Exhibit 99.1
Intel Third-Quarter Revenue $8.7 Billion
-- Operating income $1.4 billion
-- EPS 22 cents
-- Record mobile and server microprocessor unit shipments
-- Over 6 million processors based on new Intel(R) Core(TM)
microarchitecture shipped
SANTA CLARA, Calif.--(BUSINESS WIRE)--Oct. 17, 2006--Intel Corporation
today announced third-quarter revenue of $8.7 billion, operating income of $1.4
billion, net income of $1.3 billion and earnings per share (EPS) of 22 cents.
Excluding the effects of share-based compensation, the company posted operating
income of $1.7 billion, net income of $1.5 billion and EPS of 27 cents.
Operating results included a gain of approximately $100 million from the
sale of a portion of an investment in Micron Technology, gains from divestitures
of approximately $130 million and a restructuring charge of $98 million. These
items resulted in a net positive impact to EPS of approximately 1.5 cents.
"We're pleased with the results of the third quarter, with record mobile
and server processor shipments, strong manufacturing execution, industry acclaim
for our new products, and quad-core processors now extending our leadership this
quarter," said Intel President and CEO Paul Otellini.
GAAP Results (including the effects of share-based compensation)
- ----------------------------------------------------------------------
Q3 2006 vs. Q3 2005 vs. Q2 2006
- ----------------------------------------------------------------------
Revenue $8.7 billion -12% +9%
- ----------------------------------------------------------------------
Operating Income $1.4 billion -56% +28%
- ----------------------------------------------------------------------
Net Income $1.3 billion -35% +47%
- ----------------------------------------------------------------------
EPS 22 cents -31% +47%
- ----------------------------------------------------------------------
Note: GAAP results for 2005 do not include the effects of share-based
compensation. Results for the third quarter of 2006 include the
effects of investment gains, divestiture gains and restructuring
charges that on a net basis increased EPS by 1.5 cents. Results for
last year's third quarter included a legal settlement that lowered
EPS by approximately 2 cents and a tax increase related to the
American Jobs Creation Act that reduced EPS by 4 cents.
- ----------------------------------------------------------------------
Non-GAAP Results (excluding the effects of share-based compensation)
- ----------------------------------------------------------------------
Q3 2006 vs. Q3 2005 vs. Q2 2006
- ----------------------------------------------------------------------
Operating Income $1.7 billion -45% +22%
- ----------------------------------------------------------------------
Net Income $1.5 billion -22% +38%
- ----------------------------------------------------------------------
EPS 27 cents -16% +42%
- ----------------------------------------------------------------------
Note: Results for the third quarter of 2006 include the effects of
investment gains, divestiture gains, and restructuring charges that
on a net basis increased EPS by 1.5 cents. Results for last year's
third quarter included a legal settlement that lowered EPS by
approximately 2 cents and a tax increase related to the American Jobs
Creation Act that reduced EPS by 4 cents.
- ----------------------------------------------------------------------
Financial Review
The gross margin percentage was consistent with the company's expectation
in July as the impact of higher microprocessor revenue was offset by a write-off
of older processor inventory of approximately $100 million. Expenses (R&D plus
MG&A) were lower than expected primarily due to lower payroll and discretionary
spending. Net gains on equity investments and interest and other were higher
than forecast due to investment gains and gains on divestitures.
Key Product Trends (Sequential)
-- Total microprocessor units were higher. The ASP was lower.
-- Chipset and motherboard units were higher.
-- Flash memory units were lower.
Sales Patterns
Sequential revenue was above normal seasonal patterns in the Americas, EMEA
and Japan regions following a lower-than-seasonal second quarter for the
company. Microprocessor unit sales were higher than seasonally normal off a low
second-quarter base, and pricing remained competitive, notably in the desktop
segment.
Q3 2006 vs. Q3 2005 vs. Q2 2006
- ------------------ ----------------- ----------------- ---------------
Asia-Pacific $4.3 billion -16% +7%
- ------------------ ----------------- ----------------- ---------------
Americas $1.9 billion -1% +10%
- ------------------ ----------------- ----------------- ---------------
EMEA $1.6 billion -20% +17%
- ------------------ ----------------- ----------------- ---------------
Japan $923 million Flat +2%
- ------------------ ----------------- ----------------- ---------------
Recent Events
-- Intel began initial revenue shipments of the world's first quad-core
microprocessors for PCs and high-volume servers. The processors plug
into existing customer system designs, providing integer performance
gains of up to 50 percent in servers and up to nearly 70 percent in
desktops and workstations.
