Intel Reports First Quarter Revenue of $6.7 Billion First Quarter Earnings Excluding Acquisition-Related Costs(1) $0.16 Per Share; First Quarter Earnings Per Share $0.07
SANTA CLARA, Calif., Apr 17, 2001 (BUSINESS WIRE) --
-- Intel Investor Relations Web site: www.intc.com
-- Q1 earnings announcement call live on Web site at 2:30 p.m.
PDT
-- Conference call replay number 719/457-0820; access No. 601126
-- Replay available shortly after end of conference call through
April 24
Intel Corporation today announced first quarter revenue of $6.7 billion, down 16
percent from the first quarter of 2000 and down 23 percent sequentially.
For the first quarter, net income, excluding acquisition-related costs, was $1.1
billion, down 64 percent from the first quarter of 2000 and down 58 percent
sequentially. First quarter earnings, excluding acquisition-related costs, were
$0.16 per share, a decrease of 63 percent from $0.43 in the first quarter of
2000 and down 58 percent sequentially. Last year's first quarter earnings per
share includes a reversal of previously accrued taxes that reduced that
quarter's tax provision by $600 million, and improved first quarter 2000 results
by $0.09 per share. The reversal was related to the company's previous
announcement that the Internal Revenue Service had closed its examination of the
its tax returns up to and including 1998.
Including acquisition-related costs, in accordance with generally accepted
accounting principles, first quarter net income was $485 million, down 82
percent from first quarter of 2000 and down 78 percent sequentially. Earnings
per share were $0.07, down 82 percent from $0.39 in the first quarter of 2000
and down 78 percent sequentially.
Acquisition-related costs in the first quarter consisted of $75 million in
one-time charges for purchased in-process research and development and $585
million of amortization and write-offs of goodwill and other acquisition-related
intangibles and costs.
"Our microprocessor business appears to have stabilized and we expect to see
normal seasonal patterns going forward from our current business level," said
Craig R. Barrett, president and chief executive officer. "In our communications
businesses, we are experiencing continued softness. Looking beyond the current
environment, we believe our aggressive investment in new manufacturing
technologies and the development of cost-competitive, leading-edge products is
the winning strategy."
During the quarter, the company announced and completed the acquisitions of
Xircom Inc. and ICP Vortex Computersysteme GmbH, and announced the acquisition
of VxTel Inc. Background on acquisitions can be found in the first quarter
highlights section of this release.
During the quarter, the company paid its quarterly cash dividend of $0.02 per
share. The dividend was paid on March 1, 2001, to stockholders of record on Feb.
7, 2001. Intel has paid a regular quarterly cash dividend for more than eight
years.
During the quarter, the company repurchased a total of 29.4 million shares of
common stock, at a cost of $1.0 billion, under an ongoing program. Since the
program began in 1990, the company has repurchased 1.4 billion shares at a total
cost of $23.2 billion.
BUSINESS OUTLOOK
The following statements are based on current expectations. These statements are
forward-looking, and actual results may differ materially. These statements do
not include the potential impact of any mergers, acquisitions or other business
combinations that may be completed after March 31, 2001.
Beginning this quarter, Intel will have a mid-quarter Business Update to the
Outlook provided below. This quarter's Business Update is scheduled for June 7.
Continuing uncertainty in global economic conditions make it particularly
difficult to predict product demand and other related matters.
-- Revenue in the second quarter of 2001 is expected to be
between $6.2 billion and $6.8 billion.
-- Gross margin percentage in the second quarter of 2001 is
expected to be 49 percent, plus or minus a couple of points,
down from 51.7 percent in the first quarter. Intel's gross
margin expectation for the full-year 2001 is 50 percent, plus
or minus a few points. Gross margin percentage varies
primarily with revenue levels, product mix, product pricing,
changes in unit costs and timing of factory ramps and
associated costs.
-- Expenses (R&D, excluding in-process R&D, plus MG&A) in the
second quarter of 2001 are expected to be between $2.2 billion
and $2.3 billion. Expenses may vary from this expectation
depending, in part, on revenue and profits.
-- R&D spending, excluding in-process R&D, is expected to be
approximately $4.2 billion in 2001.
-- Capital spending for 2001 is expected to be approximately $7.5
billion. The company will use its financial strength to invest
in key areas such as 0.13-micron process technology, which
will enable the company to cost-effectively produce
leading-edge microprocessors beginning later this year, and
300 mm process technology, which is expected to lead to
approximately 30 percent microprocessor die cost-per-unit
reductions in 2002 and beyond.
-- Gains from equity investments and interest and other for the
second quarter of 2001 are expected to be approximately $115
million. This expectation assumes no net gains from the sale
of equity investments and will vary depending on equity market
levels and volatility, the realization of expected gains on
investments, including gains on investments acquired by third
parties, determination of impairment reserves, interest rates,
cash balances, mark-to-market of derivative instruments, and
assuming no unanticipated items.
-- The tax rate for 2001 is expected to be approximately 29.8
percent, excluding the impact of acquisition-related costs,
lower than the previous expectation of 30.3 percent.
-- Depreciation is expected to be approximately $1.0 billion in
the second quarter and $4.1 billion for the full year 2001.
-- Amortization of goodwill and other acquisition-related
intangibles and costs is expected to be approximately $520
million in the second quarter and $2.1 billion for the full
year 2001.
The statements by Craig R. Barrett and the above statements contained in this
Outlook are forward-looking statements that involve a number of risks and
uncertainties. In addition to factors discussed above, other factors that could
cause actual results to differ materially include the following: business and
economic conditions and growth in the computing and communications industries in
various geographic regions; changes in customer order patterns; changes in the
mixes of microprocessor types and speeds, purchased components and other
products; competitive factors, such as rival chip architectures and
manufacturing technologies, competing software-compatible microprocessors and
acceptance of new products in specific market segments; pricing pressures;
development and timing of introduction of compelling software applications;
excess or obsolete inventory and variations in inventory valuation; continued
success in technological advances, including development and implementation of
new processes and strategic products for specific market segments; execution of
the manufacturing ramp; excess manufacturing capacity; the ability to grow new
networking, communications, wireless and other Internet-related businesses and
successfully integrate and operate any acquired businesses; impact of events
outside the United States such as the business impact of fluctuating currency
rates or unrest or political instability in a locale, such as unrest in Israel;
unanticipated costs or other adverse effects associated with processors and
other products containing errata (deviations from published specifications);
litigation involving antitrust, intellectual property, consumer and other
issues; and other risk factors listed from time to time in the company's SEC
reports, including but not limited to the report on Form 10-K for the year ended
Dec. 30, 2000 (Part I, Item 2, Outlook section).
