In an interview on FOX Business Network, Intel (NASDAQ:INTC) CEO Paul Otellini talks earnings, insider trading, the economy, health care and cap and trade.
Below are excerpts and full transcript from the interview: Courtesy of Fox Business News.
On Intel’s earnings:
“There is concern that this is the peak, in terms of our earnings capability. We obviously don’t think so. In terms of raw sales, the data is that this year there will be more personal computers sold than last year, in the middle of a recession.”
On consumer sales in the U.S.:
“Consumer sales here are good. The back to school season was extraordinary. I think there is a lot of anticipation for this selling season for the holiday.”
On Rajiv Goel, who has been accused of leaking information:
“My first thought was ‘who’s Rajiv Goel’—I’d never heard of this guy. He’s a fairly low-level guy.”
“People are people. I don’t want to judge him. He hasn’t been arrested. I think he’s only been charged. If this is true, he’s out.”
On the economy and creation of new jobs:
“Take the uncertainty out. Businesses hate uncertainty. Give businesses a clear view of taxation, health care costs, can you get H1V Visas for employees you want to hire, those kinds of things.”
“At the end of the day, ending recession is about confidence. Rebuilding confidence, it’s not about a different structure of the banks or anything. Do people have confidence that the economy is going to be better tomorrow than today. That will happen as the GDP improves and I think people will expand if you take the variability out.”
On government stability during the recession:
“You can argue on too much was spent or too little on TARP and thing s like that. The net result is we survived, the system survived. At the end of the day that will turn out to be a small investment for putting the stability into the system at the time it did. And it wasn’t just the United States, we helped stabilize the entire world with our actions.”
On a public health care option:
“At face value, I don’t think it would help our employees. They get a fairly good health package today – they have a lot of choice today. I would be afraid of any option that took away that choice.”
On Cap and Trade:
“I don’t think I like what is being proposed. It doesn’t take into account the fact that people build things for a global basis and you have global competition. This either has to be done on a global basis; otherwise all you’re doing is moving the pollution and making the U.S. less competitive.”
David Asman: WE ARE JOINED NOW IN A FIRST ON FOX BUSINESS INTERVIEW WITH THE CEO OF INTEL, PAUL OTELLINI. IT’S GOOD TO SEE YOU IN PERSON.
NOW LAST WEEK, UNBELIEVABLE THIRD QUARTER EARNINGS, AND WHAT IMPRESSED MOST PEOPLE WAS THAT IT WAS TOP LINE EARNINGS GROWTH. AND THERE HAVE BEEN SO MANY PEOPLE WHO HAVE COME OUT WITH POSITIVE EARNINGS BASED ON FIRING PEOPLE AND CUTTING COSTS. THIS WAS BASED ON INCREASED SALES, AND IT REALLY SPARKED, WHAT WE SEE NOW, THE MARKET IS NOW AT 10,100, THAT’S WHAT KIND OF SPARKED THE MARKET RALLY LAST WEEK. BUT EXPECTATIONS ARE SO HIGH FOR YOU TO INCREASE COMPUTER SALES. DO YOU THINK EXPECTATIONS ARE TOO HIGH NOW?
Otellini: I DON’T THINK SO ACTUALLY. IF IT WAS TOO HIGH THE STOCK WOULD HAVE GONE UP AFTER EARNINGS AS OPPOSED TO STAYED FLAT OR GONE DOWN A LITTLE BIT. THERE IS CONCERN IS THIS THE PEAK, IN TERM OF THE EARNING CAPABILITY. WE DON’T THINK SO. IN TERMS OF THE RAW SALES THE DATA IS THAT THIS YEAR, THERE WILL BE MORE PERSONAL COMPUTER UNITS SOLD THAN LAST YEAR IN THE MIDDLE OF RECESSION.
David: YOU SUGGESTED IT MIGHT BE 10%.
Otellini: NO, I SAID UP A COUPLE OF PERCENT.
David: OKAY. ALL RIGHT.
Otellini: THIS YEAR. YOU KNOW, WITH THE YEAR STARTED OUT DOWN 10%. AND THIS SHOWS THE RESILIENCE OF TECHNOLOGY.
David: I WANT TO MAKE IT STRAIGHT BECAUSE IT HAS BEEN MISREPORTED THEN. IT’S BEEN REPORTED ELSEWHERE — THIS IS AN A.P. STORY — 2010 P.C. UNITS COULD INCREASE 10%.
Otellini: 2010. I WAS TALKING ABOUT 2009 VERSUS 2008. THE RECESSION YEAR –
David: YOU STICK BY 2010 –
Otellini: WE DIDN’T MAKE A FORECAST FOR 2010. THAT’S PROBABLY GARTNER OR SOMEONE. IT WOULDN’T ARGUE WITH THE NUMBER. TRADITIONALLY IT GROWS 10 TO 11% A YEAR. IN BOOM YEARS IT CAN BE TWICE THAT. IN BUST YEAR, IT’S THE LOW, 6, 7, 8% NUMBERS.