-- The company announced a processor shipment crossover to advanced 65nm
technology during the quarter and has now shipped more than 40 million
65nm processors, including over 6 million based on the new Intel(R)
Core(TM) microarchitecture.
-- Intel announced that the first of 15 45nm processor designs is
scheduled to be completed by the end of the year, with Intel's
next-generation 45nm process technology on track for production in the
second half of 2007.
-- The company launched 10 Intel(R) Core(TM) 2 Duo and Intel(R) Core(TM)
2 Extreme processors for consumer and business desktop PCs, notebooks
and workstations, with more than 550 customer systems in design or
production.
-- Intel launched a new generation of corporate PC technology based on
the Intel Core 2 Duo processor and Intel(R) vPro(TM) technology, which
provides IT departments with more proactive control of security and
costs.
-- The company introduced eight Dual-Core Intel Xeon(R) 7100 series
processors for multi-processor (MP) servers offering up to twice the
performance and up to four times the performance-per-watt of previous
designs. Dell, Fujitsu-Siemens and IBM announced new world performance
records using the new Intel Xeon MP processors.
-- Intel introduced the industry's first WiMAX chip solution capable of
supporting mobile as well as fixed networks and supporting all global
WiMAX frequencies, with equipment makers including Motorola planning
to design the WiMAX solution into their equipment.
-- Intel and Micron Technology announced sampling of the industry's first
NAND flash memories built on 50nm process technology, with commercial
production expected in 2007.
Business Outlook and Risk Factors Regarding Forward-Looking Statements
The following expectations do not include the potential impact of any
mergers, acquisitions, divestitures or other business combinations that may be
completed after Oct. 16.
Q4 2006 Outlook
-- Revenue: Expected to be between $9.1 billion and $9.7 billion.
-- Gross margin: 50 percent, plus or minus a couple of points (51
percent, plus or minus a couple of points, excluding share-based
compensation effects of approximately 1 percent).
-- Expenses (R&D plus MG&A): Between $2.7 billion and $2.8 billion
(between $2.5 billion and $2.6 billion excluding share-based
compensation effects of approximately $250 million). In addition, the
company expects restructuring charges of approximately $125 million.
-- Net gains from equity investments and interest and other:
Approximately $135 million.
-- Tax rate: Approximately 30 percent.
-- Depreciation: Between $1.1 billion and $1.2 billion.
-- R&D for 2006: Approximately $5.9 billion (approximately $5.4 billion
excluding share-based compensation effects of approximately $500
million).
-- Capital spending for 2006: Between $5.7 billion and $5.9 billion,
lower than the previous expectation primarily due to greater equipment
reuse, productivity improvements and small timing changes.
The above statements and any others 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 set forth below to be the important factors that
could cause actual results to differ materially from the Corporation's published
expectations:
-- Intel operates in intensely competitive industries that are
characterized by a high percentage of costs that are fixed or
difficult to reduce in the short term, significant pricing pressures,
and product demand that is highly variable and difficult to forecast.
Additionally, Intel is transitioning to a new microarchitecture on
65nm process technology in all major product segments, and there could
be execution issues associated with these changes, including product
defects and errata along with lower than anticipated manufacturing
yields. Revenue and the gross margin percentage are affected by the
timing of new Intel product introductions and the demand for and
market acceptance of Intel's products; actions taken by Intel's
competitors, including product offerings, marketing programs and
pricing pressures and Intel's response to such actions; Intel's
ability to respond quickly to technological developments and to
incorporate new features into its products; and the availability of
sufficient inventory of Intel products and related components from
other suppliers to meet demand. Factors that could cause demand to be
different from Intel's expectations include customer acceptance of
Intel and competitors' products; changes in customer order patterns,
including order cancellations; changes in the level of inventory at
customers; and changes in business and economic conditions.
-- The gross margin percentage could vary significantly from expectations
based on changes in revenue levels; product mix and pricing; capacity
utilization; 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;
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, particularly certain marketing and compensation expenses,
vary depending on the level of demand for Intel's products and the
level of revenue and profits.
-- Intel is in the midst of a structure and efficiency review which is
resulting in several actions that could have an impact on expected
expense levels and gross margin.
-- 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 jurisdictions in which profits are
determined to be earned and taxed; changes in the estimates of
credits, benefits and deductions; the resolution of issues arising
from tax audits with various tax authorities; and the ability to
realize deferred tax assets.
-- 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.
-- Dividend declarations and the dividend rate are at the discretion of
Intel's board of directors, and plans for future dividends may be
revised by the board. Intel's dividend and stock buyback programs
could be affected by changes in its capital spending programs, changes
in its cash flows and changes in the tax laws, as well as by the level
and timing of acquisition and investment activity.
