Exhibit 99.1
Intel Third-Quarter Revenue $8.5 Billion;
Earnings Per Share of 30 Cents Includes Tax Benefits
SANTA CLARA, Calif.--(BUSINESS WIRE)--Oct. 12, 2004--Intel Corporation
today announced third-quarter revenue of $8.5 billion, up 5 percent sequentially
and up 8 percent year-over-year.
Third-quarter net income was $1.9 billion, up 8 percent sequentially and up
15 percent year-over-year. Earnings per share were 30 cents, up 11 percent
sequentially and up 20 percent from 25 cents in the third quarter of 2003.
"Intel delivered growth in both of its major businesses in the third
quarter driven by record server and mobile microprocessor shipments and market
segment share gains in flash memory," said Intel CEO Craig R. Barrett. "Growth
was not as high as we originally anticipated due to inventory adjustments at
some of our major customers and lower than expected overall demand for PCs.
"Intel crossed over to 90nm technology in microprocessor shipments to the
computing market segment for the quarter and built 65nm memory chips containing
more than half a billion transistors each, reflecting the company's long-term
strategy of investing in leading-edge process technology. We also returned more
cash to our stockholders with a $2.5-billion share re-purchase, our largest
ever."
Intel's results for the third quarter of 2004 included tax-related items
that increased earnings-per-share by 3.6 cents; additional information about
these tax items is included in the Financial Review section of this release.
Intel's results for the second quarter of 2004 included tax-related items that
increased earnings by 1.7 cents per share. The company's results for the third
quarter of 2003 included a tax benefit related to a divestiture that increased
earnings by 1.9 cents per share.
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 important 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 Oct. 11, 2004.
- -- Revenue in the fourth quarter is expected to be between $8.6
billion and $9.2 billion.
- -- Gross margin percentage for the fourth quarter is expected to be
approximately 56 percent, plus or minus a couple of points. The gross
margin percentage could vary from expectations based on changes in
revenue levels, product mix and pricing, manufacturing yields, changes
in unit costs, capacity utilization and the existence of excess
capacity, and the timing and execution of the manufacturing ramp and
associated costs.
- -- Expenses (R&D plus MG&A) in the fourth quarter are expected to be
between $2.4 billion and $2.5 billion. Expenses, particularly certain
marketing and compensation expenses, could vary from expectations
depending on the level of demand for our products and the level of
revenue and profits.
- -- R&D spending for 2004 is expected to be $4.7 billion, slightly
below the previous expectation of $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 fourth
quarter are expected to be approximately $65 million.
- -- The tax rate for the fourth quarter is expected to be approximately
30.5 percent. The tax rate expectation is based on current tax law and
current expected income, and assumes Intel continues 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, the resolution of issues arising
from tax audits with various tax authorities and the ability to
realize deferred tax assets.
- -- Depreciation for the fourth quarter is expected to be between $1.1
billion and $1.2 billion.
- -- Amortization of acquisition-related intangibles and costs is
expected to be approximately $40 million in the fourth quarter and
approximately $180 million for the full year.
THIRD-QUARTER REVIEW AND RECENT HIGHLIGHTS
Financial Review
- -- The gross margin percentage for the quarter was 55.7 percent, as
compared to the revised expectation of approximately 58 percent, plus
or minus a couple of points, primarily due to higher than expected
inventory reserves; higher than expected motherboard and chipset units
and lower than expected processor units in the revenue mix; and an
inventory write-down as a result of lower chipset unit costs.
- -- The effective tax rate for the quarter was 21.4 percent, lower than
the July expectation of approximately 31 percent and below the
September expectation of approximately 29.5 percent. The September
expectation reflected the impact of a higher percentage of profits
being generated in lower-tax jurisdictions, which increased earnings
by 0.6 cents per share. Subsequently, in connection with preparing and
filing its 2003 federal tax return and preparing its state returns,
Intel reduced its third-quarter tax provision by $195 million, which
increased earnings by 3 cents per share. The reduction in the tax
provision was primarily driven by additional tax benefits for export
sales, along with state tax benefits for divestitures.
- -- Intel used approximately $2.5 billion in cash to repurchase 106.3
million shares of its common stock under an ongoing program.
Key Product Trends (Sequential)
- -- Intel Architecture microprocessor units were higher and set a
third-quarter record. The average selling price was approximately
flat.
- -- Chipset units set a record.
- -- Motherboard units set a record.
- -- Flash memory units were approximately flat.