Status of Business Outlook and scheduled Business Update:
Intel expects that its corporate representatives will meet privately during the
quarter with investors, the media, investment analysts and others. At these
meetings, Intel may reiterate the Outlook published in this press release. At
the same time, Intel will keep this press release and Outlook publicly available
on its Web site (www.intc.com). Prior to the Business Update and related Quiet
Periods (described below), the public can continue to rely on the Outlook on the
Web site as being Intel's current expectations on matters covered, unless Intel
publishes a notice stating otherwise.
Intel intends to publish a Business Update press release on June 7, 2001, and
hold a related analysts' conference call (available for listening by webcast).
From June 2, 2001, until publication of the Business Update, Intel will observe
a "Quiet Period." During the Quiet Period, the Outlook, as provided in this
press release and the company's 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. During the Quiet Period, Intel
representatives will not comment concerning the Outlook or Intel's financial
results or expectations.
A Quiet Period, operating in similar fashion with regard to the Business Update
and the company's SEC filings, will begin June 16, 2001, and will extend until
the day when Intel's next quarterly Earnings Release is published, presently
scheduled for July 17, 2001.
FIRST QUARTER 2001 BUSINESS REVIEW
Intel Architecture Group
-- Microprocessor unit shipments were lower than the fourth
quarter.
-- Chipset unit shipments were lower than the fourth quarter.
-- Motherboard unit shipments were lower than the fourth quarter.
Wireless Communications and Computing Group
-- Flash memory unit shipments were lower than the fourth
quarter.
Intel Communications Group (formerly the Network Communications and
Communications Products Groups)
-- Unit shipments of Fast Ethernet and Gigabit Ethernet
connections were lower than the fourth quarter.
-- Unit shipments of network processing components, which include
embedded Pentium(R) III processors, network processors and I/O
processors, were lower than the fourth quarter.
-- Unit shipments of microcontrollers were lower than the fourth
quarter.
Financial Review
-- Average selling prices of microprocessors in the first quarter
were lower than the fourth quarter.
-- Gross margin percentage in the first quarter was 51.7 percent,
meeting revised expectations and down from fourth quarter
gross margin percentage of 63 percent, primarily due to the
significant sequential drop in first quarter revenue.
-- Expenses (R&D, excluding in-process R&D, plus MG&A) in the
first quarter were $2.2 billion, down 11 percent from fourth
quarter expenses. First quarter expenses were higher than
revised expectations that they would be down approximately 15
percent sequentially, primarily due to lower than expected
spending reductions because of prior commitments in hiring and
discretionary spending.
-- Gains on equity investments and interest and other were $264
million in the first quarter, higher than previous
expectations of $180 million. Interest and other includes a
$45 million pre-tax gain from adopting the Statement of
Financial Accounting Standards No. 133 on accounting for
derivatives and hedging. This gain is primarily due to the
mark-to-market of Intel Capital equity derivatives. With the
adoption, approximately $1.4 billion of investments were
reclassified to trading assets, primarily from short-term
investments.
Intel Capital had no net gains on equity investments, after
recognizing gains of $428 million, which were fully offset by
impairment reserves.
-- The effective tax rate was approximately 29.8 percent in the
first quarter, excluding the impact of acquisition-related
costs.
-- Amortization of goodwill and other acquisition-related
intangibles and costs was $585 million, higher than previous
expectations of $465 million, primarily due to a write-off of
goodwill related to certain acquisitions and the impact of
acquisitions completed after the March 8 release.
FIRST QUARTER AND RECENT HIGHLIGHTS
Intel Architecture Group
-- In January, the company introduced two new ultra-low-power
mobile PC microprocessors, including the industry's first
mobile processor to operate under 1 volt while consuming less
than half a watt of power. Enabled by Intel's advanced
processor design and power-reduction technologies, the
Intel(R) Ultra Low Voltage mobile Pentium(R) III processor 500
MHz featuring Intel(R) SpeedStep(TM) technology and the
Intel(R) Ultra Low Voltage mobile Celeron(TM) processor 500
MHz are designed to deliver high performance, minimal power
consumption and extended battery life for the smallest mobile
PCs.
-- In February, the company announced the Intel(R) Low Voltage
mobile Pentium(R) III processor 700 MHz featuring Intel(R)
SpeedStep(TM) technology. The processor delivers outstanding
performance, low power consumption and extended battery life
to new categories of mini-notebooks weighing less than 3
pounds.
-- In March, the company announced it has begun shipments of its
900 MHz large cache Intel(R) Pentium(R) III Xeon(TM)
processors. Featuring 2 MB of "on-die" level-two (L2) cache,
the processors deliver new levels of performance for high-end,
Intel-based server platforms based on 4-way and 8-way
multiprocessing systems.
-- Also in March, the company introduced the mobile Intel(R)
Pentium(R) III processor at 1 Gigahertz (GHz) featuring Intel
SpeedStep(TM) technology. The new processor is the world's
fastest mobile PC processor and is designed for full-size and
thin-and-light notebooks, the most popular categories of
mobile PCs.
-- In April, the company released the Intel(R) Celeron(TM)
processor at 850 MHz, the company's fastest offering for
desktop value PCs.
Wireless Communications and Computing Group
-- In February, the company announced that Sonera, a leading
European mobile communications and services provider, endorsed
the Intel(R) Personal Internet Client Architecture (Intel PCA)
in an effort to accelerate the development of applications for
next-generation, Internet-ready wireless devices.
Additionally, Sonera Venture Capital and the Intel
Communications Fund announced they would cooperate in
identifying investment opportunities in companies with
technologies that help shape and grow next-generation Internet
applications for wireless devices.
