Exhibit 99.1
Intel Fourth-Quarter Revenue of $8.74 Billion at Record Level; Fourth-Quarter
Earnings Per Share $0.33; EPS Includes $0.09 Goodwill Impairment Charge and
$0.09 Tax Benefit on Divestitures
SANTA CLARA, Calif.--(BUSINESS WIRE)--Jan. 14, 2004--Intel
Corporation today announced fourth-quarter revenue of $8.74 billion,
up 12 percent sequentially and up 22 percent year-over-year.
Fourth-quarter revenue was slightly higher than the previous record of
$8.73 billion set in the third quarter of 2000.
Fourth-quarter net income was $2.2 billion, up 31 percent
sequentially and up 107 percent year-over-year. Earnings per share
were $0.33, up 32 percent sequentially and up 106 percent from $0.16
in the fourth quarter of 2002.
"We ended the year on a high note as ongoing strength in emerging
markets coupled with improving demand in established markets drove
revenue to record levels," said Craig R. Barrett, Intel chief
executive officer. "Intel's substantial investments in capital and R&D
over the past few years allowed us to ship record microprocessor units
in 2003 and introduce exciting new products such as Intel(R)
Centrino(TM) mobile technology.
"In 2004, our focus will be to drive double-digit growth through
technology leadership and global market expansion, and by pursuing
adjacent opportunities in communications and the digital home, while
using our 90-nanometer and 300-millimeter factories to reduce costs
and improve profitability."
The fourth quarter 2003 results included the impact of a
$611-million goodwill write-down related to the Wireless
Communications and Computing Group (WCCG). At the time of the
fourth-quarter Business Update, the company also anticipated a tax
benefit of approximately $200 million related to a divestiture. Due to
an additional divestiture that closed during the quarter, the tax
benefit increased by $420 million, or approximately $0.06 more than
anticipated. Intel's third-quarter results included a tax benefit of
$125 million related to a divestiture, and last year's fourth-quarter
results included a tax benefit of approximately $75 million related to
divestitures.
Full-Year Results
Revenue for 2003 was $30.1 billion, up 13 percent from $26.8
billion in 2002. Net income was $5.6 billion, up 81 percent from $3.1
billion in 2002. Earnings per share were $0.85, up 85 percent from
$0.46 in 2002.
For the year, the company paid cash dividends of $524 million, or
$0.08 per share, and used $4.0 billion in cash to repurchase
approximately 176 million shares of common stock.
BUSINESS OUTLOOK
The following statements are based on current expectations. These
statements are forward-looking, and actual results may differ
materially. These statements do not include the potential impact of
any mergers, acquisitions, divestitures or other business combinations
that may be completed after Jan. 13, 2004.
-- Revenue in the first quarter is expected to be between $7.9
billion and $8.5 billion.
-- Gross margin percentage in the first quarter is expected to be
approximately 60 percent, plus or minus a couple of points.
Intel's gross margin percentage varies primarily with revenue
levels, product mix and pricing, changes in unit costs and
inventory valuation, capacity utilization, and the timing of
factory ramps and associated costs.
-- Gross margin percentage for 2004 is expected to be
approximately 62 percent, plus or minus a few points, as
compared to 57 percent in 2003.
-- Expenses (R&D plus MG&A) in the first quarter are expected to
be approximately $2.3 billion. Expenses, particularly certain
marketing- and compensation-related expenses, vary depending
on the level of revenue and profits.
-- R&D spending is expected to be approximately $4.8 billion in
2004, as compared to $4.4 billion in 2003. The expected
increase in R&D spending is primarily driven by development of
the company's next-generation 65-nm process technology,
scheduled for production in 2005 on 300-mm wafers.
-- Capital spending for 2004 is expected to be between $3.6
billion and $4.0 billion, as compared to $3.7 billion in 2003.
Intel's capital equipment spending is primarily targeted at
300-mm technology, which is providing the company with ongoing
capital efficiency improvements.
-- Gains from equity investments and interest and other in the
first quarter are expected to be approximately $35 million.
