Exhibit 99.1
Intel Second-Quarter Revenue $8.05 Billion; Earnings Per Share 27 Cents
SANTA CLARA, Calif.--(BUSINESS WIRE)--July 13, 2004--Intel
Corporation today announced second-quarter revenue of $8.05 billion,
approximately flat sequentially and up 18 percent year-over-year.
Second-quarter net income was $1.8 billion, flat sequentially and
up 96 percent year-over-year. Earnings per share were 27 cents, up 4
percent sequentially and up 93 percent from 14 cents in the second
quarter of 2003.
"Intel continued to post strong year-over-year results in the
second quarter as our microprocessor business followed seasonal trends
and our communications business grew nicely, led by flash memory,"
said Intel CEO Craig R. Barrett. "We had a notable quarter with
respect to new product launches with the introduction of 90 nm
processors for mobile and the enterprise market segment along with
our Grantsdale chipset for the desktop which delivers some of the most
significant PC platform enhancements in a decade. Looking to the
second half, we will use our investments in leading-edge capacity to
drive growth in our core microprocessor business and expand our
presence in chipsets, flash and other communications products."
Intel's second-quarter results included a previously disclosed
$62-million reversal of previously accrued taxes primarily related to
the closing of a state income tax audit, as well as an adjustment to
the effective tax rate. These items increased second-quarter
earnings-per-share by 1.7 cents. Intel's first-quarter results
included a legal settlement charge that reduced earnings per share by
1.7 cents.
BUSINESS OUTLOOK
The following statements are based on current expectations. These
statements are forward-looking, and actual results may differ
materially. Please see the Risk Factors Regarding Forward-Looking
Statements in this release for a description of certain risk factors
that could cause actual results to differ, and refer to Intel's annual
and quarterly reports on file with the Securities and Exchange
Commission (SEC) for a more complete description of the risks. These
statements do not include the potential impact of any mergers,
acquisitions, divestitures or other business combinations that may be
completed after July 12.
-- Revenue in the third quarter is expected to be between $8.6
billion and $9.2 billion.
-- Gross margin percentage in the third 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.
-- The gross margin percentage for 2004 is now expected to be 60
percent, plus or minus a couple of points, as compared to the previous
expectation of 62 percent, plus or minus a few points. The company
expects faster growth in products such as flash memories, chipsets and
motherboards that have lower margins. In addition, Intel expects
microprocessor margins to increase at a rate slower than previously
expected due to a slight reduction in microprocessor average selling
prices and a slower than expected reduction in microprocessor unit
costs.
-- Expenses (R&D plus MG&A) in the third quarter are expected to
be approximately $2.5 billion. Expenses, particularly certain
marketing- and compensation-related expenses, vary depending on the
level of revenue and profits.
-- The R&D spending expectation for 2004 is unchanged at
approximately $4.8 billion.
-- The capital spending expectation for 2004 is unchanged at
between $3.6 billion and $4.0 billion.
-- Gains from equity investments and interest and other in the
third quarter are expected to be approximately $50 million.
-- The tax rate for the third quarter is now expected to be
approximately 31 percent, as compared to the previous expectation of
approximately 32 percent, primarily due to an increase in the
estimated tax benefit for export sales. The tax rate expectation is
based on current expected income and assumes Intel continues to
receive tax benefits for export sales. The tax rate may be affected by
changes in tax law, the closing of acquisitions or divestitures, the
jurisdiction in which profits are determined to be earned and taxed,
the resolution of issues arising from tax audits with various tax
authorities, and the ability to realize deferred tax assets.
-- Depreciation is expected to be between $1.1 billion and $1.2
billion in the third quarter and approximately $4.6 billion for the
year.
-- Amortization of acquisition-related intangibles and costs is
expected to be approximately $40 million in the third quarter and
approximately $175 million for the full year.
