Exhibit 99.1
Intel Announces Record Revenue of $9.96 Billion; EPS of 32 Cents Includes Legal
Settlement that Lowered EPS by Approximately 2 Cents
SANTA CLARA, Calif.--(BUSINESS WIRE)--Oct. 18, 2005--Intel Corporation
today announced record revenue of $9.96 billion for the third quarter, up 18
percent year-over-year and up 8 percent sequentially.
Third-quarter operating income was $3.1 billion, up 31 percent
year-over-year and up 17 percent sequentially, and includes the impact of a
legal settlement discussed below. Net income was $2 billion, up 5 percent
year-over-year and down 2 percent sequentially. Earnings per share (EPS) were 32
cents, up 7 percent from 30 cents in the third quarter of 2004 and down 3
percent from 33 cents in the second quarter of 2005. Third-quarter net income
and EPS included the impact of a legal settlement and tax item discussed below.
"In the third quarter, we achieved all-time records in company revenue and
unit shipments across all of our major product lines," said Paul Otellini, Intel
president and CEO. "Execution remained solid as we launched our new dual-core
server platform ahead of schedule and began shipping microprocessors built on
our industry-leading 65nm process technology. The combination of our 65nm
manufacturing network, broad range of new dual-core processors and unique
ability to provide platform solutions positions us well for continued growth."
Earlier this month, Intel and MicroUnity Inc. entered into a settlement
agreement that resolves a patent infringement case and provides certain rights
for Intel customers. Under the agreement, Intel will pay $300 million to
MicroUnity. Intel recorded a preliminary $140-million charge to third-quarter
cost of sales, which reduced earnings per share by approximately 2 cents. The
remaining $160 million represents the value of intellectual property assets that
are expected to be amortized over approximately 10 years. The company expects to
finalize the accounting by the time of the filing of the third-quarter Form
10-Q.
As discussed in the company's Sept. 8 Mid-Quarter Business Update, Intel's
results for the third quarter included the impact of an increase in taxes of
approximately $250 million, equivalent to 4 cents per share, related to the
decision to repatriate foreign-earned income under the American Jobs Creation
Act (Jobs Act). The company's results for last year's third quarter included a
tax adjustment that increased earnings-per-share by 3 cents. Intel's results for
the previous quarter included a tax adjustment that increased earnings-per-share
by approximately 2 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 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, investments or other business combinations that may
be completed after Oct. 17.
-- Revenue in the fourth quarter is expected to be between $10.2 billion
and $10.8 billion.
-- Gross margin percentage for the fourth quarter is expected to be
approximately 63 percent, plus or minus a couple of points, as
compared to 59.7 percent in the third quarter. The gross margin
percentage could vary from expectations based on changes in revenue
levels; product mix and pricing; variations in inventory valuation,
including variations related to the timing of qualifying products for
sale; excess or obsolete inventory; manufacturing yields; changes in
unit costs; capacity utilization; impairments of long-lived assets,
including manufacturing, assembly/test and intangible assets; and the
timing and execution of the manufacturing ramp and associated costs,
including start-up costs.
-- Expenses (R&D plus MG&A) in the fourth quarter are expected to be
approximately $3 billion, higher than $2.8 billion in the third
quarter, primarily driven by seasonally higher marketing spending
along with higher revenue- and profit-dependent spending. Expenses,
particularly certain marketing and compensation expenses, vary
depending on the level of demand for Intel's products and the level of
revenue and profits.
-- The R&D spending expectation for 2005 is unchanged at approximately
$5.2 billion.
-- The capital spending expectation for 2005 is unchanged at
approximately $5.9 billion, plus or minus $200 million.
-- Gains from equity investments and interest and other in the fourth
quarter are expected to be approximately $130 million.
-- The fourth-quarter tax rate is expected to be approximately 31
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; changes in the estimates of
credits, benefits and deductions; as well as the taxes associated with
repatriation of cash under the Jobs Act; 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
billion and $1.1 billion.