-- The tax rate for 2004 is expected to be approximately 32
percent. The tax rate expectation is based on current tax law
and current expected income, and assumes Intel will continue
to receive tax benefits for export sales. The tax rate may be
affected by the closing of acquisitions or divestitures, the
jurisdiction in which profits are determined to be earned and
taxed, and the ability to realize deferred tax assets.
-- Depreciation is expected to be between $1.1 billion and $1.2
billion in the first quarter and approximately $4.6 billion
for the year.
-- Amortization of acquisition-related intangibles and costs is
expected to be approximately $60 million in the first quarter
and approximately $170 million for the full year.
The statements in this document that refer to plans and
expectations for the first quarter, the year and the future are
forward-looking statements that involve a number of risks and
uncertainties. A number of factors in addition to those discussed
above could cause actual results to differ materially from
expectations. Demand for Intel's products, which impacts revenue and
the gross margin percentage, is affected by business and economic
conditions, as well as computing and communications industry trends,
and changes in customer order patterns. Intel conducts much of its
manufacturing, assembly and test, and sales activities outside the
United States and is thus subject to a number of other factors,
including currency controls and fluctuations, tariff and import
regulations, and regulatory requirements which may limit our or our
customers' ability to manufacture, assemble and test, or sell products
in particular countries. If terrorist activity, armed conflict, civil
or military unrest or political instability occurs in the United
States, Israel or other locations, such events may disrupt
manufacturing, assembly and test, logistics, security and
communications, and could also result in reduced demand for Intel's
products. The impacts of major health concerns, or of large-scale
outages or interruptions of service from utility or other
infrastructure providers, on Intel, its suppliers, customers or other
third parties could also adversely affect our business and impact our
customer order patterns. Revenue and the gross margin percentage are
affected by competing chip architectures and manufacturing
technologies, competing software-compatible microprocessors, pricing
pressures and other competitive factors, as well as market acceptance
of Intel's new products, availability of sufficient inventory to meet
demand, availability of externally purchased components, and
development and timing of compelling software applications and
operating systems that take advantage of the features of our products.
Future revenue is also dependent on continuing technological
advancement, including developing and implementing new processes and
strategic products, as well as the timing of new product
introductions, sustaining and growing new businesses and integrating
and operating any acquired businesses. The gross margin percentage
could also be affected by the execution of the manufacturing ramp,
excess manufacturing capacity, excess or obsolete inventory,
variations in inventory valuation and impairment of manufacturing
assets. The expectation regarding gains or losses from equity
securities and interest and other assumes no unanticipated events and
varies depending on equity market levels and volatility, gains or
losses realized on the sale or exchange of securities, impairment
charges related to non-marketable and other investments, interest
rates, cash balances, and changes in fair value of derivative
instruments. Expectations of impairment charges on investments are
based on experience, and it is not possible to know which specific
investments are likely to be impaired or the extent or timing of
individual impairments. Results could also be affected by adverse
effects associated with product defects and errata (deviations from
published specifications), and by litigation, such as that described
in Intel's SEC reports, as well as other risk factors listed in
Intel's SEC reports, including the report on Form 10-Q for the quarter
ended Sept. 27, 2003.
Status of Business Outlook and Mid-Quarter Business Update
During the quarter, Intel's corporate representatives may
reiterate the Business Outlook during private meetings with investors,
investment analysts, the media and others. Intel intends to publish a
Mid-Quarter Business Update on March 4. From the close of business on
Feb. 27 until publication of the Update, Intel will observe a "Quiet
Period" during which the Outlook and the company's filings with the
SEC on Forms 10-K and 10-Q should be considered to be historical,
speaking as of prior to the Quiet Period only and not subject to
update by the company. For more information about the Outlook, Update
and related Quiet Periods, please refer to the Outlook section of the
Web site at www.intc.com.
FOURTH QUARTER REVIEW AND RECENT HIGHLIGHTS
Financial Review
-- The gross margin percentage for the fourth quarter was 63.6
percent, higher than the company's revised expectation of 62
percent, plus or minus a point primarily due to higher
revenue. The gross margin percentage was higher than 58.2
percent in the third quarter primarily due to higher revenue,
as well as higher inventory as the company's Prescott
processor qualified for shipment, and lower unit and start-up
costs.