-- Also in February, Intel introduced a new addition to the
company's flash memory family, the Intel Persistent Storage
Manager (PSM), version 3.0 software. Coupled with Intel(R)
StrataFlash(TM) memory, PSM serves as a flash file and media
manager that enables code execution, file storage and registry
back-up. The software is specifically aimed at handheld
devices using Microsoft's Windows(2) CE operating system.
-- In February, the company announced it would provide
high-performance flash memory to Cisco Systems for a variety
of communications technologies and Siemens AG for
next-generation, Internet-ready cell phones and wireless
devices.
-- In March, the company announced IBM would provide software
designed to work with the Intel Personal Internet Client
Architecture (Intel PCA) for wireless devices and other
Internet appliances. The two companies will work together to
deliver standards-based hardware and software solutions for
next-generation, Internet-ready household devices.
Intel Communications Group
-- In January, Intel announced it had entered into a definitive
agreement under which Intel, through a wholly-owned
subsidiary, would acquire Xircom Inc., for $25 per share in an
all-cash tender offer valued at approximately $748 million.
The acquisition, which was completed in March, complements
Intel's existing desktop PC and server-based network access
businesses by enabling Intel to provide new products for
notebook and mobile computing uses.
-- In February, the company introduced seven optical networking
semiconductor products that enable telecommunications
equipment manufacturers to create new systems that extend the
reach of optical networks, add intelligence to those networks
and deliver new services.
-- In February, Intel began sampling the world's first
single-chip Gigabit Ethernet controller, an advanced
semiconductor device used to help direct the flow of data
across networks. The new single-chip controller will help
accelerate the deployment of Gigabit Ethernet networks by
greatly simplifying the design process for systems designers.
-- In February, the company announced it had entered into a
definitive agreement to acquire privately held VxTel Inc. in a
cash transaction worth approximately $550 million. VxTel is a
semiconductor company that has developed unique Voice over
Packet (VoP) products that help deliver high-quality voice and
data communications over next-generation optical networks. The
transaction was completed in April.
New Business Group
-- In March, the company confirmed that it would supply 250,000
Intel Dot.Station(TM) Web appliances to AOL Avant as part of
its Internet bundle for consumers in Spain.
-- Also in March, Intel(R) Online Services, Inc. announced a new
marketing program for application service providers (ASPs).
The Intel Online Services ASP Accelerator Program provides
comprehensive marketing programs and a service foundation that
allows ASPs to differentiate their businesses.
Technology and Manufacturing Review
-- In March, the company announced that its researchers have
developed and delivered the first industry-standard format
photomasks (also called "masks") for Extreme Ultra Violet
(EUV) lithography. This marks a significant milestone in the
demonstration of EUV as the next-generation lithography
standard for the semiconductor industry.
-- Also in March, Intel announced that it had manufactured its
first silicon chips using its 0.13-micron process technology
and 300 mm wafer development in fab D1C. This fab, which is
located in Hillsboro, Ore., is the first in the industry to
produce fully-functional computer chips built using advanced
0.13-micron process technology on the new, larger 300 mm
wafers. Intel remains on track to bring chips built on these
advanced technologies into the marketplace at the beginning of
next year. The company expects microprocessor die costs per
unit to be 30 percent less on 300m wafers than today's 200 mm
wafers.
Intel Capital
Intel Capital, Intel's strategic investment program, makes equity investments to
grow the Internet economy on a worldwide basis, in support of Intel's strategic
interests. Intel Capital invests in companies to establish innovative
technologies, develop industry standard solutions, drive Internet growth and
advance the computing platform. Intel Capital also manages acquisitions.
Two specific areas of focus for Intel Capital are the Intel Communications Fund
and the Intel 64 Fund. The Intel Communications Fund is a $500 million fund
focused on supporting the Intel(R) Internet Exchange(TM) Architecture, CT
Media(TM) and the company's wireless communications efforts. The Intel 64 Fund
is a $253 million equity fund created by Intel and other corporate investors to
accelerate the development of solutions for Intel's 64-bit architecture. The
funds continue to achieve their goals. As of the end of the quarter, Intel
Capital's strategic equity portfolio included more than 575 companies worldwide.
The portfolio includes securities of both publicly-traded and private companies
as follows:
March 31, 2001 (in millions) Carrying Value
---------------------------- --------------
Marketable equity securities $1,266
Other equity investments $2,032
------
Total portfolio $3,298
======
As of March 31, 2001, the total carrying value of the portfolio included
approximately $48 million of net unrealized appreciation on the marketable
equity securities. Marketable equity securities include the Intel Capital
portfolio holdings classified as trading assets or as marketable strategic
equity securities and they are carried at current market value in the balance
sheet. Other equity investments are classified as other assets in the balance
sheet. They include non-marketable securities carried at the lower of cost or
market value and equity derivatives carried at current market value. Total
portfolio value will vary based on a number of factors, including market
fluctuations, investments, dispositions and changes in the marketable status of
securities.
For more information on Intel Capital's strategy and portfolio please visit
www.intel.com/capital.
FINANCIAL INFORMATION
The financial review section is in the tables following this release. Along with
the income statement and balance sheet information, additional information is
available from the investor relations Web site at www.intc.com in a spreadsheet
format that can be downloaded.
Copies of this earnings release and Intel's annual report can be obtained via
the Internet at www.intc.com or by calling Intel's transfer agent, Computershare
Investor Services, L.L.C., at 800/298-0146.
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.
(1) Acquisition-related costs consist of one-time write-offs of purchased
in-process research and development and goodwill, and the ongoing amortization
of goodwill and other acquisition-related intangibles and costs. Intangibles
include, for example, the value of the acquired companies' developed technology,
trademarks and workforce-in-place. Earnings excluding acquisition-related costs
differ from earnings presented according to generally accepted accounting
principles because they exclude these costs.
(2) Third-party marks and brands are property of their respective holders.