-- Amortization of acquisition-related intangibles and costs is expected
to be approximately $20 million in the fourth quarter.
THIRD-QUARTER REVIEW AND RECENT HIGHLIGHTS
Financial Review
-- The gross margin percentage was 59.7 percent including the impact of
the MicroUnity legal settlement. Gross margin excluding the impact of
the settlement would have been 61.1 percent, slightly above the range
provided in the Sept. 8 Business Update.
-- Intel used $2.5 billion in cash to repurchase 93.6 million shares of
its common stock during the quarter under an ongoing program.
-- The company paid a cash dividend of 8 cents per share on Sept. 1 to
stockholders of record on Aug. 7.
Key Product Trends (Sequential)
-- Total microprocessor units set a record. The average selling price was
approximately flat.
-- Chipset units set a record.
-- Motherboard units were lower.
-- Flash memory units set a record. The average selling price was higher.
-- Wireless connectivity units set a record.
-- Application processor units for products such as cellular phones and
PDAs set a record.
Digital Enterprise
To boost server performance, Intel launched its first dual-core, 64-bit
Intel(R) Xeon(R) processor for dual-processor servers, previously code-named
Paxville. The processor includes Hyper-Threading Technology and can increase the
performance of multithreaded applications by as much as 50 percent(1) when
compared to the previous, single-core version. Intel also announced plans to
ship the dual-core 64-bit Intel Xeon processor 7000 sequence for multiprocessor
(MP) servers later in the fourth quarter. New MP server platforms based on the
processor will include the Intel(R) E8501 chipset, which supports an 800 MHz
system bus, a dual independent system bus and DDR2 memory.
To increase server power efficiency, the company introduced low-voltage
versions of its 64-bit Intel Xeon processors, including a 3 GHz, low-voltage
version that operates in a 55-watt processor power envelope and a 3.2 GHz,
mid-voltage version for use in 90-watt configurations, both targeted at rack and
blade server designs.
Intel prepared for the volume ramp of new dual-core platforms by launching
a broad evaluation program that will provide thousands of systems to enterprise
customers and software developers, including a dual-core Intel Xeon server
platform code-named Bensley for upcoming processors code-named Dempsey and
Woodcrest. The evaluation program will help developers optimize their
multithreaded applications and allow IT end users to evaluate performance gains,
test compatibility with in-house applications and accelerate deployment plans.
The Itanium(R) Solutions Alliance was formed by Intel along with Bull,
Fujitsu, Fujitsu Siemens Computers, Hitachi, HP, NEC, SGI and Unisys. This
additional level of collaboration within the Itanium community will further grow
software capabilities and choices for Itanium-based servers.
For the Digital Office, the company demonstrated how Intel(R)
Virtualization Technology and Intel(R) Active Management Technology can be used
in future business PC designs to help IT managers fight computer viruses by
detecting, isolating and patching infected PCs, thereby protecting the network
and preserving user productivity.
At the Intel Developer Forum in August, the company unveiled a
next-generation processor microarchitecture that will power the company's future
platforms for the Digital Enterprise, Digital Office, Digital Home and Mobility.
The new microarchitecture combines the power-efficiency associated with the
company's industry-leading notebook PC processors with multicore computing
capability and "(star)T" technologies that help enable 64-bit computing and
improved manageability, reliability and security. The new microarchitecture will
be the foundation of new Intel platforms beginning in the second half of 2006
with the introduction of dual-core processors code-named Woodcrest for server
platforms, Conroe for desktop platforms, and Merom for notebook platforms, all
of which will be manufactured on Intel's 65nm process technology.
Mobility
In handheld computing and communications, Research In Motion (RIM)
announced plans to use the Intel's new cellular processor, codenamed Hermon, in
next-generation BlackBerry* devices, which are used on high-speed EDGE wireless
networks to enable users to connect to the Internet and send and receive data
with broadband-like speed. In addition, Motorola announced plans for the Moto Q*
smartphone which uses an Intel application processor code-named Bulverde for
applications including mobile e-mail and Web surfing.