SECOND-QUARTER REVIEW AND RECENT HIGHLIGHTS
Financial Review
-- The gross margin percentage for the second quarter was 59.4
percent, below the revised expectation of between 60 percent and 61
percent due to an unanticipated $38-million charge for a chipset
manufacturing excursion that occurred late in the quarter and revenue
being slightly below the midpoint of the updated range.
-- Gains from equity investments and interest and other in the
quarter were $39 million, below the previous expectation of
approximately $60 million, primarily due to higher than expected
impairments.
-- The effective tax rate for the quarter was 27.4 percent
including the $62-million reversal of previously accrued taxes and an
adjustment for an increase in the estimated tax benefit for export
sales.
-- Inventory levels grew by approximately $427 million during the
quarter, with approximately half of the increase coming from
microprocessor inventories, and the balance primarily from flash
memory and chipset inventories.
Key Product Trends (Sequential)
-- Intel Architecture microprocessor units were lower. The average
selling price was just below the first-quarter level.
-- Chipset units were higher.
-- Motherboard units set a record.
-- Flash memory units were significantly higher.
-- Connectivity product units set a record.
Intel Architecture Business
During the quarter, Intel introduced 22 microprocessors built on
90 nm lithography and 300 mm wafers, as well as the first chipsets
using the company's 130 nm technology. The introductions bring new
microprocessor and platform technology to a wide range of desktop,
notebook, workstation and server systems.
For the desktop, Intel introduced a new family of chipsets
designed to help make home PCs more entertaining and business PCs more
productive and secure. Formerly code-named Grantsdale and Alderwood,
the Intel(R) 915 G/P and 925X Express chipsets deliver some of the
most significant PC platform enhancements in a decade, including
support for high-definition video, 7.1 surround sound audio and dual
displays. Intel also introduced six Pentium(R) 4 processors with
Hyper-Threading (HT) technology that can be used with the new chipsets
to help users better enjoy digital music, photos, videos and games on
the PC. The company also introduced four Celeron(R) D processors for
value desktop systems.
In mobile, the company launched new Intel(R) Pentium(R) M
processors designed to boost the performance of wireless-enabled
notebooks based on Intel(R) Centrino(TM) mobile technology. Formerly
code-named Dothan, the processors include new design features such as
increased on-die cache memory that enhance the way wireless notebook
users work, learn, play and communicate. The company also introduced
several Mobile Intel(R) Pentium(R) 4 processors for desktop-equivalent
notebooks and a Celeron(R) M processor for value notebooks.
For the enterprise, Intel introduced new Intel(R) Xeon(R)
processors, formerly code-named Nocona, which together with the
Intel(R) E7525 chipset bring new capabilities and performance levels
to workstations. The platforms support HT Technology, an 800 MHz
system bus, PCI Express graphics and I/O, DDR2 memory, 64-bit memory
extension technology for working with data sets greater than 4 GB, and
Demand Based Switching with enhanced Intel(R) SpeedStep(R) technology
for lower power consumption. Server platforms based on the new Intel
Xeon processors are expected to be introduced during the third
quarter.
The Itanium(R) 2 processor continued to gain acceptance in
commercial IT deployments at companies including The Body Shop,
Procter & Gamble and Volvo. Software availability for the Itanium
processor grew with the commercial release of SAS(1) 9 business
intelligence software optimized for Itanium 2-based servers. Intel
showed the first wafers of a next-generation Itanium processor
code-named Montecito that contains 1.7 billion transistors. Montecito
is expected to deliver up to twice the performance of current Itanium
processors and is scheduled to be the company's first dual-core
processor when introduced in 2005.
In high-performance computing, the Top500(1) ranking for June
reported that more than half of the world's 500 fastest supercomputers
are based on Intel Xeon and Itanium 2 processors, up from just one
Intel-based system in the June 2001 ranking. The Itanium-based
"Thunder" system at the Lawrence Livermore National Laboratory was
ranked second fastest in the world.