-- The effective tax rate for the fourth quarter was 15.8
percent, lower than the company's revised expectation of
approximately 32 percent. At the time of its Mid-Quarter
Business Update, the company anticipated the realization of a
tax benefit related to the divestiture of real estate assets
through the sale of the stock of Dialogic Corp. Later in the
quarter, the company also completed a divestiture of certain
intellectual property assets through the sale of the stock of
DSP Communications Inc.
-- During the quarter, the company used $2.0 billion in cash to
repurchase approximately 61 million shares of common stock
under an ongoing program. The company did not repurchase
shares during the third quarter. As of the end of the fourth
quarter, the company is authorized to repurchase an additional
414 million shares under the program.
Key Product Trends (Sequential)
-- Intel Architecture microprocessor units set a record. The
average selling price was slightly higher primarily due to a
richer mix within server processors.
-- Chipset units were approximately flat and at record levels.
-- Motherboard units set a record.
-- Flash memory units were approximately flat.
-- Ethernet connectivity product units were higher and at record
levels.
Intel Architecture Business
For the desktop, Intel began shipments of the Pentium(R) 4
processor Extreme Edition at 3.2 GHz which brings Hyper-Threading
Technology and an additional 2 Mbytes of cache memory to demanding PC
gamers and computing enthusiasts. During the fourth quarter, Intel
also began shipping the company's first 90-nm microprocessor,
code-named Prescott, which is being ramped in high volume.
In mobile, the company introduced the Celeron(R) M processor, the
first value processor based on the company's Banias microarchitecture
for mobile computing. Intel also introduced the Mobile Celeron
processor at 2.50 GHz along with a 2.8-GHz Celeron processor for use
in mobile and desktop systems. Intel now expects the company's first
90-nm mobile microprocessor, code-named Dothan, to be shipped during
the second quarter, later than originally planned due to circuit
modifications that needed to be made prior to the volume manufacturing
ramp.
For the digital home, Intel announced development of the
Entertainment PC, a slim, remote-control-based device that connects to
consumer TV systems. Entertainment PCs are expected to be available
from PC manufacturers in mid-2004 for below $800, giving consumers the
ability to store and wirelessly share digital music, photos, videos
and 3-D games in the home. The company also announced the $200-million
Intel(R) Digital Home Fund, which will invest in companies developing
hardware and software technologies for driving the convergence of PC
and consumer electronics applications. Intel demonstrated a new Liquid
Crystal On Silicon technology designed to enable HDTV displays with
higher image quality and lower cost than current displays.
In enterprise computing, a number of customers around the world
adopted Itanium(R) 2-based servers, including CompUSA, Fiat Group,
First Trust Corporation, the ING Group, the Koehler Group of Germany
and Korean telecommunications provider KT. The Itanium 2 processor
extended its performance leadership by achieving the industry's first
TPC-C benchmark result exceeding 1 million transactions per minute. In
high-performance computing, the number of Intel processor-based
systems in the TOP500(1) list grew by nearly 50 percent over a six
month period, with supercomputers based on Intel processors
outnumbering those based on RISC processors for the first time.
Wireless Communications and Computing Group
In flash, the company ramped shipments of its latest Intel
StrataFlash(R) memory for high-end cellular phones into volume,
enabling the company to transition the majority of its flash bit
shipments from 0.18-micron technology to 0.13-micron technology during
the quarter.
In applications processing, Motorola and Samsung announced new
cellular phones based on Intel XScale(R) technology-based processors.
Motorola announced its new A760 smart phone based on the Intel(R) PXA
262 processor with 256 Mbytes of stacked Intel StrataFlash memory.
Samsung introduced a variety of new products based on the Intel(R)
PXA255 processor, including its SGH-i700 smart phone.