In notebook computing, Intel announced an agreement with Matsushita Battery
Industrial to develop technology enabling "all-day computing." The company also
said it is working with Crown Castle and DiBcom to demonstrate mobile broadcast
TV functionality on mobile platforms based on Intel(R) Centrino(R) mobile
technology as well as Intel XScale(R) technology.
To enable future mobile platforms and small-form factor devices that
combine performance and long battery life, Intel announced it is developing an
ultra-low power derivative of its 65nm process technology.
To further accelerate the deployment of WiMAX wireless broadband networks,
Intel launched the Asian Broadband Campaign which will provide consulting and
expertise along with silicon and technical services. Intel Capital invested in
Unwired Australia, which is quickly moving to WiMAX technology and expanding
wireless broadband services to more cities. Intel now expects 100 WiMAX trials
to be underway worldwide by the end of the year.
Intel and Cisco Systems announced plans to enhance the quality and
reliability of wireless LANs and allow enterprises to use computers and the
network as a combined defense against security threats. In 2006, the companies
plan to deliver a new set of features called Business Class Wireless Suite that
will allow Intel Centrino mobile technology-based clients to scan for the best
access point within a business wireless LAN and provide enhanced Voice over IP
services and technologies for notebook PCs.
To advance the bandwidth available from Wi-Fi networks, Intel and other
industry leaders formed the Enhanced Wireless Consortium. The companies will
enable an ecosystem of a new generation of interoperable, high-performance
wireless LAN products with the goal of accelerating the development of the IEEE
802.11n standard. Intel also launched the Digital Communities initiative and is
working with a diverse group of high-tech companies to help communities use
wireless technology and new applications to enhance government efficiency,
promote economic growth, foster greater community satisfaction and bridge the
digital divide.
Digital Home
As part of its strategy to deliver technology tailored to the needs of
consumers, Intel announced plans to deliver platforms with a new Intel(R)
Viiv(TM) technology brand name. PCs with Intel Viiv technology will include
remote controls and work with a variety of Intel-verified online services and
software, including movies, music, photos and games. Designed from the ground up
for the digital home, Intel Viiv technology will include a suite of Intel
ingredients including a dual-core processor, chipset, platform software and
networking capabilities. Systems based on the first versions of the new platform
will be available in the first quarter of 2006 in a variety of form factors and
designs.
Intel is also developing platforms to power consumer electronics (CE)
devices such as digital televisions, set-top boxes and digital media recorders.
Intel announced the Oplus(TM) MN301 "system-on-a-chip" multimedia display
processor for flat panel displays and HDTV monitors. The company also announced
its intention to acquire demodulator and tuner technologies as well as expertise
from Zarlink Semiconductor that comprise the "front end" of such CE devices,
enabling them to receive, process, display and store digital broadcast signals.
Technology and Manufacturing
Intel has initiated commercial production and revenue shipments of
dual-core microprocessors based on the company's industry-leading 65nm, 300mm
process technology, which enables cost-effective, high-volume manufacturing of
multicore microprocessors and other advanced products. Intel expects to ship
hundreds of thousands of processors built on 65nm technology by the end of the
year and is broadly sampling dual-core processors code-named Yonah, Presler and
Dempsey to its OEM customers in preparation for a high-volume ramp in 2006.
The company began construction of Fab 32, a new 300mm wafer fabrication
facility in Chandler, Ariz. The $3 billion factory is scheduled to begin
production of leading-edge microprocessors in the second half of 2007 on a 45nm
process technology.
The company also announced plans to invest $345 million to expand capacity
at Fab 23 in Colorado Springs, Colo. and Fab 17 in Hudson, Mass. The 200mm
facilities are being used to produce products such as chipsets and
communications devices for a variety of Intel platforms. Intel also plans to
invest $105 million to convert an inactive fabrication facility in Rio Rancho,
N.M. for use as a product testing facility.