- -- Wireless connectivity units set a record. Wired connectivity units
were lower.
Intel Architecture Business
Intel extended its mobile leadership with record microprocessor shipments
and the introduction of seven new processors spanning the mobility, value and
desktop replacement notebook market segments. Four new low-voltage and
ultra-low-voltage Pentium(R) M processors and Celeron(R) M processors enable
highly mobile sub-notebook, mini-notebook and tablet PCs weighing less than
three pounds. Two new Celeron M processors bring Intel's latest mobile
architecture to value-priced thin-and-light notebook PCs. The mobile Pentium 4
processor 548 supporting HT Technology brings performance for processor
intensive and multithreaded applications to desktop replacement notebooks.
In the enterprise segment, Intel generated record processor unit shipments
and launched a major new Intel(R) Xeon(R) platform for dual-processor servers
that provides faster processor and system bus speeds, support for faster DDR2
memory, high-bandwidth PCI Express* interconnect technology, Demand Based
Switching for power reduction, and Intel(R) EM64T technology for working with
very large data sets. The company released software tools that help developers
optimize the performance of applications running on Intel microprocessors with
EM64T. Intel also demonstrated a forthcoming Itanium(R) family processor
codenamed Montecito that will have 1.7 billion transistors, providing multiple
CPU cores and 24 MB of cache memory.
For the desktop, Intel introduced the Celeron D processor 340 along with
the Intel(R) 910GL Express chipset, bringing greater computing performance,
Intel(R) High Definition Audio and Intel(R) Graphics Media Accelerator 900
technology to value-priced PCs.
Intel continued its efforts to reach beyond megahertz to deliver platform
performance and capabilities in new ways. The company announced it has shipped
50 million microprocessors with HyperThreading (HT) technology, which
accelerates the performance of "multithreaded" operating systems and
applications that allow tasks to be executed in parallel by multiple processors
or HT technology-enabled systems. The company discussed new platform
technologies designed to help make future PCs more manageable, reliable and
secure, and discussed plans to ship multicore processors into all of its
computing segments beginning in 2005, bringing additional performance to the
growing base of multithreaded Intel Architecture software.
For the digital home, Intel announced the 2004 Entertainment PC platform.
Based on the Pentium(R) 4 processor with HT Technology and Intel(R) 915 Express
Chipset, the platform allows manufacturers to develop Entertainment PCs for the
upcoming holiday season and beyond. Intel also announced industry advances in
hardware and software technologies designed to allow consumers to access premium
protected content such as first-release movies on networked digital devices
throughout the home. Intel and Dolby Laboratories announced plans to help bring
premium surround-sound audio to Intel-based platforms while Intel Capital
invested in five companies developing digital home technologies.
Intel Communications Group
In wireless, Intel shipped a record number of WiFi connections and
delivered the first samples of a product code-named Rosedale, a system-on-a-chip
solution for WiMAX* wireless broadband equipment for homes and businesses. In
addition, Intel, NEC, Texas Instruments and Wisair demonstrated forthcoming
Wireless USB and ultra-wideband technologies that will enable wireless
high-bandwidth data transfers between PCs and other devices such as digital
audio players and camcorders.
In flash, Intel gained market segment share driven by record shipments of
the company's high-density Intel(R) StrataFlash(R) memories for the cellular
phone market segment.
In cellular, Intel, Nokia and Symbian announced plans to enable smart
phones based on the Nokia Series 60 Platform to be built using Intel(R)
XScale(R) technology. In addition, Intel and Symbian are developing a reference
design that manufacturers can use to build 3G phones based on Symbian OS*
software and a forthcoming Intel processor code-named Hermon.
In communications infrastructure, Fujitsu and UTStarcom have adopted Intel
processors and standards-based communications platform technologies in
forthcoming service provider equipment. In optical, Fujitsu selected Intel
optical transport processors for use in dense wavelength division multiplexing
systems.
Technology and Manufacturing Group
Intel achieved an important technology crossover as the majority of
microprocessors shipped into the computing market segments during the third
quarter were based on the company's 90nm production process.
The company announced that its forthcoming 65nm manufacturing technology
has been used to build fully functional 70 Mb SRAM chips containing more than
half a billion transistors. The milestone signals that the company is on track
to double the transistor density on future chips in accordance with Moore's Law.
Intel's 65nm technology development is expected to be completed in 2005, with
high-volume product shipments in 2006.