INTEL CORPORATION
CONSOLIDATED SUMMARY INCOME STATEMENT DATA
(In millions, except per share amounts)
Three Months Ended
----------------------
Mar. 31 Apr. 1
2001 2000
----------------------
NET REVENUE $ 6,677 $ 7,993
-------- --------
Cost of sales 3,225 2,989
Research and development 995 951
Marketing, general and
administrative 1,155 1,124
Amortization of goodwill and
other acquisition-related
intangibles and costs 585 313
Purchased in-process research
and development 75 62
-------- --------
Operating costs and expenses 6,035 5,439
-------- --------
OPERATING INCOME 642 2,554
Gains on equity investments - 449
Interest and other 264 191
-------- --------
INCOME BEFORE TAXES 906 3,194
Income taxes 421 498
-------- --------
NET INCOME $ 485 $ 2,696
======== ========
BASIC EARNINGS PER SHARE $ 0.07 $ 0.40
======== ========
DILUTED EARNINGS PER SHARE $ 0.07 $ 0.39
======== ========
COMMON SHARES OUTSTANDING 6,721 6,683
COMMON SHARES ASSUMING DILUTION 6,899 6,995
Note: Certain prior period amounts have been reclassified to conform
with the current presentation.
--------------------------------------------------
PRO FORMA INFORMATION EXCLUDING
ACQUISITION-RELATED COSTS
The following pro forma supplemental information excludes the effect
of acquisition-related costs. This pro forma information is not
prepared in accordance with generally accepted accounting principles.
Three Months Ended
----------------------
Mar. 31 Apr. 1
2001 2000
----------------------
Pro forma operating costs
and expenses $ 5,375 $ 5,064
Pro forma operating income $ 1,302 $ 2,929
Net income excluding
acquisition-related costs $ 1,099 $ 3,038
Basic earnings per share excluding
acquisition-related costs $ 0.16 $ 0.45
Diluted earnings per share
excluding acquisition-related
costs $ 0.16 $ 0.43
INTEL CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEET DATA
(In millions)
Mar 31, Dec. 30,
2001 2000
-------- --------
CURRENT ASSETS
Cash and short-term investments $ 10,058 $ 13,473
Trading assets 1,545 350
Accounts receivable 3,432 4,129
Inventories:
Raw materials 406 384
Work in process 1,367 1,057
Finished goods 879 800
-------- --------
2,652 2,241
Deferred tax assets and other 1,052 957
-------- --------
Total current assets 18,739 21,150
Property, plant and equipment, net 16,774 15,013
Marketable strategic equity
securities 1,159 1,915
Other long-term investments 1,141 1,797
Goodwill and other
acquisition-related intangibles 6,071 5,941
Other assets 2,365 2,129
-------- --------
TOTAL ASSETS $ 46,249 $ 47,945
======== ========
CURRENT LIABILITIES
Short-term debt $ 479 $ 378
Accounts payable and
accrued liabilities 5,398 6,305
Deferred income on shipments
to distributors 648 674
Income taxes payable 862 1,293
-------- --------
Total current liabilities 7,387 8,650
LONG-TERM DEBT 704 707
DEFERRED TAX LIABILITIES 1,240 1,266
STOCKHOLDERS' EQUITY
Common stock and capital in
excess of par value 8,712 8,486
Other stockholders' equity 28,206 28,836
-------- --------
Total stockholders' equity 36,918 37,322
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 46,249 $ 47,945
======== ========
INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
(In millions)
Q1 2001 Q4 2000 Q1 2000
------- ------- -------
GEOGRAPHIC REVENUES:
Americas 35% 41% 39%
Europe 25% 25% 27%
Asia-Pacific 28% 25% 25%
Japan 12% 9% 9%
SELECTED CASH FLOW INFORMATION:
Depreciation $ 934 $ 786 $ 897
Amortization of goodwill and
other acquisition-related
intangibles & costs $ 585 $ 459 $ 313
Purchased in-process research
and development $ 75 $ 18 $ 62
Capital spending ($2,664) ($2,423) ($1,074)
Stock repurchase program ($1,001) ($1,001) ($1,000)
Proceeds from sales of shares to
employees, tax benefit & other $ 356 $ 95 $ 633
Dividends paid ($ 135) ($ 135) ($ 100)
Net cash used for acquisitions ($ 498) ($ 215) ($1,406)
SHARE INFORMATION
(adjusted for stock splits):
Average common shares outstanding 6,721 6,723 6,683
Dilutive effect of:
Stock options 178 215 305
Convertible notes - - 7
Common shares assuming dilution 6,899 6,938 6,995
STOCK BUYBACK:
BUYBACK ACTIVITY:
Shares repurchased 29.4 22.8 19.6
Cumulative shares repurchased 1,422.7 1,393.3 1,339.4
PUT WARRANT ACTIVITY:
Put warrant sales - - -
Put warrant expirations - - (4.0)
Put warrant exercises - - -
Put warrants outstanding - - -
BUYBACK SUMMARY:
Shares authorized for buyback 1,520.0 1,520.0 1,520.0
Cumulative shares repurchased (1,422.7) (1,393.3) (1,339.4)
Put warrants outstanding - - -
Shares available for buyback 97.3 126.7 180.6
OTHER INFORMATION:
Employees (in thousands) 88.2 86.1 71.7
Days sales outstanding 40 37 36
INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
($ in millions)
Q1 2001 Q4 2000 Q1 2000
------- ------- -------
OPERATING SEGMENT
INFORMATION:
Intel Architecture Group:
Revenues 5,133 6,851 6,652
Operating profit 1,683 3,233 3,006
All other:
Revenues 1,544 1,851 1,341
Operating loss (1,041) (657) (452)
Total:
Revenues 6,677 8,702 7,993
Operating profit 642 2,576 2,554
The Intel Architecture Group includes microprocessors, motherboards
and board-level products, including chipsets.
The "all other" category includes revenues and earnings or losses from
non-reportable operating segments: the Wireless Communications and
Computing Group, the Communications Products Group, the Network
Communications Group and the New Business Group. During the first
quarter of 2001, the company announced its intention to combine the
Networking Communications Group and the Communications Products Group
to form the new Intel Communications Group. Operations of these groups
had not been combined as of March 31, 2001.
In addition, "all other" includes certain corporate-level operating
expenses, including a portion of profit-dependent bonus expenses that
are not allocated to the operating segments. Prior to 2001 the
majority of the profit-dependent bonus expenses were kept at the
corporate level, but as of the first quarter of 2001, the majority of
these expenses have been allocated to the operating segments.
Information for prior periods has been restated to conform to the new
presentation.
CONTACT: Intel Corp.