The Linksys division of Cisco Systems featured its Wireless
Digital Media Adapter based on the Intel PXA(R) 250 processor during
the 2003 holiday selling season, allowing consumers to experience
PC-based digital photos and music on traditional TV and stereo
equipment. Intel announced it is working with Creative Labs, iRiver
America and Samsung to help deliver a new category of Portable Media
Players based on Intel XScale technology for the high-quality playback
of authorized music, photo and movie content.
Intel and Sony Music Entertainment announced plans to enable users
to access high-quality music, images, videos and other Sony Music
Entertainment content on Intel-based cell phones and PDAs. Intel and
iAnywhere Solutions, a subsidiary of Sybase, announced plans to
develop mobile software for small-to-medium businesses. The companies
also introduced a toolkit that helps software developers create
applications for mobile PC and Wi-Fi users.
Intel Communications Group
In wireless, the company introduced a dual-mode 802.11a/b wireless
network connection for notebook PCs based on Intel Centrino mobile
technology. The new product adds a higher Wi-Fi speed offering within
the Intel Centrino mobile technology product line, which previously
included only 802.11b capability. Intel also began shipments of a new
802.11b/g connection to appear in systems based on Intel Centrino
mobile technology during the first quarter of 2004.
In optical, network storage company QLogic chose Intel's
10-gigabit-per-second optical transceiver for use in its SANbox
5200(1) product, the storage industry's first Fibre Channel stackable
switch.
Intel announced plans to combine its communications-related
businesses into a single organization called the Intel Communications
Group. The new organization will assume the product portfolio of the
former Wireless Communications and Computing Group, including flash
memories, processors based on Intel XScale technology, and chipsets
and signal processing activities related to the Intel(R) Personal
Internet Client Architecture (Intel(R) PCA).
Technology and Manufacturing Group
Intel announced that it has built fully functional SRAM chips
using 65-nm technology, its next-generation high-volume semiconductor
manufacturing process. Intel is scheduled to bring its 65-nm
technology into production in 2005 on 300-mm wafers.
The company also announced it has identified new materials for
future transistors designed to replace materials that have been in use
for over 30 years. Intel's researchers have developed high-performance
transistors using a new high-k gate dielectric along with new metals
for the transistor gate. The company may integrate the new materials
into its high-volume manufacturing technology in the 2007 timeframe,
enabling transistors with significantly lower levels of current
leakage for lower power consumption and heat dissipation.
EARNINGS WEBCAST
Intel will hold a public webcast at 2:30 p.m. PST today on its
Investor Relations Web site at www.intc.com. A replay of the webcast
will be available until April 13.
Intel, the world's largest chip maker, is also a leading
manufacturer of computer, networking and communications products.
Additional information about Intel is available at
www.intel.com/pressroom.
Intel, Intel Centrino, Pentium, Celeron, Itanium, Intel
StrataFlash, Intel XScale, Intel Personal Internet Client Architecture
and Intel PCA are trademarks or registered trademarks of Intel
Corporation or its subsidiaries in the United States and other
countries.
(1) Other names and brands may be claimed as the property of
others.