Intel Communications Group
In flash, the company increased shipments of its 1.8-volt Intel(R)
StrataFlash(R) wireless memory optimized for cellular devices and
expanded its product offerings into the "broad market" segment for
flash in products such as set-top boxes, communications equipment and
many other embedded systems.
In communications infrastructure, Huawei Technologies and Korea
Telecom adopted Intel-based modular communications solutions in
forthcoming products. The new equipment will use standards-based
AdvancedTCA(1) system technology along with carrier grade Linux(1).
Intel also introduced a 1U carrier grade server and announced new
versions of its Pentium M, Ultra Low Voltage Celeron M, and Intel(R)
PXA270 processors for use in communications infrastructure and other
embedded applications.
In wireless networking, Intel and Proxim announced plans to
develop WiMAX base stations and customer premise equipment for fixed
and portable access. Intel announced agreements with the
municipalities of Dalian and Chengdu to help bring WiMAX connectivity
to Internet users in these Chinese cities. In wireline networking,
Intel introduced a server adapter that provides the low cost, small
form factor and multimode fiber capabilities needed to bring
10-gigabit Ethernet connectivity to the data center.
In applications processing, customers including Dell Computer and
palmOne introduced personal digital assistants based on the recently
announced Intel(R) PXA27X processor family, formerly code-named
Bulverde.
Technology and Manufacturing Group
Intel's transition to 90 nm, 300 mm silicon technology made
continued progress during the quarter, with further yield increases
and a crossover with 130 nm microprocessor fabrication volumes. The
company expects a crossover in total microprocessor shipments during
the third quarter and anticipates that the vast majority of its
microprocessor shipments will be converted to 90 nm technology by the
end of the year. Intel also plans to begin production of the company's
first 90 nm flash products on 200 mm technology during the third
quarter.
Intel announced the start of production at Fab 24 in Ireland, the
company's third factory capable of producing 90 nm processors on 300
mm wafers. The company also announced plans to invest an additional $2
billion in its Irish facilities to expand clean room capacity and
enable 65 nm manufacturing at Fab 24 along with a planned expansion
called Fab 24-2.
Intel announced that it has begun a $2 billion construction
project to convert Fab 12, a 200 mm wafer fabrication facility in
Chandler, Ariz., to a 300 mm facility for initial use in 65 nm
production. The project is scheduled to be completed in late 2005.
EARNINGS WEBCAST
Intel will hold a public webcast at 2:30 p.m. PDT today on its
Investor Relations Web site at www.intc.com. A replay of the webcast
will be available until Oct. 12.
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 Sept. 2. From the close of business on
Aug. 27 until publication of the Update, Intel will observe a "Quiet
Period" during which the Business Outlook disclosed in the company's
press releases and 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 Business Outlook, Update and related Quiet
Periods, please refer to the Business Outlook section of Intel's Web
site at www.intc.com.
RISK FACTORS REGARDING FORWARD-LOOKING STATEMENTS
The statements in this document that refer to plans and
expectations for the third 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. 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, the availability of
sufficient inventory to meet demand, the availability of externally
purchased components or materials, and the development and timing of
introduction of compelling software applications and operating systems
that take advantage of the features of Intel's 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, including the
ramp of 90 nm process technology on 300 mm wafers, excess
manufacturing capacity, excess or obsolete inventory, variations in
inventory valuation and impairment of manufacturing or assembly and
test assets. 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 Intel's or its customers' ability to
manufacture, assemble and test, design, develop 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 Intel's business and impact customer order patterns. 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 or regulatory matters involving
intellectual property, stockholder, consumer, antitrust and other
issues, such as the litigation and/or regulatory matters 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
March 27.
