:19:04.320 --> 0:19:07.560 you know, one with Amazon and two other compute use cases. 0:19:07.600 --> 0:19:10.000 So we'll be updating you know, the market as we 0:19:10.040 --> 0:19:13.440 win more of those customers and describing the lifetime deal 0:19:13.560 --> 0:19:16.679 value of those to the marketplace as well. So we'll 0:19:16.720 --> 0:19:20.840 give some of those breadcrumbs along the way. But it 0:19:20.920 --> 0:19:24.040 takes a couple of years for people to move these designs, 0:19:24.080 --> 0:19:26.119 a year to design it, a year to bring it 0:19:26.160 --> 0:19:30.160 into production until it starts to ramp in the marketplace. 0:19:30.560 --> 0:19:33.640 So key milestones for eighteen A that customers are now 0:19:33.680 --> 0:19:40.040 beginning those design cycles, the design tools, the design libraries. 0:19:39.440 --> 0:19:42.440 Are being moved over to eighteen A, but. 0:19:42.400 --> 0:19:45.520 It really isn't until twenty six that those results start 0:19:45.560 --> 0:19:48.760 to really help Intel's products. And then twenty six twenty 0:19:48.800 --> 0:19:52.320 seven until we start to see meaningful volumes externally. 0:19:53.520 --> 0:19:56.320 That way just days away from an election in this country, 0:19:56.760 --> 0:19:59.760 and I'm particularly interested in your assessment and planning for 0:20:00.160 --> 0:20:02.960 might happen to the Chips Act programs. Of course, I 0:20:03.000 --> 0:20:05.600 don't expect you to know what will happen in the election. 0:20:06.320 --> 0:20:09.200 You do not have a crystal ball. But former President 0:20:09.240 --> 0:20:13.520 Trump has kind of made disparaging remarks about President Biden's 0:20:13.560 --> 0:20:15.679 economic agenda. How are you planning for that? 0:20:15.760 --> 0:20:16.040 Please? 0:20:17.359 --> 0:20:20.440 Yeah, And I'd say maybe three different perspectives. Number One, 0:20:20.480 --> 0:20:23.600 the Chips Act was a bipartisan act and with that 0:20:23.760 --> 0:20:27.320 strong support from both sides of the aisle. And with that, 0:20:27.400 --> 0:20:31.440 we believe the importance of that in terms of industrial policy. 0:20:31.480 --> 0:20:38.199 The semiconductor industry is well supported by Congress and both parties. Second, 0:20:38.720 --> 0:20:42.399 we are disappointed by how long and how slow the 0:20:42.800 --> 0:20:47.320 dispensing of funds has been and well over two years 0:20:47.359 --> 0:20:50.359 at this point. I've invested thirty billion in capital and 0:20:50.400 --> 0:20:53.680 we've seen zero dollars of the Chips grants at this point. 0:20:53.920 --> 0:20:56.119 So we do believe that that has been too slow, 0:20:56.160 --> 0:20:59.360 and we're somewhat frustrated by that, and we've taken out 0:20:59.359 --> 0:21:02.680 of our financials four this year. That said Yil, there's 0:21:02.680 --> 0:21:05.800 also the Investment tax credit that we are seeing in 0:21:05.840 --> 0:21:08.320 It is much larger than the grant portion of the 0:21:08.400 --> 0:21:11.640 CHIPSAC and that is now law, and that will be beneficial. 0:21:11.880 --> 0:21:15.600 But clearly, I think whoever wins the election, the importance 0:21:15.640 --> 0:21:18.920 of this industry, the importance of rebuilding this supply chain 0:21:18.920 --> 0:21:23.399 of manufacturing is well supported. And Intel as a designer, 0:21:23.760 --> 0:21:27.320 R and D and manufacturer is unique in the United 0:21:27.359 --> 0:21:30.000 States and in the overall structure of the industry. And 0:21:30.040 --> 0:21:34.679 we expect the broad support rate of the administration regardless 0:21:34.760 --> 0:21:36.760 which party wins as a result. 0:21:36.960 --> 0:21:38.320 Thank you, Pat. 0:21:38.359 --> 0:21:41.520 Two quarters ago your CFO told me you were two 0:21:41.560 --> 0:21:45.160 over indexed to CPU, and we know what happened with Goudi. 