Liz Claman: YOUR GUIDANCE WAS REALLY GOOD FOR Q-4. VERY STRONG. ABOUT 10.1 BILLION VERSUS WHAT PEOPLE TALK ABOUT THE WHIS HER NUMBER OF – WHISPER NUMBER OF 9.5 BILLION. WHAT IS DRIVING THIS, AS OPPOSED TO THREE QUARTERS AGO WHERE IT WAS A TOUGHER ATMOSPHERE.
Otellini: WE CALLED THE BOTTOM IN FEBRUARY. WE THOUGHT THINGS HAD TROUGHED OUT AND WOULD IMPROVE. WHAT DRIVEN IS THE SAME THING ALL YEAR. TWO THINGS CONSUMER IS BUYING — WORLDWIDE CONSUMERs ARE BUYING NOTEBOOKs AND NETBOOKs AND CHINA HAS BEEN STRONG ALL YEAR LONG.
Liz: HOW ABOUT IN THE U.S.?
Otellini: CONSUMER SALES HERE ARE GOOD. BACK-TO-SCHOOL SEASON WAS EXTRAORDINARY.
I THINK THERE IS A LOT OF ANTICIPATION FOR THIS SELLING SEASON. FOR THE HOLIDAY. A STUDENT GOES TO SCHOOL AND THEY ARE GOING TO NEED A NOTEBOOK. CAN’T DO IT WITHOUT IT.
David: AND THEN THERE IS WINDOWS 7. FOR A LOT OF YEARS, BUSINESSES SAID WE CAN PUT OFF UPGRADING BECAUSE WE’RE NOT TOO IMPRESSED WITH VISTA AND OTHER PRODUCTS BUT WINDOWS 7 MAY REALLY CHANGE ALL THAT. HOW DO YOU THINK IT WILL? HOW ARE YOU AT INTEL CHANGING YOUR STRATEGY BECAUSE OF THAT?
Otellini: THREE THINGS COMING TOGETHER. ONE, IT’S BEEN A LONG TIME SINCE PEOPLE UPGRADED. MOST CORPORATIONS ARE USING XP, ALMOST TEN YEARS NOW. SECOND THING, GENERATION OF HARDWARE THAT PEOPLE HAVE IN THEIR SHOPS TODAY IS OLD. THE FLEET IS OLD. THE AVERAGE DESK TOP IS FIVE YEARS OLD AND THE AVERAGE NOTEBOOK IS FOUR YEARS OLD. THAT MEANS THEY’RE OUT OF WARRANTY, SO THEY COST CORPORATIONS MORE TO KEEP THAN BUY A NEW ONE. YOU BUY A NEW ONE AND YOU GET NEW SOFTWARE AND SECURITY FEATURES. I THINK ALL THAT LEADS TO A PENT-UP DEMAND, PARTICULARLY IF YOU GET THE CFOs SEEING THE LIGHT AT THE END OF THE TUNNEL IN TERMS OF THE BUSINESS IMPROVING FOR 2010. IT COULD START REFRESH CYCLE AGAIN.
Liz: I HAVE TO ASK ABOUT THE SITUATION NOW THAT POPPED UP LATE LAST WEEK. THE INSIDER TRADING SCANDAL. GALLEON HOLDINGS WHERE THE MAN RUNNING IT HAS MOLES INSIDE COMPANY, INTEL AMONG THEM, WHERE A MEMBER WHO WORKED IN YOUR TREASURY DEPARTMENT AS I UNDERSTAND IT, HAS BEEN ARRESTED. THIS IS A GALLEON FOUNDER AND GUY NAMED RAJIV GOEL IS EXECUTIVE IN YOUR COMPANY. WHEN YOU HEARD ABOUT THIS, WHAT WAS YOUR FIRST THOUGHT.
Otellini: WE’LL MY FIRST THOUGHT WAS WHO’S RAJIV GOEL. HE’S A FAIRLY LOW LEVEL GUY IN OUR I-CAP OR VENTURE CAPITAL ARM. ASSIGNED TO TREASURY. THE ALLEGATIONS ARE THAT HE LEAKED INFORMATION IN 2006 ABOUT THE EARNINGS AND THE CLEAR WIRE TRANSACTION.
Liz: WERE YOUR LIVID? THIS IS AN EMPLOYEE?