INTEL CORPORATION
CONSOLIDATED SUMMARY INCOME STATEMENT DATA
(In millions, except per share amounts)
Three Months Twelve Months
Ended Ended
----------------- -----------------
Dec. 27, Dec. 28, Dec. 27, Dec. 28,
2003 2002 2003 2002
-------- -------- -------- --------
NET REVENUE $ 8,741 $ 7,160 $30,141 $26,764
Cost of sales 3,185 3,464 13,047 13,446
-------- -------- -------- --------
GROSS MARGIN 5,556 3,696 17,094 13,318
-------- -------- -------- --------
Research and development 1,177 1,022 4,360 4,034
Marketing, general and
administrative 1,141 1,104 4,278 4,334
Impairment of goodwill 611 - 617 -
Amortization and impairment of
acquisition-related
intangibles and costs 65 106 301 548
Purchased in-process research
and development - - 5 20
-------- -------- -------- --------
OPERATING EXPENSES 2,994 2,232 9,561 8,936
-------- -------- -------- --------
OPERATING INCOME 2,562 1,464 7,533 4,382
Losses on equity securities,
net (35) (171) (283) (372)
Interest and other, net 53 54 192 194
-------- -------- -------- --------
INCOME BEFORE TAXES 2,580 1,347 7,442 4,204
Income taxes 407 298 1,801 1,087
-------- -------- -------- --------
NET INCOME $ 2,173 $ 1,049 $ 5,641 $ 3,117
======== ======== ======== ========
BASIC EARNINGS PER SHARE $ 0.33 $ 0.16 $ 0.86 $ 0.47
======== ======== ======== ========
DILUTED EARNINGS PER SHARE $ 0.33 $ 0.16 $ 0.85 $ 0.46
======== ======== ======== ========
COMMON SHARES OUTSTANDING 6,512 6,598 6,527 6,651
COMMON SHARES ASSUMING DILUTION 6,671 6,660 6,621 6,759
INTEL CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEET DATA
(In millions)
Dec. 27, Sept. 27, Dec. 28,
2003 2003 2002
----------- ---------- ----------
CURRENT ASSETS
Cash and short-term investments $ 13,539 $ 13,038 $ 10,786
Trading assets 2,625 2,402 1,801
Accounts receivable 2,960 3,290 2,574
Inventories:
Raw materials 333 273 223
Work in process 1,490 1,247 1,365
Finished goods 696 705 688
----------- ---------- ----------
2,519 2,225 2,276
Deferred tax assets and other 1,239 1,383 1,488
----------- ---------- ----------
Total current assets 22,882 22,338 18,925
Property, plant and equipment, net 16,661 17,220 17,847
Marketable strategic equity
securities 514 561 56
Other long-term investments 1,866 1,134 1,178
Goodwill 3,705 4,317 4,330
Other assets 1,515 1,433 1,888
----------- ---------- ----------
TOTAL ASSETS $ 47,143 $ 47,003 $ 44,224
=========== ========== ==========
CURRENT LIABILITIES
Short-term debt $ 224 $ 352 $ 436
Accounts payable and accrued
liabilities 5,237 4,751 4,527
Deferred income on shipments to
distributors 633 696 475
Income taxes payable 785 1,470 1,157
----------- ---------- ----------
Total current liabilities 6,879 7,269 6,595
LONG-TERM DEBT 936 882 929
DEFERRED TAX LIABILITIES 1,482 1,491 1,232
STOCKHOLDERS' EQUITY 37,846 37,361 35,468
----------- ---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 47,143 $ 47,003 $ 44,224
=========== ========== ==========
INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
(In millions)
Q4 2003 Q3 2003 Q4 2002
--------- --------- ---------
GEOGRAPHIC REVENUE:
Americas $2,356 $2,168 $2,161
27% 28% 30%
Asia-Pacific $3,475 $3,266 $2,741
40% 42% 38%
Europe $2,126 $1,683 $1,772
24% 21% 25%
Japan $784 $716 $486
9% 9% 7%
CASH INVESTMENTS:
Cash and short-term investments $13,539 $13,038 $10,786
Trading assets - fixed income (1) $2,321 $2,118 $1,460
-----------------------------
Total cash investments $15,860 $15,156 $12,246
INTEL CAPITAL PORTFOLIO:
Trading assets - equity securities (2) $0 $0 $98
Marketable strategic equity securities $514 $561 $56
Other strategic investments $752 $689 $947
-----------------------------
Total Intel Capital portfolio $1,266 $1,250 $1,101
TRADING ASSETS:
Trading assets - equity securities
offsetting deferred compensation (3) $304 $284 $243
Total trading assets - sum of 1+2+3 $2,625 $2,402 $1,801
SELECTED CASH FLOW INFORMATION:
Depreciation $1,177 $1,167 $1,244
Impairment of goodwill $611 $0 $0
Amortization and impairment of
acquisition-related intangibles & costs $65 $68 $106
Purchased in-process research &
development $0 $5 $0
Capital spending ($707) ($1,072) ($1,203)