0:21:45.800 --> 0:21:48.119 You made painful decisions in the court to gone reduce 0:21:48.200 --> 0:21:52.000 headcount by sixteen five hundred. Do you now have the 0:21:52.040 --> 0:21:55.800 plan in place and are you confident from here? 0:21:57.359 --> 0:21:59.480 You know, we laid out a clean sheet program that 0:21:59.520 --> 0:22:02.520 we went through to really benchmark the business. We took 0:22:02.560 --> 0:22:06.440 a conservative view of the funding plan, as we call 0:22:06.520 --> 0:22:09.600 it internally, saying you know, we're taking a modest growth 0:22:09.640 --> 0:22:12.880 outlook and we're building our cost structure to that very 0:22:13.320 --> 0:22:16.320 modest outlook, but we've also built now a lot of 0:22:16.359 --> 0:22:18.960 optionality to scale up into the business. We have a 0:22:19.000 --> 0:22:23.280 shell ahead where we have capacity that we can scale 0:22:23.320 --> 0:22:28.840 into if necessary, and we've made a smaller, more efficient 0:22:29.000 --> 0:22:33.399 Nimbre company that is able to execute with more agility 0:22:33.480 --> 0:22:36.520 and speed as well. So we feel like we're now 0:22:36.680 --> 0:22:39.720 well set up for the future. This was a challenging 0:22:39.800 --> 0:22:42.879 quarter for me for the company, but we feel like 0:22:42.920 --> 0:22:45.160 we're well set up for the future. And the good 0:22:45.200 --> 0:22:49.440 operational results that exceeded the markets expectations and the increased 0:22:49.440 --> 0:22:51.919 guidance for Q four, we feel like we're now in 0:22:51.960 --> 0:22:53.040 a very solid position. 0:22:54.359 --> 0:22:57.080 Intel CEO Pat Gelsinger, thank you for joining us here 0:22:57.119 --> 0:22:59.679 on this special bluebot technology straight from the analyst school. 0:23:00.000 --> 0:23:00.800 Appreciate your time. 0:23:00.920 --> 0:23:04.680 Thank you, ed like always, Okay, let's get more reactions 0:23:04.680 --> 0:23:07.040 to that conversation the numbers and what is the big 0:23:07.080 --> 0:23:11.240 earning story this Thursday Bloomberg Intelligence and this Congensabani who's 0:23:11.280 --> 0:23:14.880 just posted his reaction on the Bloomberg terminal saying details 0:23:14.920 --> 0:23:18.200 on two new eighteen eight customers will be key to 0:23:18.320 --> 0:23:21.600 offset pains from the third quarter pains that We've just 0:23:21.640 --> 0:23:24.480 been through extensively, Kunjan, But just go a bit deeper 0:23:24.520 --> 0:23:26.560 into your thesis and your reaction to what Pat said. 0:23:26.960 --> 0:23:28.840 Yeah, this is a name that I struggled with most 0:23:29.359 --> 0:23:31.440 ed there were a lot of positives. If you want 0:23:31.440 --> 0:23:34.679 to take a positive view, right, they came in slightly better. 0:23:35.119 --> 0:23:36.280 You have to if you want to. 0:23:36.600 --> 0:23:39.479 But to be fair, they came in slightly better than 0:23:39.600 --> 0:23:42.760 feared on most top line Q three, Q four, the 0:23:42.760 --> 0:23:44.960 free cash flow target is moving in the right direction. 0:23:45.080 --> 0:23:48.840 The gross to netcapax, the ratio is improving. But at 0:23:48.840 --> 0:23:51.359 the same time, we thought the gross margin floor was 0:23:51.400 --> 0:23:54.080 sort of something they already said last quarter. Right, so 0:23:54.160 --> 0:23:57.560 we have this massive significant impairment charges. Yes, you can 0:23:57.600 --> 0:23:59.680 ignore that, and the gross margin was better than a 0:24:00.080 --> 0:24:02.800 bit of there, but you have to make sure, right, 0:24:02.840 --> 0:24:05.359 how many times are we going to draw this clean 0:24:05.359 --> 0:24:06.080 sheet and go on? 0:24:06.160 --> 0:24:09.959 From their AI accelerators, the chip that everyone talks about, 0:24:10.080 --> 0:24:12.879 Goudie's not getting traction. They won't make five hundred million 0:24:12.880 --> 0:24:16.000 dollars in sales this year. What was your reaction to that. 0:24:16.000 --> 0:24:18.360 That's part of sort of the negatives out of today, right, 0:24:18.520 --> 0:24:21.040 the AI story doesn't seem to get any better In fact, 0:24:21.040 --> 0:24:23.440 this announcement makes it sort of slow down even more. 0:24:24.080 --> 0:24:27.399 Based on the implied guide of for DCAI, it seems 0:24:27.480 --> 0:24:30.080 that the share loss have not stopped. And on the 0:24:30.160 --> 0:24:33.480 other hand, you have the competitor AMD suggesting strong turing 0:24:33.600 --> 0:24:36.480 ramp next quarter, right versus a flatish guide from Intel. 