The company also announced it has installed the industry's first commercial
extreme-ultraviolet (EUV) lithography tool and set up an EUV mask pilot line.
The announcement marks the transition of EUV from the laboratory into a pilot
line research environment, with the first commercial use targeting 32nm
production in 2009.
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 Jan. 11.
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
Dec. 2. From the close of business on Nov. 26 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 fourth quarter, the year and the future are forward-looking statements that
involve a number of risks and uncertainties. Many factors could affect Intel's
actual results, and variances from Intel's current expectations regarding such
factors could cause actual results to differ materially from those expressed in
these forward-looking statements. Intel presently considers the factors
accompanying certain of such statements above and set forth below to be the
important factors that could cause actual results to differ materially from
Intel's published expectations. A more detailed discussion of these factors, as
well as other factors that could affect Intel's results, is contained in Intel's
SEC filings, including the report on Form 10-Q for the quarter ended June 26,
2004.
-- Intel operates in intensely competitive industries. Revenue and the
gross margin percentage are affected by the demand for and market
acceptance of Intel's products, pricing pressures and actions taken by
our competitors, the timing of new product introductions and the
availability of sufficient inventory to meet demand. Factors that
could cause demand to be different from Intel's expectations include
changes in business and economic conditions, changes in customer order
patterns and the level of inventory at customers.
-- The gross margin percentage could also be affected by excess or
obsolete inventory, variations in inventory valuation, and impairment
of manufacturing or assembly and test assets.
-- The expectation regarding gains or losses from equity securities and
interest and other could vary from expectations 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
the fair value of derivative instruments.
-- Intel's results could be impacted by unexpected economic, social and
political conditions in the countries in which Intel, its customers or
its suppliers operate, including security risks, possible
infrastructure disruptions and fluctuations in foreign currency
exchange rates.
-- Intel's 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 regulatory matters described in
Intel's SEC reports.
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 Xeon, Itanium, Intel StrataFlash and Intel
XScale are marks or registered trademarks of Intel Corporation or its
subsidiaries in the United States and other countries.
*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 Nine Months Ended
------------------- ---------------------
Sept. 25, Sept. 27, Sept. 25, Sept. 27,
2004 2003 2004 2003
-------- -------- --------- ---------
NET REVENUE $ 8,471 $ 7,833 $ 24,611 $ 21,400
Cost of sales 3,752 3,275 10,242 9,862
-------- -------- --------- ---------
GROSS MARGIN 4,719 4,558 14,369 11,538
-------- -------- --------- ---------
Research and development 1,183 1,135 3,564 3,183
Marketing, general and
administrative 1,123 1,046 3,434 3,137
Impairment of goodwill - - - 6
Amortization of
acquisition-related
intangibles and costs 40 68 141 236
Purchased in-process
research and
development - 5 - 5
-------- -------- --------- ---------
OPERATING EXPENSES 2,346 2,254 7,139 6,567
-------- -------- --------- ---------
OPERATING INCOME 2,373 2,304 7,230 4,971
Gains (losses) on equity
securities, net (10) (63) 1 (248)
Interest and other, net 63 34 159 139
-------- -------- --------- ---------
INCOME BEFORE TAXES 2,426 2,275 7,390 4,862
Income taxes 520 618 1,997 1,394
-------- -------- --------- ---------
NET INCOME $ 1,906 $ 1,657 $ 5,393 $ 3,468
======== ======== ========= =========
BASIC EARNINGS PER SHARE $ 0.30 $ 0.25 $ 0.84 $ 0.53
======== ======== ========= =========
DILUTED EARNINGS PER
SHARE $ 0.30 $ 0.25 $ 0.82 $ 0.53
======== ======== ========= =========
COMMON SHARES OUTSTANDING 6,375 6,517 6,435 6,532
COMMON SHARES ASSUMING
DILUTION 6,442 6,625 6,541 6,605