Doug Lusk, 408/765-1679 (investor relations)
Tom Beermann, 408/765-6855 (press relations)
URL: www.businesswire.com
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SANTA CLARA, Calif., Apr 17, 2001 (BUSINESS WIRE) --
-- Intel Investor Relations Web site: www.intc.com
-- Q1 earnings announcement call live on Web site at 2:30 p.m.
PDT
-- Conference call replay number 719/457-0820; access No. 601126
-- Replay available shortly after end of conference call through
April 24
Intel Corporation today announced first quarter revenue of $6.7 billion, down 16
percent from the first quarter of 2000 and down 23 percent sequentially.
For the first quarter, net income, excluding acquisition-related costs, was $1.1
billion, down 64 percent from the first quarter of 2000 and down 58 percent
sequentially. First quarter earnings, excluding acquisition-related costs, were
$0.16 per share, a decrease of 63 percent from $0.43 in the first quarter of
2000 and down 58 percent sequentially. Last year's first quarter earnings per
share includes a reversal of previously accrued taxes that reduced that
quarter's tax provision by $600 million, and improved first quarter 2000 results
by $0.09 per share. The reversal was related to the company's previous
announcement that the Internal Revenue Service had closed its examination of the
its tax returns up to and including 1998.
Including acquisition-related costs, in accordance with generally accepted
accounting principles, first quarter net income was $485 million, down 82
percent from first quarter of 2000 and down 78 percent sequentially. Earnings
per share were $0.07, down 82 percent from $0.39 in the first quarter of 2000
and down 78 percent sequentially.
Acquisition-related costs in the first quarter consisted of $75 million in
one-time charges for purchased in-process research and development and $585
million of amortization and write-offs of goodwill and other acquisition-related
intangibles and costs.
"Our microprocessor business appears to have stabilized and we expect to see
normal seasonal patterns going forward from our current business level," said
Craig R. Barrett, president and chief executive officer. "In our communications
businesses, we are experiencing continued softness. Looking beyond the current
environment, we believe our aggressive investment in new manufacturing
technologies and the development of cost-competitive, leading-edge products is
the winning strategy."
During the quarter, the company announced and completed the acquisitions of
Xircom Inc. and ICP Vortex Computersysteme GmbH, and announced the acquisition
of VxTel Inc. Background on acquisitions can be found in the first quarter
highlights section of this release.
During the quarter, the company paid its quarterly cash dividend of $0.02 per
share. The dividend was paid on March 1, 2001, to stockholders of record on Feb.
7, 2001. Intel has paid a regular quarterly cash dividend for more than eight
years.
During the quarter, the company repurchased a total of 29.4 million shares of
common stock, at a cost of $1.0 billion, under an ongoing program. Since the
program began in 1990, the company has repurchased 1.4 billion shares at a total
cost of $23.2 billion.
BUSINESS OUTLOOK
The following statements are based on current expectations. These statements are
forward-looking, and actual results may differ materially. These statements do
not include the potential impact of any mergers, acquisitions or other business
combinations that may be completed after March 31, 2001.
Beginning this quarter, Intel will have a mid-quarter Business Update to the
Outlook provided below. This quarter's Business Update is scheduled for June 7.
Continuing uncertainty in global economic conditions make it particularly
difficult to predict product demand and other related matters.
-- Revenue in the second quarter of 2001 is expected to be
between $6.2 billion and $6.8 billion.
-- Gross margin percentage in the second quarter of 2001 is
expected to be 49 percent, plus or minus a couple of points,
down from 51.7 percent in the first quarter. Intel's gross
margin expectation for the full-year 2001 is 50 percent, plus
or minus a few points. Gross margin percentage varies
primarily with revenue levels, product mix, product pricing,
changes in unit costs and timing of factory ramps and
associated costs.
-- Expenses (R&D, excluding in-process R&D, plus MG&A) in the
second quarter of 2001 are expected to be between $2.2 billion
and $2.3 billion. Expenses may vary from this expectation
depending, in part, on revenue and profits.
-- R&D spending, excluding in-process R&D, is expected to be
approximately $4.2 billion in 2001.
-- Capital spending for 2001 is expected to be approximately $7.5
billion. The company will use its financial strength to invest
in key areas such as 0.13-micron process technology, which
will enable the company to cost-effectively produce
leading-edge microprocessors beginning later this year, and
300 mm process technology, which is expected to lead to
approximately 30 percent microprocessor die cost-per-unit
reductions in 2002 and beyond.
-- Gains from equity investments and interest and other for the
second quarter of 2001 are expected to be approximately $115
million. This expectation assumes no net gains from the sale
of equity investments and will vary depending on equity market
levels and volatility, the realization of expected gains on
investments, including gains on investments acquired by third
parties, determination of impairment reserves, interest rates,
cash balances, mark-to-market of derivative instruments, and
assuming no unanticipated items.
-- The tax rate for 2001 is expected to be approximately 29.8
percent, excluding the impact of acquisition-related costs,
lower than the previous expectation of 30.3 percent.
-- Depreciation is expected to be approximately $1.0 billion in
the second quarter and $4.1 billion for the full year 2001.
-- Amortization of goodwill and other acquisition-related
intangibles and costs is expected to be approximately $520
million in the second quarter and $2.1 billion for the full
year 2001.
The statements by Craig R. Barrett and the above statements contained in this
Outlook are forward-looking statements that involve a number of risks and
uncertainties. In addition to factors discussed above, other factors that could
cause actual results to differ materially include the following: business and
economic conditions and growth in the computing and communications industries in
various geographic regions; changes in customer order patterns; changes in the
mixes of microprocessor types and speeds, purchased components and other
products; competitive factors, such as rival chip architectures and
manufacturing technologies, competing software-compatible microprocessors and
acceptance of new products in specific market segments; pricing pressures;
development and timing of introduction of compelling software applications;
excess or obsolete inventory and variations in inventory valuation; continued
success in technological advances, including development and implementation of
new processes and strategic products for specific market segments; execution of
the manufacturing ramp; excess manufacturing capacity; the ability to grow new
networking, communications, wireless and other Internet-related businesses and
successfully integrate and operate any acquired businesses; impact of events
outside the United States such as the business impact of fluctuating currency
rates or unrest or political instability in a locale, such as unrest in Israel;
unanticipated costs or other adverse effects associated with processors and
other products containing errata (deviations from published specifications);
litigation involving antitrust, intellectual property, consumer and other
issues; and other risk factors listed from time to time in the company's SEC
reports, including but not limited to the report on Form 10-K for the year ended
Dec. 30, 2000 (Part I, Item 2, Outlook section).