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, Pentium, Celeron, Intel Centrino, Intel Xeon, Intel
SpeedStep, Itanium and Intel StrataFlash are marks 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 Ended Six Months Ended
------------------- -------------------
June 26, June 28, June 26, June 28,
2004 2003 2004 2003
--------- --------- --------- ---------
NET REVENUE $ 8,049 $ 6,816 $ 16,140 $ 13,567
Cost of sales 3,269 3,348 6,490 6,587
--------- --------- --------- ---------
GROSS MARGIN 4,780 3,468 9,650 6,980
--------- --------- --------- ---------
Research and development 1,186 1,029 2,381 2,048
Marketing, general and
administrative 1,170 1,073 2,311 2,091
Impairment of goodwill - 6 - 6
Amortization of acquisition-
related intangibles and costs 43 84 101 168
--------- --------- --------- ---------
OPERATING EXPENSES 2,399 2,192 4,793 4,313
--------- --------- --------- ---------
OPERATING INCOME 2,381 1,276 4,857 2,667
Gains (losses) on equity
securities, net (8) (58) 11 (185)
Interest and other, net 47 53 96 105
--------- --------- --------- ---------
INCOME BEFORE TAXES 2,420 1,271 4,964 2,587
Income taxes 663 375 1,477 776
--------- --------- --------- ---------
NET INCOME $ 1,757 $ 896 $ 3,487 $ 1,811
========= ========= ========= =========
BASIC EARNINGS PER SHARE $ 0.27 $ 0.14 $ 0.54 $ 0.28
========= ========= ========= =========
DILUTED EARNINGS PER SHARE $ 0.27 $ 0.14 $ 0.53 $ 0.27
========= ========= ========= =========
COMMON SHARES OUTSTANDING 6,449 6,525 6,464 6,540
COMMON SHARES ASSUMING DILUTION 6,558 6,580 6,591 6,595
INTEL CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEET DATA
(In millions)
June 26, March 27, Dec. 27,
2004 2004 2003
----------- ----------- -----------
CURRENT ASSETS
Cash and short-term investments $ 14,264 $ 13,146 $ 13,539
Trading assets 2,708 2,572 2,625
Accounts receivable 3,183 3,374 2,960
Inventories:
Raw materials 395 355 333
Work in process 1,912 1,682 1,490
Finished goods 916 759 696
----------- ----------- -----------
3,223 2,796 2,519
Deferred tax assets and other 1,380 1,203 1,239
----------- ----------- -----------
Total current assets 24,758 23,091 22,882
Property, plant and equipment,
net 16,007 16,192 16,661
Marketable strategic equity
securities 582 608 514
Other long-term investments 2,238 2,043 1,866
Goodwill 3,730 3,705 3,705
Other assets 1,357 1,449 1,515
----------- ----------- -----------
TOTAL ASSETS $ 48,672 $ 47,088 $ 47,143
=========== =========== ===========
CURRENT LIABILITIES
Short-term debt $ 216 $ 296 $ 224
Accounts payable and accrued
liabilities 5,253 4,928 5,237
Deferred income on shipments to
distributors 640 701 633
Income taxes payable 1,429 491 785
----------- ----------- -----------
Total current liabilities 7,538 6,416 6,879
LONG-TERM DEBT 898 927 936
DEFERRED TAX LIABILITIES 1,643 1,635 1,482
STOCKHOLDERS' EQUITY 38,593 38,110 37,846
----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 48,672 $ 47,088 $ 47,143
=========== =========== ===========
INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
(In millions)
Q2 2004 Q1 2004 Q2 2003
--------- --------- ----------
GEOGRAPHIC REVENUE:
Americas $1,956 $2,163 $1,955
24% 27% 28%
Asia-Pacific $3,661 $3,284 $2,778
45% 40% 41%
Europe $1,665 $1,927 $1,418
21% 24% 21%
Japan $767 $717 $665
10% 9% 10%
ADDITIONAL REVENUE-RELATED INFORMATION:
Intel Architecture business
microprocessor revenue $5,751 $5,980 $4,844
Intel Architecture business chipset,
motherboard and other revenue $1,023 $1,045 $1,006
Flash revenue $587 $417 $411
CASH INVESTMENTS:
Cash and short-term investments $14,264 $13,146 $11,202
Trading assets - fixed income (1) $2,390 $2,265 $2,162
------------------------------
Total cash investments $16,654 $15,411 $13,364