-- Intel's results could be affected by the amount, type, and valuation
of share-based awards granted as well as the amount of awards
cancelled due to employee turnover and the timing of award exercises
by employees.
-- Intel's results could be impacted by unexpected economic, social,
political and physical/infrastructure conditions in the countries in
which Intel, its customers or its suppliers operate, including
military conflict and other security risks, natural disasters,
infrastructure disruptions, health concerns and fluctuations in
currency exchange rates.
-- Intel's results could 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.
A more detailed discussion of these and other factors that could affect
Intel's results is included in Intel's SEC filings, including the report on Form
10-Q for the quarter ended July 1.
Status of Business Outlook
During the quarter, Intel's corporate representatives may reiterate the
Business Outlook during private meetings with investors, investment analysts,
the media and others. From the close of business on Dec. 1 until publication of
the company's fourth-quarter 2006 earnings release, Intel will observe a "Quiet
Period" during which the Business Outlook disclosed in the company's press
releases and filings with the SEC should be considered to be historical,
speaking as of prior to the Quiet Period only and not subject to update by the
company.
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, with a replay available until Dec. 1.
Intel, the world leader in silicon innovation, develops technologies,
products and initiatives to continually advance how people work and live.
Additional information about Intel is available at www.intel.com/pressroom.
Intel, the Intel logo, Intel Core, Intel vPro and Intel Xeon are trademarks
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. 30, Oct. 1, Sept. 30, Oct. 1,
2006 2005 2006 2005
----------- --------- --------- ----------
NET REVENUE $ 8,739 $ 9,960 $ 25,688 $ 28,625
Cost of sales 4,445 4,012 12,280 11,876
----------- --------- --------- ----------
GROSS MARGIN 4,294 5,948 13,408 16,749
----------- --------- --------- ----------
Research and development 1,389 1,341 4,447 3,783
Marketing, general and
administrative 1,425 1,478 4,662 4,082
Restructuring 98 - 98 -
Amortization of
acquisition-related
intangibles and costs 8 29 37 103
----------- --------- --------- ----------
OPERATING EXPENSES 2,920 2,848 9,244 7,968
----------- --------- --------- ----------
OPERATING INCOME 1,374 3,100 4,164 8,781
Gains (losses) on equity
securities, net 168 (2) 207 (20)
Interest and other, net 272 145 570 387
----------- --------- --------- ----------
INCOME BEFORE TAXES 1,814 3,243 4,941 9,148
Income taxes 513 1,248 1,398 2,937
----------- --------- --------- ----------
NET INCOME $ 1,301 $ 1,995 $ 3,543 $ 6,211
=========== ========= ========= ==========
BASIC EARNINGS PER SHARE $ 0.23 $ 0.33 $ 0.61 $ 1.01
=========== ========= ========= ==========
DILUTED EARNINGS PER
SHARE $ 0.22 $ 0.32 $ 0.60 $ 1.00
=========== ========= ========= ==========
COMMON SHARES OUTSTANDING 5,769 6,062 5,808 6,139
COMMON SHARES ASSUMING
DILUTION 5,832 6,144 5,885 6,211
INTEL CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEET DATA
(In millions)
Sept. 30, July 1, Dec. 31,
2006 2006 2005
------------ ------------ -----------
CURRENT ASSETS
Cash and short-term investments $ 7,123 $ 6,421 $ 11,314
Trading assets 1,096 1,222 1,458
Accounts receivable 3,358 3,178 3,914
Inventories:
Raw materials 535 496 409
Work in process 2,265 2,331 1,662
Finished goods 1,677 1,505 1,055
------------ ------------ -----------
4,477 4,332 3,126
Deferred taxes and other
current assets 1,550 1,602 1,382
------------ ------------ -----------
TOTAL CURRENT ASSETS 17,604 16,755 21,194
Property, plant and equipment,
net 18,038 18,098 17,111
Marketable strategic equity
securities 388 604 537
Other long-term investments 3,085 3,513 4,135
Goodwill 3,861 3,871 3,873
Other long-term assets 3,879 3,247 1,464
------------ ------------ -----------
TOTAL ASSETS $ 46,855 $ 46,088 $ 48,314
============ ============ ===========
CURRENT LIABILITIES
Short-term debt $ 196 $ 287 $ 313
Accounts payable and accrued
liabilities 6,880 6,570 6,329
Deferred income on shipments to
distributors 603 567 632
Income taxes payable 1,378 998 1,960
------------ ------------ -----------
TOTAL CURRENT LIABILITIES 9,057 8,422 9,234
Long-term debt 2,060 2,054 2,106
