Intel Corporation (INTC)’s 4th Quarter 2014 Earnings Conference Call Transcript

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Operator
The next question comes from Ruben Roy from Piper Jaffray.

Ruben Roy, Piper Jaffray
Thank you. First question is for Brian, just around SoFIA, and some of the commentary that you had on expectations for a solid ramp in the second half. Just qualified internally, I believe. Is the chip qualified on network, and can you talk about design win traction at this point?

Brian Krzanich, Chief Executive Officer
Sure, so we have – let me start, there’s a series of SoFIA products. The first of the products is the SoFIA 3G, which is basically has a 3G modem. The second product will be SoFIA LTE, LTE modem. Add what we said was the 3G modem version, the SoFIA 3G has finished its internal qualification, which means that we’ve gone through and made sure that the apps processor is fully functional and the modem is working. All of that work is done, and it’s electrically and logically functional. We are in the process now, and we’ve got several design wins, and I’m just never able to go and tell you, but it’s with all of our major OEMs and partners plus some.
We are in the process now of going out to the carriers and getting the carrier certifications. That’s why we said actually – that’s the time difference between ramping a product or qualifying the product in Q-4 internally, and before our customers can ramp in the first half, There is a lot of that qualification getting it out there for the rest of the world. Same thing will happen, we said we would qualify internally in the first half the LTE, with the ramp of the second half, it’s that same process that’s going to occur.

Ruben Roy, Piper Jaffray
Thank you for that, Brian. Just a quick follow-up for Stacy, on the data center side. Solid year for ASP growth, and, I think over the last few years, you’ve been averaging mid to high single digit ASP growth. Can you talk a little bit about the drivers behind that, and if you think that’s sustainable over the next couple of years? Thanks.

Stacy Smith, Chief Financial Officer
Yeah. So, I think I said in the past, I view ASP growth in the data center product line as being much more akin to capacity additions. So, as the performance of the machines go up, as people move up in terms of one-way servers to two-way to four-way servers – we see that as an increase in ASP. But, it really is from the standpoint of a CIO, an increase in capacity that they go and buy.
How sustainable it will be? I don’t know. But, it is a segment of the market where as we bring technology in and that technology brings benefit to the customers, and increases their capacity and decreases their operate costs, we get paid for advancing technology faster than others can do it. I don’t know, Brian, if you want to add anything to that?

Brian Krzanich, Chief Executive Officer
I think you covered it well.

Ruben Roy, Piper Jaffray
Thanks.

Operator
The next question comes from John Pitzer from Credit Suisse.

John Pitzer, Credit Suisse
Good Afternoon guys. Brian, Stacy, nice job on the quarter! My first question, Stacy, is a follow-up on gross margins. You’ve given us Q-1, and you’ve told us that second half is going to be above the full year guide at 62. I’m kind of curious, relative to how you see the first half playing out. Is Q-1 going to be the trough, or do you have more, sort of, non-operational things like start-up costs in the June quarter that could actually have gross margins go down again sequentially in June, before rebounding in the second half?

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