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. 17.
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. 8. From the close of business on Dec. 2 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 July 2,
2005.
-- 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, the availability of sufficient
inventory to meet demand, pricing pressures and actions taken by
Intel's competitors. Factors that could cause demand to be different
from Intel's expectations include changes in customer order patterns,
including order cancellations; changes in the level of inventory at
customers; and changes in business and economic conditions.
-- 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 marketable, non-marketable
and other investments; interest rates; cash balances; and changes in
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, Intel Xeon, Itanium, Intel Centrino, XScale, Intel Viiv and Oplus
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.
(1) Performance based on result submitted to www.spec.org on
SPECint_rate_base2000 benchmark. Baseline system configuration: IBM eServer
xSeries 346 Server platform with two 64-bit Intel Xeon processors 3.60 GHz with
2MB L2 Cache, 800 MHz system bus, 8x512MB ECC PC2-3200 DIMMs for RAM, Microsoft
Windows Server 2003 Standard Edition for OS and Intel Compiler 8.1 binaries. For
more information see
www.spec.org/cpu2000/results/res2005q2/cpu2000-20050514-04113.html. New
configuration: IBM eServer xSeries 346 Server platform with two Dual-Core Intel
Xeon processors 2.80 GHz with 2x2MB L2 Cache, 800 MHz system bus, 4 GB DDR2,
Microsoft Windows Server 2003 Standard Edition, Intel C/C++ Compiler 9.0 for
32-bit applications, Intel Fortran Compiler 9.0 (20050624Z) for 32-bit
applications, Microsoft Visual Studio .NET, MicroQuill Smartheap Library 7.30.
For additional information on other applications tested and benchmark results
see http://www.intel.com/performance/server/xeon/index.htm. Results vary by
hardware and software configuration.
INTEL CORPORATION
CONSOLIDATED SUMMARY INCOME STATEMENT DATA
(In millions, except per share amounts)
Three Months Nine Months
Ended Ended
--------------- -----------------
Oct. 1, Sept. 25, Oct. 1, Sept.25,
2005 2004 2005 2004
------- ------- -------- --------
NET REVENUE $9,960 $8,471 $28,625 $24,611
Cost of sales 4,012 3,752 11,876 10,242
------- ------- -------- --------
GROSS MARGIN 5,948 4,719 16,749 14,369
------- ------- -------- --------
Research and development 1,341 1,183 3,783 3,564
Marketing, general and
administrative 1,478 1,123 4,082 3,434
Amortization of
acquisition-related
intangibles and costs 29 40 103 141
------- ------- -------- --------
OPERATING EXPENSES 2,848 2,346 7,968 7,139
------- ------- -------- --------
OPERATING INCOME 3,100 2,373 8,781 7,230
Gains (losses) on equity
securities, net (2) (10) (20) 1
Interest and other, net 145 63 387 159
------- ------- -------- --------
INCOME BEFORE TAXES 3,243 2,426 9,148 7,390
Income taxes 1,248 520 2,937 1,997
------- ------- -------- --------
NET INCOME $1,995 $1,906 $ 6,211 $ 5,393
======= ======= ======== ========
BASIC EARNINGS PER SHARE $ 0.33 $ 0.30 $ 1.01 $ 0.84
======= ======= ======== ========
DILUTED EARNINGS PER SHARE $ 0.32 $ 0.30 $ 1.00 $ 0.82
======= ======= ======== ========
COMMON SHARES OUTSTANDING 6,062 6,375 6,139 6,435
COMMON SHARES ASSUMING DILUTION 6,144 6,442 6,211 6,541
INTEL CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEET DATA
(In millions)
Oct. 1, July 2, Dec. 25,
2005 2005 2004
-------- -------- --------
CURRENT ASSETS
Cash and short-term investments $11,951 $12,600 $14,061
Trading assets 1,982 2,224 3,111
Accounts receivable 3,748 3,448 2,999
Inventories:
Raw materials 381 384 388
Work in process 1,434 1,506 1,418