Status of Business Outlook and scheduled Business Update:
Intel expects that its corporate representatives will meet privately during the
quarter with investors, the media, investment analysts and others. At these
meetings, Intel may reiterate the Outlook published in this press release. At
the same time, Intel will keep this press release and Outlook publicly available
on its Web site (www.intc.com). Prior to the Business Update and related Quiet
Periods (described below), the public can continue to rely on the Outlook on the
Web site as being Intel's current expectations on matters covered, unless Intel
publishes a notice stating otherwise.
Intel intends to publish a Business Update press release on June 7, 2001, and
hold a related analysts' conference call (available for listening by webcast).
From June 2, 2001, until publication of the Business Update, Intel will observe
a "Quiet Period." During the Quiet Period, the Outlook, as provided in this
press release and the company's 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. During the Quiet Period, Intel
representatives will not comment concerning the Outlook or Intel's financial
results or expectations.
A Quiet Period, operating in similar fashion with regard to the Business Update
and the company's SEC filings, will begin June 16, 2001, and will extend until
the day when Intel's next quarterly Earnings Release is published, presently
scheduled for July 17, 2001.
FIRST QUARTER 2001 BUSINESS REVIEW
Intel Architecture Group
-- Microprocessor unit shipments were lower than the fourth
quarter.
-- Chipset unit shipments were lower than the fourth quarter.
-- Motherboard unit shipments were lower than the fourth quarter.
Wireless Communications and Computing Group
-- Flash memory unit shipments were lower than the fourth
quarter.
Intel Communications Group (formerly the Network Communications and
Communications Products Groups)
-- Unit shipments of Fast Ethernet and Gigabit Ethernet
connections were lower than the fourth quarter.
-- Unit shipments of network processing components, which include
embedded Pentium(R) III processors, network processors and I/O
processors, were lower than the fourth quarter.
-- Unit shipments of microcontrollers were lower than the fourth
quarter.
Financial Review
-- Average selling prices of microprocessors in the first quarter
were lower than the fourth quarter.
-- Gross margin percentage in the first quarter was 51.7 percent,
meeting revised expectations and down from fourth quarter
gross margin percentage of 63 percent, primarily due to the
significant sequential drop in first quarter revenue.
-- Expenses (R&D, excluding in-process R&D, plus MG&A) in the
first quarter were $2.2 billion, down 11 percent from fourth
quarter expenses. First quarter expenses were higher than
revised expectations that they would be down approximately 15
percent sequentially, primarily due to lower than expected
spending reductions because of prior commitments in hiring and
discretionary spending.
-- Gains on equity investments and interest and other were $264
million in the first quarter, higher than previous
expectations of $180 million. Interest and other includes a
$45 million pre-tax gain from adopting the Statement of
Financial Accounting Standards No. 133 on accounting for
derivatives and hedging. This gain is primarily due to the
mark-to-market of Intel Capital equity derivatives. With the
adoption, approximately $1.4 billion of investments were
reclassified to trading assets, primarily from short-term
investments.
Intel Capital had no net gains on equity investments, after
recognizing gains of $428 million, which were fully offset by
impairment reserves.
-- The effective tax rate was approximately 29.8 percent in the
first quarter, excluding the impact of acquisition-related
costs.
-- Amortization of goodwill and other acquisition-related
intangibles and costs was $585 million, higher than previous
expectations of $465 million, primarily due to a write-off of
goodwill related to certain acquisitions and the impact of
acquisitions completed after the March 8 release.
FIRST QUARTER AND RECENT HIGHLIGHTS
Intel Architecture Group
-- In January, the company introduced two new ultra-low-power
mobile PC microprocessors, including the industry's first
mobile processor to operate under 1 volt while consuming less
than half a watt of power. Enabled by Intel's advanced
processor design and power-reduction technologies, the
Intel(R) Ultra Low Voltage mobile Pentium(R) III processor 500
MHz featuring Intel(R) SpeedStep(TM) technology and the
Intel(R) Ultra Low Voltage mobile Celeron(TM) processor 500
MHz are designed to deliver high performance, minimal power
consumption and extended battery life for the smallest mobile
PCs.
-- In February, the company announced the Intel(R) Low Voltage
mobile Pentium(R) III processor 700 MHz featuring Intel(R)
SpeedStep(TM) technology. The processor delivers outstanding
performance, low power consumption and extended battery life
to new categories of mini-notebooks weighing less than 3
pounds.
-- In March, the company announced it has begun shipments of its
900 MHz large cache Intel(R) Pentium(R) III Xeon(TM)
processors. Featuring 2 MB of "on-die" level-two (L2) cache,
the processors deliver new levels of performance for high-end,
Intel-based server platforms based on 4-way and 8-way
multiprocessing systems.
-- Also in March, the company introduced the mobile Intel(R)
Pentium(R) III processor at 1 Gigahertz (GHz) featuring Intel
SpeedStep(TM) technology. The new processor is the world's
fastest mobile PC processor and is designed for full-size and
thin-and-light notebooks, the most popular categories of
mobile PCs.
-- In April, the company released the Intel(R) Celeron(TM)
processor at 850 MHz, the company's fastest offering for
desktop value PCs.
Wireless Communications and Computing Group
-- In February, the company announced that Sonera, a leading
European mobile communications and services provider, endorsed
the Intel(R) Personal Internet Client Architecture (Intel PCA)
in an effort to accelerate the development of applications for
next-generation, Internet-ready wireless devices.
Additionally, Sonera Venture Capital and the Intel
Communications Fund announced they would cooperate in
identifying investment opportunities in companies with
technologies that help shape and grow next-generation Internet
applications for wireless devices.
-- Also in February, Intel introduced a new addition to the
company's flash memory family, the Intel Persistent Storage
Manager (PSM), version 3.0 software. Coupled with Intel(R)
StrataFlash(TM) memory, PSM serves as a flash file and media
manager that enables code execution, file storage and registry
back-up. The software is specifically aimed at handheld
devices using Microsoft's Windows(2) CE operating system.