Stock repurchase program ($2,003) $0 ($1,006)
Proceeds from sales of shares to
employees, tax benefit & other $324 $421 $73
Dividends paid ($131) ($131) ($132)
Net cash used for acquisitions ($40) ($21) $0
SHARE INFORMATION:
Average common shares outstanding 6,512 6,517 6,598
Dilutive effect of stock options 159 108 62
Common shares assuming dilution 6,671 6,625 6,660
STOCK BUYBACK:
BUYBACK ACTIVITY:
Shares repurchased 61.4 - 58.8
Cumulative shares repurchased 1,886.0 1,824.6 1,710.2
BUYBACK SUMMARY:
Shares authorized for buyback 2,300.0 2,300.0 1,820.0
Increase in authorization - - 480.0
Cumulative shares repurchased (1,886.0) (1,824.6) (1,710.2)
Shares available for buyback 414.0 475.4 589.8
OTHER INFORMATION:
Employees (in thousands) 79.7 79.1 78.7
Days sales outstanding 36 37 34
INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
($ in millions)
Full Year Full Year
Q4 2003 Q3 2003 2003 Q4 2002 2002
- ----------------------------------------------------------------------
OPERATING SEGMENT INFORMATION:
Intel Architecture Business
Revenue 7,671 6,838 26,102 5,928 22,316
Operating income 3,732 2,915 10,411 2,001 6,592
- ----------------------------------------------------------------------
Intel Communications Group
Revenue 592 544 2,147 544 2,080
Operating loss (49) (94) (426) (168) (622)
- ----------------------------------------------------------------------
Wireless Communications and
Computing Group
Revenue 469 450 1,857 662 2,239
Operating loss (97) (122) (432) (97) (287)
- ----------------------------------------------------------------------
All Other
Revenue 9 1 35 26 129
Operating loss (1,024) (395) (2,020) (272) (1,301)
- ----------------------------------------------------------------------
Total
Revenue 8,741 7,833 30,141 7,160 26,764
Operating income 2,562 2,304 7,533 1,464 4,382
- ----------------------------------------------------------------------
The Intel Architecture operating segment's products include
microprocessors, chipsets and motherboards. The Intel
Communications Group's (ICG) products include wired and wireless
Ethernet products, network processing components and embedded
computing products. The Wireless Communications and Computing
Group's (WCCG) products include flash memory, application
processors and cellular baseband chipsets for cellular handsets
and handheld devices.
On December 10, 2003, we announced that we would be consolidating
certain communications-related businesses within ICG and WCCG into
a single organization, the Intel Communications Group. This
reorganization is effective for 2004. As the reporting period for
this earnings release is as of December 27, 2003, the operating
segment results for these communications-related businesses are
presented under the organization structure that existed as of
December 27, 2003.
The "all other" category includes acquisition-related costs,
including amortization and impairment of acquisition-related
intangibles, in- process research and development and the fourth
quarter of 2003 charge for impairment of goodwill of $611 million.
In addition, "all other" includes certain corporate-level costs
and operating expenses, including a portion of profit-dependent
bonus and other expenses that are not allocated to the operating
segments. The results for 2002 included an impairment of
identified intangible assets of $127 million as well as a charge
of $106 million related to the wind down of the Web hosting
business.
INTEL CORPORATION
INTEL ARCHITECTURE BUSINESS REVENUE
(In millions)
Full Year
Q4 2003 Q3 2003 Q2 2003 Q1 2003 2003
----------------------------------------------
Microprocessor revenue $ 6,488 $ 5,698 $ 4,829 $ 4,852 $ 21,867
Chipset, motherboard
and other revenue 1,183 1,140 1,004 908 4,235
----------------------------------------------
Total revenue $ 7,671 $ 6,838 $ 5,833 $ 5,760 $ 26,102
Full Year
Q4 2002 Q3 2002 Q2 2002 Q1 2002 2002
----------------------------------------------
Microprocessor revenue $ 4,968 $ 4,518 $ 4,367 $ 4,805 $ 18,658
Chipset, motherboard
and other revenue 960 889 846 963 3,658
----------------------------------------------
Total revenue $ 5,928 $ 5,407 $ 5,213 $ 5,768 $ 22,316