Intel's Fourth-Quarter Revenue to Be Below Expectations Due to Hard Disk Drive Supply Shortages
Sales of personal computers are expected to be up sequentially in the fourth quarter. However, the worldwide PC supply chain is reducing inventories and microprocessor purchases as a result of hard disk drive supply shortages. The company expects hard disk drive supply shortages to continue into the first quarter, followed by a rebuilding of microprocessor inventories as supplies of hard disk drives recover during the first half of 2012.
The company now expects the fourth-quarter gross margin to be 64.5 percent, plus or minus a couple of percentage points, lower than the previous expectation of 65 percent, plus or minus a couple of percentage points. The expectation for a non-GAAP gross margin is 65.5 percent, plus or minus a couple of percentage points, lower than the previous expectation of 66 percent, plus or minus a couple of percentage points.
All other expectations are unchanged.
Status of Business Outlook
Intel's Business Outlook is posted on intc.com and may be reiterated in
public or private meetings with investors and others. The Business
Outlook will be effective through the close of business
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. Words such as "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates," "may," "will," "should" and
their variations identify forward-looking statements. Statements that
refer to or are based on projections, uncertain events or assumptions
also identify forward-looking statements. 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.
Demand could be different from
Intel'sexpectations due to factors including changes in business and economic conditions, including supply constraints and other disruptions affecting customers; customer acceptance of Intel's and competitors' products; changes in customer order patterns including order cancellations; and changes in the level of inventory at customers. Uncertainty in global economic and financial conditions poses a risk that consumers and businesses may defer purchases in response to negative financial events, which could negatively affect product demand and other related matters.
Inteloperates in intensely competitive industries that are characterized by a high percentage of costs that are fixed or difficult to reduce in the short term and product demand that is highly variable and difficult to forecast. Revenue and the gross margin percentage are affected by the timing of Intelproduct introductions and the demand for and market acceptance of Intel'sproducts; actions taken by Intel'scompetitors, including product offerings and introductions, marketing programs and pricing pressures and Intel's response to such actions; and Intel's ability to respond quickly to technological developments and to incorporate new features into its products.
Intelis in the process of transitioning to its next generation of products on 22nm process technology, and there could be execution and timing issues associated with these changes, including products defects and errata and lower than anticipated manufacturing yields.
- The gross margin percentage could vary significantly from expectations based on capacity utilization; variations in inventory valuation, including variations related to the timing of qualifying products for sale; changes in revenue levels; product mix and pricing; the timing and execution of the manufacturing ramp and associated costs; start-up costs; excess or obsolete inventory; changes in unit costs; defects or disruptions in the supply of materials or resources; product manufacturing quality/yields; and impairments of long-lived assets, including manufacturing, assembly/test and intangible assets.
Expenses, particularly certain marketing and compensation expenses, as
well as restructuring and asset impairment charges, vary depending on
the level of demand for
Intel'sproducts and the level of revenue and profits.
Intel'sresults could be affected by adverse economic, social, political and physical/infrastructure conditions in countries where 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 the timing of closing of acquisitions and divestitures.
Intel'sresults 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 SECreports. An unfavorable ruling could include monetary damages or an injunction prohibiting us from manufacturing or selling one or more products, precluding particular business practices, impacting Intel's ability to design its products, or requiring other remedies such as compulsory licensing of intellectual property.
A detailed discussion of these and other factors that could affect
Intel's results is included in Intel's
EXPLANATION OF NON-GAAP FORECASTS
This document contains non-GAAP financial measures that we believe are helpful in understanding and comparing our past financial performance and our future results. The non-GAAP financial measures disclosed by the company exclude certain business combination accounting adjustments and certain expenses related to acquisitions. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the forecast calculated in accordance with GAAP and the reconciliation from this forecast should be carefully evaluated. Management believes the non-GAAP financial measures are appropriate for period to period comparisons in our budget, planning and evaluation processes, and to show the reader how our performance compares to other periods. Our non-GAAP financial measures reflect adjustments based on the following items:
Deferred revenue write-down and associated costs: Business combination accounting principles require us to write down to fair values the software license updates; software product and hardware systems support contracts; product support contracts and hardware systems support contracts assumed in our acquisitions. The revenue for these support contracts is deferred and typically recognized over a one year period, so our GAAP revenues for the one year period after the acquisition does not reflect the full amount of revenues that would have been reported if the acquired deferred revenue was not written down to fair value. The non-GAAP adjustments eliminate the effect of the deferred revenue write-down and include the costs associated with the revenue adjustment. We believe these adjustments to the revenue from these support contracts and to the associated costs are useful to investors as an additional means to reflect revenue trends of our business.
Amortization of acquisition-related intangible
assets: Amortization of acquisition-related intangible assets
consists of amortization of developed technology, trade names, and
customer relationships acquired in connection with business
SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP OUTLOOK
Set forth below is a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure. The non-GAAP financial measure disclosed by the company has limitations and should not be considered a substitute for, or superior to, the financial measure prepared in accordance with GAAP, and the financial outlook prepared in accordance with GAAP and the reconciliation from this outlook should be carefully evaluated. Please refer to "Explanation of Non-GAAP Forecasts" in this document for a detailed explanation of the adjustment made to comparable GAAP measure, the ways management uses the non-GAAP measure, and the reasons why management believes the non-GAAP measure provide useful information for investors.
|Q4 2011 Outlook|
|GAAP GROSS MARGIN PERCENTAGE||64.5%||+/− a couple percentage points|
|Deferred revenue write-down and associated costs||0.1%|
|Amortization of acquisition-related intangibles||0.9%|
|NON-GAAP GROSS MARGIN PERCENTAGE||65.5%||+/− a couple percentage points|
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