Deferred tax liabilities 375 470 703
Other long-term liabilities 346 346 89
Stockholders' equity 35,017 34,796 36,182
------------ ------------ -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 46,855 $ 46,088 $ 48,314
============ ============ ===========
INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
(In millions)
Q3 2006 Q2 2006 Q3 2005
------------ ------------ ------------
GEOGRAPHIC REVENUE:
Asia-Pacific $4,314 $4,015 $5,124
49% 50% 52%
Americas $1,891 $1,713 $1,903
22% 22% 19%
Europe $1,611 $1,375 $2,007
18% 17% 20%
Japan $923 $906 $926
11% 11% 9%
CASH INVESTMENTS:
Cash and short-term investments $7,123 $6,421 $11,951
Trading assets - fixed income
(1) 677 828 1,632
------------ ------------ ------------
Total cash investments $7,800 $7,249 $13,583
STRATEGIC EQUITY INVESTMENTS
Marketable strategic equity
securities $388 $604 $520
Other strategic investments 2,593 1,887 555
------------ ------------ ------------
Total strategic equity
investments $2,981 $2,491 $1,075
TRADING ASSETS:
Trading assets - equity
securities offsetting deferred
compensation (2) $419 $394 $350
Total trading assets - sum of
1+2 $1,096 $1,222 $1,982
SELECTED CASH FLOW INFORMATION:
Depreciation $1,193 $1,156 $1,055
Share-based compensation $335 $332 -
Amortization of intangibles and
other acquisition-related
costs $63 $59 $59
Capital spending ($1,180) ($1,738) ($1,282)
Stock repurchase program ($500) ($1,000) ($2,500)
Proceeds from sales of shares
to employees, tax benefit &
other $281 $163 $444
Dividends paid ($577) ($582) ($486)
Net cash used for acquisitions - - ($22)
EARNINGS PER SHARE INFORMATION:
Average common shares
outstanding 5,769 5,801 6,062
Dilutive effect of employee
equity incentive plans 12 17 82
Dilutive effect of convertible
debt 51 50 N/A
------------ ------------ ------------
Common shares assuming dilution 5,832 5,868 6,144
STOCK BUYBACK:
Shares repurchased 26.6 54.3 93.6
Cumulative shares repurchased 2,824.3 2,797.7 2,486.9
Remaining dollars authorized
for buyback (in billions) $17.4 $17.9 N/A
OTHER INFORMATION:
Employees (in thousands) 99.9 102.5 96.0
INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
($ in millions)
Three Months Ended Nine Months Ended
-------------------------------------
OPERATING SEGMENT INFORMATION: Q3 2006 Q3 2005 Q3 2006 Q3 2005
- ----------------------------------------------------------------------
Digital Enterprise Group
Microprocessor revenue 3,521 4,936 10,751 14,483
Chipset, motherboard and
other revenue 1,425 1,434 3,963 4,249
Net revenue 4,946 6,370 14,714 18,732
Operating income 858 2,164 3,165 6,574
- ----------------------------------------------------------------------
Mobility Group
Microprocessor revenue 2,239 2,331 6,544 6,304
Chipset and other revenue 809 639 2,172 1,722
Net revenue 3,048 2,970 8,716 8,026
Operating income 1,260 1,431 3,362 3,784
- ----------------------------------------------------------------------
Flash Memory Group
Net revenue 507 573 1,587 1,678
Operating loss (116) (30) (369) (142)
- ----------------------------------------------------------------------
All Other
Net revenue 238 47 671 189
Operating loss (628) (465) (1,994) (1,435)
- ----------------------------------------------------------------------
Total
Net revenue 8,739 9,960 25,688 28,625
Operating income 1,374 3,100 4,164 8,781
- ----------------------------------------------------------------------
The company's operating segments currently include the Digital Enterprise
Group, the Mobility Group, the Flash Memory Group, the Digital Home Group,
the Digital Health Group, and the Channel Platforms Group. The prior period
amounts have been adjusted retrospectively to reflect reorganizations.
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 notebook computing market segment, wireless connectivity products,
and application and cellular baseband processors used in handheld devices.
In the second quarter of 2006, the company entered into an agreement to
sell the business line that includes application and cellular baseband
processors used in handheld devices. The Flash Memory Group operating
segment includes NOR flash memory products designed for cellular phones and
embedded form factors, and NAND flash memory products manufactured by IMFT
that are designed for digital audio players and memory cards. Revenue for
the "all other" category primarily relates to microprocessors and related
chipsets sold by the Digital Home Group.