Otellini: SURE. SURE. WE HAVE A ZERO TOLERANCE POLICY ON THIS AS YOU CAN IMAGINE. BUT PEOPLE ARE PEOPLE. I DON’T WANT TO JUDGE HIM. HE HASN’T BEEN ARRESTED. I DON’T THINK — I THINK HE’S JUST BEEN CHARGED. BUT IF THIS IS TRUE, THAT’S — HE’S OUT. HE HAS TO FIND A NEW PLACE TO MAKE A LIVING.
Liz: ARE YOU WORKING WITH THE S.E.C. OR OTHER FEDERAL OFFICIALS TO SCREEN OTHER PEOPLE THAT MIGHT HAVE HELPED THE INSIDE TRADER?
Otellini: NOT TO MY KNOWLEDGE. TO MY KNOWLEDGE THEY’VE NOT REQUESTED ANYTHING.
THEY DIDN’T NOTICE US EARLY ON. THIS GOES TO 2006. THEY WERE PROBABLY WATCHING THINGS FOR A LONG PERIOD OF TIME WHICH I WOULD EXPECT THEM TO DO WHEN THEY HAVE THE HINTS OF INSIDER TRADING SOMEWHERE. TO MY KNOWLEDGE, THEY DIDN’T ASK THE COOPERATION. OF COURSE, IF THEY ASK –
David: BUT ARE YOU DOING INTERNAL CHECKS TO MAKE SURE NOBODY ELSE IS INVOLVED.
Otellini: THERE’S NOTHING YOU CAN DO. YOU CAN’T PROVE THE NEGATIVE AS YOU KNOW.
YOU CAN REINFORCE WHAT THE POLICIES ARE. ANYONE WHO MIGHT HAVE BEEN THINKING ABOUT IT, IS PROBABLY NOT THINKING ABOUT IT TODAY. THE LONG ARM OF JUSTICE CAN REACH OUT.
Liz: YOU HAVE SO MUCH GROWTH ON ANY GIVEN DAY. SO I’M SURE IT’S TEMPTING FOR ANYONE WHO WANTS TO DO WELL ON THE STOCK. THE STOCK HAS DONE WELL SINCE THE FIRST OF THE YEAR. AND WHEN IT WAS HITTING ITS LOWS DURING THE RECESSION. LET’S TALK ABOUT THE GLOBAL PICTURE BUT MORE IMPORTANTLY PERHAPS HERE IN THE US HERE THE ECONOMY. ARE WE DOING ENOUGH IN YOUR PERSPECTIVE FOR JOB CREATION? WE ALWAYS LIKE TO GET THE PRIVATE SECTOR VIEW HOW TO GENERATE JOBS BECAUSE UNEMPLOYMENT LOOKS LIKE IT’S TICKING UP, UP, UP.
Otellini: GOVERNMENT DOESN’T GENERATE THE JOBS. PRIVATE SECTOR DOES AS YOU KNOW. THE GOOD NEWS IS THE ADMINISTRATION IS CONCERNED ABOUT THIS AND IS ASKING THE BUSINESS LEADER WHAT IS DO YOU THINK? I’VE BEEN ASKED THE QUESTION AND I GIVE THE SAME ANSWER I TELL YOU. TAKE UNCERTAINTY OUT. BUSINESSES HATE UNCERTAINTY. IF YOU DON’T KNOW WHAT THE TAX RATE IS NEXT YEAR OR IF YOU CAN REPATRIATE MONEY OR NOT, IF YOU DON’T KNOW IF YOU HAVE R&D TAX CREDIT NEXT YEAR OR NOT. IT CHANGES INVESTMENT DECISIONS. R&D YOU MAKE OVER FIVE AND TEN-YEAR PERIOD IN TERMS OF THE INVESTMENT. TO NOT KNOW IF YOU HAVE THAT CREDIT IS DIFFICULT THING TO DO. YOU’RE TALKING ABOUT A SIGNIFICANT INCENTIVE, OR DISINCENTIVE IF IT DOESN’T HAPPEN. TAKE THE VARIABILITY OUT.
Liz: FOR BUSINESSES.
Otellini: YEAH. GIVE BUSINESS A CLEAR VIEW OF TAXATION, HEALTH CARE COSTS, CAN YOU GET THE H1V VISAS FOR EMPLOYEES YOU WANT. AT THE END OF THE DAY, ENDING RECESSION IS ABOUT CONFIDENCE. REBUILDING CONFIDENCE. NOT ABOUT A DIFFERENT STRUCTURE IN THE BANKS OR ANYTHING. DO THE PEOPLE HAVE CONFIDENCE THAT THE ECONOMY IS GOING TO BE BETTER TOMORROW THAN TODAY? THAT WILL HAPPEN AS THE GDP IMPROVES AND PEOPLE EXPAND AND YOU TAKE THE VARIABILITY OUT.
David: CONFIDENCE IS COMING BACK. WE SEE IT IN THE MARKET. 10,112 IS WHAT THE DOW IS AT RIGHT NOW.