-- In February, the company announced it would provide
high-performance flash memory to Cisco Systems for a variety
of communications technologies and Siemens AG for
next-generation, Internet-ready cell phones and wireless
devices.
-- In March, the company announced IBM would provide software
designed to work with the Intel Personal Internet Client
Architecture (Intel PCA) for wireless devices and other
Internet appliances. The two companies will work together to
deliver standards-based hardware and software solutions for
next-generation, Internet-ready household devices.
Intel Communications Group
-- In January, Intel announced it had entered into a definitive
agreement under which Intel, through a wholly-owned
subsidiary, would acquire Xircom Inc., for $25 per share in an
all-cash tender offer valued at approximately $748 million.
The acquisition, which was completed in March, complements
Intel's existing desktop PC and server-based network access
businesses by enabling Intel to provide new products for
notebook and mobile computing uses.
-- In February, the company introduced seven optical networking
semiconductor products that enable telecommunications
equipment manufacturers to create new systems that extend the
reach of optical networks, add intelligence to those networks
and deliver new services.
-- In February, Intel began sampling the world's first
single-chip Gigabit Ethernet controller, an advanced
semiconductor device used to help direct the flow of data
across networks. The new single-chip controller will help
accelerate the deployment of Gigabit Ethernet networks by
greatly simplifying the design process for systems designers.
-- In February, the company announced it had entered into a
definitive agreement to acquire privately held VxTel Inc. in a
cash transaction worth approximately $550 million. VxTel is a
semiconductor company that has developed unique Voice over
Packet (VoP) products that help deliver high-quality voice and
data communications over next-generation optical networks. The
transaction was completed in April.
New Business Group
-- In March, the company confirmed that it would supply 250,000
Intel Dot.Station(TM) Web appliances to AOL Avant as part of
its Internet bundle for consumers in Spain.
-- Also in March, Intel(R) Online Services, Inc. announced a new
marketing program for application service providers (ASPs).
The Intel Online Services ASP Accelerator Program provides
comprehensive marketing programs and a service foundation that
allows ASPs to differentiate their businesses.
Technology and Manufacturing Review
-- In March, the company announced that its researchers have
developed and delivered the first industry-standard format
photomasks (also called "masks") for Extreme Ultra Violet
(EUV) lithography. This marks a significant milestone in the
demonstration of EUV as the next-generation lithography
standard for the semiconductor industry.
-- Also in March, Intel announced that it had manufactured its
first silicon chips using its 0.13-micron process technology
and 300 mm wafer development in fab D1C. This fab, which is
located in Hillsboro, Ore., is the first in the industry to
produce fully-functional computer chips built using advanced
0.13-micron process technology on the new, larger 300 mm
wafers. Intel remains on track to bring chips built on these
advanced technologies into the marketplace at the beginning of
next year. The company expects microprocessor die costs per
unit to be 30 percent less on 300m wafers than today's 200 mm
wafers.
Intel Capital
Intel Capital, Intel's strategic investment program, makes equity investments to
grow the Internet economy on a worldwide basis, in support of Intel's strategic
interests. Intel Capital invests in companies to establish innovative
technologies, develop industry standard solutions, drive Internet growth and
advance the computing platform. Intel Capital also manages acquisitions.
Two specific areas of focus for Intel Capital are the Intel Communications Fund
and the Intel 64 Fund. The Intel Communications Fund is a $500 million fund
focused on supporting the Intel(R) Internet Exchange(TM) Architecture, CT
Media(TM) and the company's wireless communications efforts. The Intel 64 Fund
is a $253 million equity fund created by Intel and other corporate investors to
accelerate the development of solutions for Intel's 64-bit architecture. The
funds continue to achieve their goals. As of the end of the quarter, Intel
Capital's strategic equity portfolio included more than 575 companies worldwide.
The portfolio includes securities of both publicly-traded and private companies
as follows:
March 31, 2001 (in millions) Carrying Value
---------------------------- --------------
Marketable equity securities $1,266
Other equity investments $2,032
------
Total portfolio $3,298
======
As of March 31, 2001, the total carrying value of the portfolio included
approximately $48 million of net unrealized appreciation on the marketable
equity securities. Marketable equity securities include the Intel Capital
portfolio holdings classified as trading assets or as marketable strategic
equity securities and they are carried at current market value in the balance
sheet. Other equity investments are classified as other assets in the balance
sheet. They include non-marketable securities carried at the lower of cost or
market value and equity derivatives carried at current market value. Total
portfolio value will vary based on a number of factors, including market
fluctuations, investments, dispositions and changes in the marketable status of
securities.
For more information on Intel Capital's strategy and portfolio please visit
www.intel.com/capital.
FINANCIAL INFORMATION
The financial review section is in the tables following this release. Along with
the income statement and balance sheet information, additional information is
available from the investor relations Web site at www.intc.com in a spreadsheet
format that can be downloaded.
Copies of this earnings release and Intel's annual report can be obtained via
the Internet at www.intc.com or by calling Intel's transfer agent, Computershare
Investor Services, L.L.C., at 800/298-0146.
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.
(1) Acquisition-related costs consist of one-time write-offs of purchased
in-process research and development and goodwill, and the ongoing amortization
of goodwill and other acquisition-related intangibles and costs. Intangibles
include, for example, the value of the acquired companies' developed technology,
trademarks and workforce-in-place. Earnings excluding acquisition-related costs
differ from earnings presented according to generally accepted accounting
principles because they exclude these costs.
(2) Third-party marks and brands are property of their respective holders.