INTEL CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEET DATA
(In millions)
Sept. 25, June 26, Dec. 27,
2004 2004 2003
--------- --------- ---------
CURRENT ASSETS
Cash and short-term investments $ 13,647 $ 14,264 $ 13,539
Trading assets 2,510 2,708 2,625
Accounts receivable 3,266 3,183 2,960
Inventories:
Raw materials 434 395 333
Work in process 1,750 1,912 1,490
Finished goods 996 916 696
--------- --------- ---------
3,180 3,223 2,519
Deferred tax assets and other 1,387 1,380 1,239
--------- --------- ---------
Total current assets 23,990 24,758 22,882
Property, plant and equipment, net 15,924 16,007 16,661
Marketable strategic equity
securities 461 582 514
Other long-term investments 2,365 2,238 1,866
Goodwill 3,734 3,730 3,705
Other assets 1,326 1,357 1,515
--------- --------- ---------
TOTAL ASSETS $ 47,800 $ 48,672 $ 47,143
========= ========= =========
CURRENT LIABILITIES
Short-term debt $ 213 $ 216 $ 224
Accounts payable and accrued
liabilities 5,514 5,253 5,237
Deferred income on shipments to
distributors 652 640 633
Income taxes payable 1,451 1,429 785
--------- --------- ---------
Total current liabilities 7,830 7,538 6,879
LONG-TERM DEBT 882 898 936
DEFERRED TAX LIABILITIES 1,358 1,643 1,482
STOCKHOLDERS' EQUITY 37,730 38,593 37,846
--------- --------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 47,800 $ 48,672 $ 47,143
========= ========= =========
INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
(In millions)
Q3 2004 Q2 2004 Q3 2003
--------- --------- ---------
GEOGRAPHIC REVENUE:
Americas $1,799 $1,956 $2,168
21% 24% 28%
Asia-Pacific $4,014 $3,661 $3,266
48% 45% 42%
Europe $1,886 $1,665 $1,683
22% 21% 21%
Japan $772 $767 $716
9% 10% 9%
ADDITIONAL REVENUE-RELATED INFORMATION:
Intel Architecture business
microprocessor revenue $5,928 $5,751 $5,719
Intel Architecture business chipset,
motherboard and other revenue $1,210 $1,023 $1,140
Flash revenue $638 $587 $389
CASH INVESTMENTS:
Cash and short-term investments $13,647 $14,264 $13,038
Trading assets - fixed income (1) $2,192 $2,390 $2,118
--------- --------- ---------
Total cash investments $15,839 $16,654 $15,156
INTEL CAPITAL PORTFOLIO:
Marketable strategic equity securities $461 $582 $561
Other strategic investments $631 $640 $689
--------- --------- ---------
Total Intel Capital portfolio $1,092 $1,222 $1,250
TRADING ASSETS:
Trading assets - equity securities
offsetting deferred compensation (2) $318 $318 $284
Total trading assets - sum of 1+2 $2,510 $2,708 $2,402
SELECTED CASH FLOW INFORMATION:
Depreciation $1,155 $1,151 $1,167
Amortization of acquisition-related
intangibles & costs $40 $43 $68
Capital spending ($1,106) ($1,026) ($1,072)
Stock repurchase program ($2,500) ($1,511) $0
Proceeds from sales of shares to
employees, tax benefit & other $302 $258 $421
Dividends paid ($253) ($258) ($131)
Net cash used for acquisitions ($20) ($33) ($21)
SHARE INFORMATION:
Average common shares outstanding 6,375 6,449 6,517
Dilutive effect of stock options 67 109 108
Common shares assuming dilution 6,442 6,558 6,625
STOCK BUYBACK:
Shares repurchased 106.3 56.0 -
Shares authorized for buyback 2,300.0 2,300.0 2,300.0
Cumulative shares repurchased (2,097.5) (1,991.2) (1,824.6)
Shares available for buyback 202.5 308.8 475.4
OTHER INFORMATION:
Employees (in thousands) 84.2 81.7 79.1
Days sales outstanding 35 36 37
INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
($ in millions)
Q3 Q2 YTD Q3 YTD
2004 2004 2004 2003 2003
- -------------------------------- ------ ------ ------- ------ -------
OPERATING SEGMENT
INFORMATION:
Intel Architecture Business
Revenue 7,138 6,774 20,937 6,859 18,481
Operating income 2,790 2,788 8,586 2,899 6,633
- -------------------------------- ------ ------ ------- ------ -------
Intel Communications Group
Revenue 1,327 1,271 3,663 973 2,893
Operating loss (251) (126) (596) (208) (681)
- -------------------------------- ------ ------ ------- ------ -------
All Other
Revenue 6 4 11 1 26
Operating loss (166) (281) (760) (387) (981)
- -------------------------------- ------ ------ ------- ------ -------
Total
Revenue 8,471 8,049 24,611 7,833 21,400
Operating income 2,373 2,381 7,230 2,304 4,971
- -------------------------------- ------ ------ ------- ------ -------
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 third 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.