Finished goods 1,000 849 815
-------- -------- --------
2,815 2,739 2,621
Deferred tax assets and other 1,228 1,179 1,266
-------- -------- --------
Total current assets 21,724 22,190 24,058
Property, plant and equipment, net 16,825 16,624 15,768
Marketable strategic equity securities 520 362 656
Other long-term investments 3,047 2,247 2,563
Goodwill 3,814 3,805 3,719
Other assets 1,430 1,285 1,379
-------- -------- --------
TOTAL ASSETS $47,360 $46,513 $48,143
======== ======== ========
CURRENT LIABILITIES
Short-term debt $ 252 $ 318 $ 201
Accounts payable and accrued liabilities 6,654 5,425 6,050
Deferred income on shipments to
distributors 692 707 592
Income taxes payable 1,901 1,330 1,163
-------- -------- --------
Total current liabilities 9,499 7,780 8,006
LONG-TERM DEBT 432 430 703
DEFERRED TAX LIABILITIES 753 689 855
STOCKHOLDERS' EQUITY 36,676 37,614 38,579
-------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $47,360 $46,513 $48,143
======== ======== ========
INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
(In millions)
Q3 2005 Q2 2005 Q3 2004
---------------------------
GEOGRAPHIC REVENUE:
Asia-Pacific $5,124 $4,679 $4,014
52% 51% 48%
Americas $1,903 $1,863 $1,799
19% 20% 21%
Europe $2,007 $1,809 $1,886
20% 20% 22%
Japan $926 $880 $772
9% 9% 9%
CASH INVESTMENTS:
Cash and short-term investments $11,951 $12,600 $13,647
Trading assets - fixed income (1) 1,632 1,883 2,192
---------------------------
Total cash investments $13,583 $14,483 $15,839
INTEL CAPITAL PORTFOLIO:
Marketable strategic equity securities $520 $362 $461
Other strategic investments 553 518 631
---------------------------
Total Intel Capital portfolio $1,073 $880 $1,092
TRADING ASSETS:
Trading assets - equity securities
offsetting deferred compensation (2) $350 $341 $318
Total trading assets - sum of 1+2 $1,982 $2,224 $2,510
SELECTED CASH FLOW INFORMATION:
Depreciation $1,055 $1,051 $1,155
Amortization of acquisition-related
intangibles & costs $29 $36 $40
Capital spending ($1,282) ($1,389) ($1,106)
Stock repurchase program ($2,500) ($2,500) ($2,500)
Proceeds from sales of shares to
employees, tax benefit & other $444 $387 $322
Dividends paid ($486) ($493) ($253)
Net cash used for acquisitions ($22) ($81) ($20)
SHARE INFORMATION:
Average common shares outstanding 6,062 6,144 6,375
Dilutive effect of stock options 82 71 67
Common shares assuming dilution 6,144 6,215 6,442
STOCK BUYBACK:
Shares repurchased 93.6 98.9 106.3
Shares authorized for buyback 2,800.0 2,800.0 2,300.0
Cumulative shares repurchased (2,486.9)(2,393.3)(2,097.5)
Shares available for buyback 313.1 406.7 202.5
OTHER INFORMATION:
Employees (in thousands) 96.0 91.0 84.2
INTEL CORPORATION
SUPPLEMENTAL OPERATING RESULTS AND OTHER INFORMATION
($ in millions)
Nine Months
Ended
--------------
Q3 Q2 Q3 Q3 Q3
OPERATING SEGMENT INFORMATION: 2005 2005 2004 2005 2004
- --------------------------------------------------------------------
Digital Enterprise Group
Microprocessor revenue 4,936 4,603 4,520 14,483 14,170
Chipset, motherboard and other
revenue 1,434 1,398 1,346 4,249 3,835
Net revenue 6,370 6,001 5,866 18,732 18,005
Operating income 2,162 2,008 1,808 6,550 6,401
- --------------------------------------------------------------------
Mobility Group
Microprocessor revenue 2,331 2,056 1,571 6,304 3,957
Flash memory revenue 572 528 638 1,678 1,642
Chipset and other revenue 640 566 352 1,722 890
Net revenue 3,543 3,150 2,561 9,704 6,489
Operating income 1,402 1,140 796 3,641 1,790
- --------------------------------------------------------------------
All Other
Net revenue 47 80 44 189 117
Operating loss (464) (499) (231)(1,410) (961)
- --------------------------------------------------------------------
Total
Net revenue 9,960 9,231 8,471 28,625 24,611