INTEL CORPORATION
CONSOLIDATED SUMMARY INCOME STATEMENT DATA
(In millions, except per share amounts)
Three Months Ended
----------------------
Mar. 31 Apr. 1
2001 2000
----------------------
NET REVENUE $ 6,677 $ 7,993
-------- --------
Cost of sales 3,225 2,989
Research and development 995 951
Marketing, general and
administrative 1,155 1,124
Amortization of goodwill and
other acquisition-related
intangibles and costs 585 313
Purchased in-process research
and development 75 62
-------- --------
Operating costs and expenses 6,035 5,439
-------- --------
OPERATING INCOME 642 2,554
Gains on equity investments - 449
Interest and other 264 191
-------- --------
INCOME BEFORE TAXES 906 3,194
Income taxes 421 498
-------- --------
NET INCOME $ 485 $ 2,696
======== ========
BASIC EARNINGS PER SHARE $ 0.07 $ 0.40
======== ========
DILUTED EARNINGS PER SHARE $ 0.07 $ 0.39
======== ========
COMMON SHARES OUTSTANDING 6,721 6,683
COMMON SHARES ASSUMING DILUTION 6,899 6,995
Note: Certain prior period amounts have been reclassified to conform
with the current presentation.
--------------------------------------------------
PRO FORMA INFORMATION EXCLUDING
ACQUISITION-RELATED COSTS
The following pro forma supplemental information excludes the effect
of acquisition-related costs. This pro forma information is not
prepared in accordance with generally accepted accounting principles.
Three Months Ended
----------------------
Mar. 31 Apr. 1
2001 2000
----------------------
Pro forma operating costs
and expenses $ 5,375 $ 5,064
Pro forma operating income $ 1,302 $ 2,929
Net income excluding
acquisition-related costs $ 1,099 $ 3,038
Basic earnings per share excluding
acquisition-related costs $ 0.16 $ 0.45
Diluted earnings per share
excluding acquisition-related
costs $ 0.16 $ 0.43
INTEL CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEET DATA
(In millions)
Mar 31, Dec. 30,
2001 2000
-------- --------
CURRENT ASSETS
Cash and short-term investments $ 10,058 $ 13,473
Trading assets 1,545 350
Accounts receivable 3,432 4,129
Inventories:
Raw materials 406 384
Work in process 1,367 1,057
Finished goods 879 800
-------- --------
2,652 2,241
Deferred tax assets and other 1,052 957
-------- --------
Total current assets 18,739 21,150
Property, plant and equipment, net 16,774 15,013
Marketable strategic equity
securities 1,159 1,915
Other long-term investments 1,141 1,797
Goodwill and other
acquisition-related intangibles 6,071 5,941
Other assets 2,365 2,129
-------- --------
TOTAL ASSETS $ 46,249 $ 47,945
======== ========
CURRENT LIABILITIES
Short-term debt $ 479 $ 378
Accounts payable and
accrued liabilities 5,398 6,305
Deferred income on shipments
to distributors 648 674
Income taxes payable 862 1,293
-------- --------
Total current liabilities 7,387 8,650
LONG-TERM DEBT 704 707
DEFERRED TAX LIABILITIES 1,240 1,266
STOCKHOLDERS' EQUITY
Common stock and capital in
excess of par value 8,712 8,486
Other stockholders' equity 28,206 28,836
-------- --------
Total stockholders' equity 36,918 37,322
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 46,249 $ 47,945
======== ========
INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
(In millions)
Q1 2001 Q4 2000 Q1 2000
------- ------- -------
GEOGRAPHIC REVENUES:
Americas 35% 41% 39%
Europe 25% 25% 27%
Asia-Pacific 28% 25% 25%
Japan 12% 9% 9%
SELECTED CASH FLOW INFORMATION:
Depreciation $ 934 $ 786 $ 897
Amortization of goodwill and
other acquisition-related
intangibles & costs $ 585 $ 459 $ 313
Purchased in-process research
and development $ 75 $ 18 $ 62
Capital spending ($2,664) ($2,423) ($1,074)
Stock repurchase program ($1,001) ($1,001) ($1,000)
Proceeds from sales of shares to
employees, tax benefit & other $ 356 $ 95 $ 633
Dividends paid ($ 135) ($ 135) ($ 100)
Net cash used for acquisitions ($ 498) ($ 215) ($1,406)
SHARE INFORMATION
(adjusted for stock splits):
Average common shares outstanding 6,721 6,723 6,683
Dilutive effect of:
Stock options 178 215 305
Convertible notes - - 7
Common shares assuming dilution 6,899 6,938 6,995
STOCK BUYBACK:
BUYBACK ACTIVITY:
Shares repurchased 29.4 22.8 19.6
Cumulative shares repurchased 1,422.7 1,393.3 1,339.4
PUT WARRANT ACTIVITY:
Put warrant sales - - -
Put warrant expirations - - (4.0)
Put warrant exercises - - -
Put warrants outstanding - - -
BUYBACK SUMMARY:
Shares authorized for buyback 1,520.0 1,520.0 1,520.0
Cumulative shares repurchased (1,422.7) (1,393.3) (1,339.4)
Put warrants outstanding - - -
Shares available for buyback 97.3 126.7 180.6
OTHER INFORMATION:
Employees (in thousands) 88.2 86.1 71.7
Days sales outstanding 40 37 36
INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
($ in millions)
Q1 2001 Q4 2000 Q1 2000
------- ------- -------
OPERATING SEGMENT
INFORMATION:
Intel Architecture Group:
Revenues 5,133 6,851 6,652
Operating profit 1,683 3,233 3,006
All other:
Revenues 1,544 1,851 1,341
Operating loss (1,041) (657) (452)
Total:
Revenues 6,677 8,702 7,993
Operating profit 642 2,576 2,554
The Intel Architecture Group includes microprocessors, motherboards
and board-level products, including chipsets.
The "all other" category includes revenues and earnings or losses from
non-reportable operating segments: the Wireless Communications and
Computing Group, the Communications Products Group, the Network
Communications Group and the New Business Group. During the first
quarter of 2001, the company announced its intention to combine the
Networking Communications Group and the Communications Products Group
to form the new Intel Communications Group. Operations of these groups
had not been combined as of March 31, 2001.
In addition, "all other" includes certain corporate-level operating
expenses, including a portion of profit-dependent bonus expenses that
are not allocated to the operating segments. Prior to 2001 the
majority of the profit-dependent bonus expenses were kept at the
corporate level, but as of the first quarter of 2001, the majority of
these expenses have been allocated to the operating segments.
Information for prior periods has been restated to conform to the new
presentation.
CONTACT: Intel Corp.
Doug Lusk, 408/765-1679 (investor relations)
Tom Beermann, 408/765-6855 (press relations)
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