Otellini: CONSUMER CONFIDENCE AS WELL.
David: CONSUMER CONFIDENCE. ARE YOU GETTING THAT SENSE OF STABILITY. NOT JUST THE OBAMA ADMINISTRATION BUT GOING BACK TO WHEN IT STARTED IN THE FALL, THERE’S A PANIC MODE FOR WHICH THERE IS NO ADVANCE PLANNING. DO YOU GET THE SENSE THAT PEOPLE HAVE PUT THE PANIC BEHIND THEM AND THEY ARE NOW TRYING TO PLAN THOSE FOLKS INSIDE THE BELTWAY?
Otellini: I THINK SO. I WAS SPENT MOST OF LAST WEEK THERE. IT’S EASY TO GO BACK AND PLAY MONDAY MORNING QUARTERBACK ON THIS ONE. IN THE FOURTH QUARTER OF LAST YEAR, NO ONE KNEW WHAT THE BOTTOM ONE. WE WERE SCARED ABOUT THE SYSTEM COLLAPSED. WE CAN ARGUE IF TOO MUCH OR TOO LITTLE WAS SPENT ON TARP. THE NET RESULTS IS WE SURVIVED. THE SYSTEM SURVIVED. AND END OF THE DAY IT WILL BE A SMALL INVESTMENT TO PUT THE STABILITY IN THE SYSTEM AT THE TIME IT DID. AND IT WASN’T JUST THE UNITED STATES, WE HELPED TO STABILIZE THE WORLD WITH THE ACTION.
David: HEALTH CARE. YOU RUN A HUGE COMPANY. DO YOU FEEL PUBLIC OPTION IN THE PRIVATE INSURANCE MIX IS A GOOD WAY TO GO. WILL IT COST YOU MORE OR LESS.
Otellini: DON’T ENOUGH ABOUT IT. AT FACE VALUE, I DON’T THINK IT WOULD HELP THE EMPLOYEES. IT I WOULD BE AFRAID OF THE OPTION THAT TOOK AWAY THE CHOICE. I FEAR A PUBLIC OPTION WOULD DO BY VIRTUE OF THE POSITION. IN THAT SENSE, I WOULDN’T LIKE IT. THERE ARE OPPORTUNITIES LIKE THE BAUCUS BILL ON EXCHANGES THAT ARE INTERESTING. WE MIGHT LOOK AT THOSE. OUR VIEW IS TAKE CONTROL OF THE OWN DESTINY. WE PUT IN A WELLNESS PLAN THE LAST THREE YEARS THAT ALLOWED US TO ATTENUATE THE GROWTH OF HEALTH CARE COST IN THE UNITED STATES. WE HELD FLAT FOR EMPLOYEE. WITHOUT PUTTING THE ADDITIONAL COST ON THE BACK OF THE EMPLOYEE. FOR PEOPLE TO FOCUS ON THE WELLNESS, DIET PLANS.
David: I’VE GOT TO ASK YOU ABOUT THE OTHER TRILLION DOLLAR PLAN IN THE WORKS, CAP AND TRADE. WHERE DO YOU STAND ON THAT?
Otellini: I DON’T THINK I LIKE WHAT’S PROPOSED. I HAVE SEEN ONE VERSION OF IT. OUT OF CANTWELL’S OFFICE. I DON’T THINK IT TAKES INTO ACCOUNT THAT PEOPLE BUILT THINGS FOR A GLOBAL BASIS AND YOU HAVE GLOBAL COMPETITION. AND I DON’T KNOW HOW YOU EFFECTIVELY BUILD A TRADE BARRIER,WHICH IS WHAT THAT BECOMES. AND PEOPLE WHO IMPORT THINGS THAT COME FROM OTHER COUNTRIES WHO DON’T HAVE AN ENERGY TAX HOW THAT WORKS OUT. SO THIS EITHER HAS TO BE DONE ON A GLOBAL BASIS.
David: HAVE A LEVEL PLAYING FIELD.
Otellini: OTHERWISE YOU JUST MOVE POLLUTION AND YOU ARE MAKING THE U.S. LESS COMPETITIVE.
Liz: PAUL OTELLINI, CEO OF INTEL COMING HERE FIRST ON FOX BUSINESS. THANKS TO YOU.
WE APPRECIATE IT.
David: ONE QUESTION I WANTED TO ASK. DID YOU EVER WANT TO BE A PRIEST?
Otellini: MY BROTHER TOOK THAT JOB.
David: OH, MAN! ONLY ONE IN THE FAMILY.
Otellin: YEP.
David: PAUL, GREAT TO SEE YOU.
Otellini: THANK YOU.
Liz: NICE TO SEE YOU.
