Business Outlook as of July 13, 2004
** 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 slower rate due to a slight reduction in microprocessor average selling prices and a slight increase in microprocessor unit costs as the company reduces inventory levels in the second half of the year.
** 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.
** R&D spending 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 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 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.
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