INTEL CAPITAL PORTFOLIO:
Marketable strategic equity securities $582 $608 $63
Other strategic investments $640 $680 $735
------------------------------
Total Intel Capital portfolio $1,222 $1,288 $798
TRADING ASSETS:
Trading assets - equity securities
offsetting deferred compensation (2) $318 $307 $272
Total trading assets - sum of 1+2 $2,708 $2,572 $2,434
SELECTED CASH FLOW INFORMATION:
Depreciation $1,151 $1,140 $1,162
Impairment of goodwill $0 $0 $6
Amortization of acquisition-related
intangibles & costs $43 $58 $84
Capital spending ($1,026) ($680) ($923)
Stock repurchase program ($1,511) ($1,505) ($1,006)
Proceeds from sales of shares to
employees, tax benefit & other $258 $490 $166
Dividends paid ($258) ($259) ($131)
Net cash used for acquisitions ($33) $0 $0
SHARE INFORMATION:
Average common shares outstanding 6,449 6,480 6,525
Dilutive effect of stock options 109 144 55
Common shares assuming dilution 6,558 6,624 6,580
STOCK BUYBACK:
Shares repurchased 56.0 49.2 51.8
Shares authorized for buyback 2,300.0 2,300.0 2,300.0
Cumulative shares repurchased (1,991.2) (1,935.2) (1,824.6)
Shares available for buyback 308.8 364.8 475.4
OTHER INFORMATION:
Employees (in thousands) 81.7 80.5 78.7
Days sales outstanding 36 36 36
INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
($ in millions)
Q2 2004 Q1 2004 YTD 2004 Q2 2003 YTD 2003
- ----------------------------------------------------------------------
OPERATING SEGMENT
INFORMATION:
Intel Architecture Business
Revenue 6,774 7,025 13,799 5,850 11,622
Operating income 2,788 3,008 5,796 1,829 3,734
- ----------------------------------------------------------------------
Intel Communications Group
Revenue 1,271 1,065 2,336 957 1,920
Operating loss (126) (219) (345) (255) (473)
- ----------------------------------------------------------------------
All Other
Revenue 4 1 5 9 25
Operating loss (281) (313) (594) (298) (594)
- ----------------------------------------------------------------------
Total
Revenue 8,049 8,091 16,140 6,816 13,567
Operating income 2,381 2,476 4,857 1,276 2,667
- ----------------------------------------------------------------------
Beginning in 2004, the company combined its communications-related
businesses into a single organization, the Intel Communications Group
(ICG). Previously, these communications businesses were in two
separate product line operating segments: the former Intel
Communications Group and the Wireless Communications and Computing
Group. The company now consists of two reportable product-line
operating segments: the Intel Architecture business, which is
composed of the Desktop Platforms Group, the Mobile Platforms Group
and the Enterprise Platforms Group; and ICG. All prior period amounts
have been restated to reflect the new presentation as well as certain
minor reorganizations effected through the second quarter of 2004.
The Intel Architecture operating segment's products include
microprocessors and related chipsets and motherboards. ICG's products
include flash memory; wired Ethernet and wireless connectivity
products; communications infrastructure components such as network
and embedded processors and optical components; microcontrollers;
application and cellular processors used in cellular handsets and
handheld computing devices; and cellular baseband chipsets.
The "all other" category includes acquisition-related costs, including
amortization and any impairments of acquisition-related intangibles
and goodwill. "All other" also includes the results of operations of
seed businesses that support the company's initiatives. Finally, "all
other" includes certain corporate-level operating expenses, including
a portion of profit-dependent bonus and other expenses not allocated
to the operating segments.