0:24:36.520 --> 0:24:39.560 So that tells me both in CCG and Data Center 0:24:39.880 --> 0:24:41.680 that the share loss have not stopped yet. 0:24:42.080 --> 0:24:45.600 Bloomberg Intelligence analyst can Jensavanni, we just talked about his research, 0:24:45.680 --> 0:24:46.680 but check it out on. 0:24:46.640 --> 0:24:47.720 The Bloomberg terminal. 0:24:48.240 --> 0:24:50.480 I want to get the final word with Bloomberg Senior 0:24:50.520 --> 0:24:54.080 executive editor Tom Giles, who has led this news rem 0:24:54.359 --> 0:24:55.240 for a long time. 0:24:55.800 --> 0:24:57.440 Interesting interview. 0:24:57.640 --> 0:24:59.800 I think, you know Pat Gelsia coming clean on how 0:25:00.240 --> 0:25:02.800 it is, but he still projects confidence. 0:25:06.440 --> 0:25:07.159 I just watch you. 0:25:07.800 --> 0:25:11.680 My overall takeaway from that conversation with Pat was he's 0:25:11.720 --> 0:25:15.280 really trying to accentuate the positive. He acknowledged it's difficult 0:25:15.320 --> 0:25:18.280 to cut sixteen five hundred jobs. They made some really 0:25:18.320 --> 0:25:23.280 hard decisions in the quarter. At the same time, he's 0:25:23.359 --> 0:25:26.160 being as honest as he could about the AI outlook. 0:25:26.520 --> 0:25:29.080 You need to have if you're a ship maker right now, 0:25:29.400 --> 0:25:32.560 you need to be able to sell an AI story 0:25:32.800 --> 0:25:35.240 and Intel is just not doing that right now. 0:25:37.080 --> 0:25:40.119 Ian King has been sending the headlines we're reporting on 0:25:40.160 --> 0:25:44.199 the terminal right that this is difficult, but they demonstrated progress. 0:25:44.200 --> 0:25:46.560 Bloomberg's Tom Giles, who leads the news room here at 0:25:46.560 --> 0:25:50.240 Bloomberg Technology, thank you very much. This was part of 0:25:50.240 --> 0:25:53.560 a mega earnings period. Right when it comes to the megacaps, 0:25:53.600 --> 0:25:54.720 Intel's still the story. 0:25:55.080 --> 0:25:56.640 It's up eight percentage points. 0:25:56.920 --> 0:26:00.000 Apple, the world's most valuable company in Amazon also reports. 0:26:00.600 --> 0:26:01.520 But the movements in. 0:26:01.520 --> 0:26:05.480 There after hours stock was a little bit more muted 0:26:05.680 --> 0:26:09.920 and a difficult one. Intel up eight percent. It's an 0:26:09.920 --> 0:26:10.720 interesting one. 0:26:10.800 --> 0:26:11.000 You know. 0:26:11.119 --> 0:26:13.960 I don't know whether or not investors will stay with 0:26:14.000 --> 0:26:16.439 the momentum in the stock. If they believe it, they 0:26:16.480 --> 0:26:19.720 will have to. I guess Tom Giles digest what Pat 0:26:19.880 --> 0:26:20.840 Gelsinger told us. 0:26:21.720 --> 0:26:24.800 Yeah, absolutely. I mean it's surged a lot, it's come 0:26:24.840 --> 0:26:27.560 back a little bit. I think as the market as 0:26:28.040 --> 0:26:30.840 the reality sinks in that they've got a tough row 0:26:31.080 --> 0:26:35.639 to hold ahead. And it's just it's there was not 0:26:36.000 --> 0:26:40.160 enough in this story to say that Intel is in 0:26:40.200 --> 0:26:43.320 the clear, and I thought Pat was upfront about that 0:26:43.400 --> 0:26:45.560 as much as he really tried to accentuate how good 0:26:45.560 --> 0:26:46.160 things are going. 0:26:46.240 --> 0:26:46.560 Got it. 0:26:47.800 --> 0:26:51.639 Bloombg's Tom Giles again, Senior executive editor for Bloomberg Technology. 0:26:51.680 --> 0:26:52.359 We appreciate it. 0:26:52.400 --> 0:26:56.200 That does it for this edition, special edition of bloombate Anology. 0:26:56.240 --> 0:26:59.680 We'll be back tomorrow morning and we'll review the entire thing. 0:27:00.080 --> 0:27:00.879 This is Bloomberg