In addition to these operating segments, the company has sales and
marketing, manufacturing, finance, and administration groups. Expenses of
these groups are generally allocated to the operating segments and are
included in the operating results reported below. In addition to the
operating results for the Digital Home Group, Digital Health Group, and
Channel Platforms Group operating segments, the "all other" category
includes certain corporate-level operating expenses, including a portion of
profit-dependent bonus and other expenses not allocated to the operating
segments. "All other" also includes the results of operations of seed
businesses that support the company's initiatives. Additionally, "all
other" includes acquisition-related costs, including amortization and any
impairments of acquisition-related intangibles and goodwill, and charges
for purchased in-process research and development. Intel does not allocate
share-based compensation charges or restructuring charges to the operating
segments; as such, these charges are included in "all other."
In addition to disclosing financial results calculated in accordance with U.S.
generally accepted accounting principles (GAAP), the company's earnings release
contains non-GAAP financial measures that exclude the effects of share-based
compensation and the requirements of SFAS No. 123(R), "Share-based Payment"
("123R"). The non-GAAP financial measures used by management and disclosed by
the company exclude the income statement effects of all forms of share-based
compensation and the effects of 123R upon the number of diluted shares used in
calculating non-GAAP earnings per share. The non-GAAP financial measures
disclosed by the company should not be considered a substitute for, or superior
to, financial measures calculated in accordance with GAAP, and the financial
results calculated in accordance with GAAP and reconciliations to those
financial statements should be carefully evaluated. The non-GAAP financial
measures used by the company may be calculated differently from, and therefore
may not be comparable to, similarly titled measures used by other companies. Set
forth below are reconciliations of the non-GAAP financial measures to the most
directly comparable GAAP financial measures.
For additional information regarding these non-GAAP financial measures, see the
Form 8-K dated October 17, 2006 that Intel has filed with the Securities and
Exchange Commission.
INTEL CORPORATION
SUPPLEMENTAL RECONCILIATIONS OF GAAP TO NON-GAAP RESULTS
(In millions, except per-share amounts and percentages)
Three Months Ended
--------------------------------
Sept. 30, July 1, Oct. 1
2006 2006 2005
----------- ---------- ---------
GAAP SPENDING $ 2,814 $ 3,089 $ 2,819
Adjustment for share-based
compensation (232) (266) -
----------- ---------- ---------
SPENDING EXCLUDING SHARE-BASED
COMPENSATION (3) $ 2,582 $ 2,823 $ 2,819
GAAP OPERATING INCOME $ 1,374 $ 1,072 $ 3,100
Adjustment for share-based
compensation within:
Cost of sales 103 66 -
Research and development 107 126 -
Marketing, general and
administrative 125 140 -
----------- ---------- ---------
OPERATING INCOME EXCLUDING SHARE-
BASED COMPENSATION (3) $ 1,709 $ 1,404 $ 3,100
GAAP NET INCOME $ 1,301 $ 885 $ 1,995
Adjustment for share-based
compensation within:
Cost of sales 103 66 -
Research and development 107 126 -
Marketing, general and
administrative 125 140 -
Income taxes (87) (93) -
----------- ---------- ---------
NET INCOME EXCLUDING SHARE-BASED
COMPENSATION (3) $ 1,549 $ 1,124 $ 1,995
GAAP DILUTED EARNINGS PER SHARE $ 0.22 $ 0.15 $ 0.32
Adjustment for share-based
compensation 0.05 0.04 -
----------- ---------- ---------
DILUTED EARNINGS PER SHARE EXCLUDING
SHARE-BASED COMPENSATION (3) $ 0.27 $ 0.19 $ 0.32
GAAP COMMON SHARES ASSUMING DILUTION 5,832 5,868 6,144
Adjustment for share-based
compensation 12 8 -
----------- ---------- ---------
COMMON SHARES ASSUMING DILUTION
EXCLUDING SHARE-BASED COMPENSATION
(3) 5,844 5,876 6,144
GAAP GROSS MARGIN PERCENTAGE 49.1% 52.1% 59.7%
Adjustment for share-based
compensation 1.2% 0.8% -
----------- ---------- ---------
GROSS MARGIN PERCENTAGE EXCLUDING
SHARE-BASED COMPENSATION (3) 50.3% 52.9% 59.7%
(3) See Item 2.02 in the Form 8-K dated October 17, 2006 that Intel
has filed with the Securities and Exchange Commission.