Operating income 3,100 2,649 2,373 8,781 7,230
- --------------------------------------------------------------------
During the first quarter of 2005, the company reorganized its business
groups to bring all major product groups in line with the company's
strategy to design and deliver technology platforms. These new
business units include the Digital Enterprise Group, the Mobility
Group, the Digital Home Group, the Digital Health Group and the
Channel Platforms Group. The Digital Enterprise Group and the Mobility
group are reportable operating segments. The Digital Home Group,
Digital Health Group and Channel Platforms Group operating segments do
not meet the quantitative thresholds for reportable segments as
defined by SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information." Therefore, these operating segments are
included within the "all other" category. All prior period amounts
have been adjusted retrospectively to reflect the new organizational
structure as well as certain minor reorganizations effected through
the third quarter of 2005. As a result of this platform
reorganization, further changes may occur in the future.
The Digital Enterprise Group operating segment's products include
microprocessors and related chipsets and motherboards designed for the
desktop (including consumer desktop) and enterprise computing market
segments, communications infrastructure components such as network
processors and embedded microprocessors, wired connectivity devices
and products for network and server storage. The Mobility Group
operating segment's products include microprocessors and related
chipsets designed for the mobile computing market segment, flash
memory, wireless connectivity products, application processors used in
cellular handsets and handheld computing devices, and cellular
baseband chipsets. Revenue for the "all other" category primarily
consists of microprocessors and related chipsets used in consumer
electronics devices. For further information on the business strategy
of each operating segment, see Intel's Quarterly Report on Form 10-Q
for the quarter ended July 2, 2005.
In October 2005, Intel entered into a legal settlement agreement with
MicroUnity, Inc. and recorded an estimated $140 million charge to
third-quarter results. Of this amount, $110 million reduced the
operating income of the Digital Enterprise Group, and $30 million
reduced the operating income of the Mobility Group.
In addition to the operating results for the Digital Home Group,
Digital Health Group and Channel Platforms Group operating segments,
the "all other" category also includes acquisition-related costs,
including amortization and any impairments of acquisition-related
intangibles and goodwill. Additionally, "all other" includes the
results of operations of seed businesses that support the company's
initiatives. Finally, "all other" includes certain corporate-level
operating expenses, including a portion of profit-dependent bonus and
other expenses not allocated to the operating segments.
INTEL CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
GROSS MARGIN EXCLUDING LEGAL SETTLEMENT CHARGE
($ in millions)
Q3 2005
------------
GAAP gross margin $5,948 59.7%
Legal settlement charge(1) $140 1.4%
------------
Gross margin, excluding
legal settlement charge $6,088 61.1%
============
(1) Subsequent to the end of the third quarter of 2005, Intel and
MicroUnity, Inc. entered into a settlement agreement which resolves
all of the issues in a patent infringement case and provides certain
rights for Intel customers. Under the agreement, Intel will pay $300
million to MicroUnity. In connection with the settlement agreement,
Intel recorded an estimated $140 million charge to third quarter cost
of sales.