Intel Second-Quarter Revenue $8.7 Billion
-- Revenue $8.7 Billion, up 8 Percent Year-over-Year
-- Operating Income $1.35 Billion, up 26 Percent Year-over-Year
-- Net Income $1.3 Billion
-- EPS 22 Cents
SANTA CLARA, Calif.--(BUSINESS WIRE)--
Intel Corporation today announced second-quarter revenue of $8.7 billion, operating income of $1.35 billion, net income of $1.3 billion and earnings per share (EPS) of 22 cents. The results include tax items that increased EPS by approximately 3 cents along with restructuring charges of $82 million.
"Intel's operational execution continued to strengthen, resulting in an outstanding product roadmap and solid year-over-year revenue growth," said Intel President and CEO Paul Otellini. "We're pleased that our efforts to streamline the company are delivering profit growth in excess of revenue growth."
Q2 2007 vs. Q2 2006 vs. Q1 2007
--------------------- ---------------- ---------------- --------------
Revenue $8.7 billion +8% -2%
--------------------- ---------------- ---------------- --------------
Operating Income $1.35 billion +26% -19%
--------------------- ---------------- ---------------- --------------
Net Income $1.3 billion +44% -22%
--------------------- ---------------- ---------------- --------------
EPS 22 cents +47% -21%
--------------------- ---------------- ---------------- --------------
Results for the first quarter of 2007 included a tax item that
increased EPS by approximately 6 cents as well as restructuring
charges of $75 million. Results for the second quarter of 2007
included tax items that increased EPS by approximately 3 cents along
with restructuring charges of $82 million.
----------------------------------------------------------------------
Financial and Key Product Trends
-- Second-quarter gross margin was 46.9 percent, lower than the
midpoint of the previous expectation. Microprocessor margins
were as expected with higher unit shipments offset by lower
average selling prices (ASPs). Demand for NOR flash products
was lower than expected, resulting in impacts that lowered
Intel's gross margin by one point.
-- Total microprocessor units were higher sequentially; the ASP
was lower.
-- Chipset units set a record during the quarter.
-- Flash memory units were higher sequentially while motherboard
units were lower.
Business Outlook
The following expectations do not include the potential impact of any mergers, acquisitions, divestitures or other business combinations that may be completed after July 16.
Q3 2007 Outlook
-- Revenue: Between $9.0 billion and $9.6 billion.
-- Gross margin: 52 percent plus or minus a couple of points.
-- Spending (R&D plus MG&A): Between $2.7 billion and $2.8
billion.
-- Restructuring and asset impairment charges: Approximately $150
million.
-- Net gains from equity investments and interest and other:
Approximately $320 million.
-- Tax rate: Approximately 29 percent, lower than the previous
expectation of approximately 31 percent.
-- Depreciation: Approximately $1.1 billion.
2007 Outlook
-- Gross margin: 51 percent plus or minus a few points,
unchanged.
-- R&D: Approximately $5.7 billion, higher than the previous
expectation of approximately $5.6 billion.
-- MG&A: Approximately $5.1 billion, unchanged.
-- Capital spending: $4.9 billion plus or minus $200 million,
lower than the previous expectation of $5.5 billion plus or
minus $200 million, primarily due to manufacturing
efficiencies.
-- Tax rate: Approximately 29 percent in the fourth quarter,
lower than the previous expectation of approximately 31
percent.
-- Depreciation: $4.6 billion plus or minus $100 million, lower
than the previous expectation of $4.8 billion plus or minus
$100 million due to suspended depreciation for NOR flash
manufacturing assets that are being held for sale.
The above statements and any others in this document that refer to plans and expectations for the third 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 in the section titled "Risk Factors" to be the important factors that could cause actual results to differ materially from the corporation's published expectations.
Recent Events
-- Intel, STMicroelectronics and Francisco Partners announced an
agreement to form a new independent company by combining
Intel's NOR flash memory business and STMicroelectronics' NOR
and NAND flash businesses. The new company is expected to be a
market segment leader in non-volatile memory solutions,
serving customers in wireless communications and other
segments. The transaction is expected to close by the fourth
quarter of 2007 upon satisfaction of regulatory reviews and
closing conditions.
-- Intel introduced a new generation of Intel(R) Centrino(R)
processor technology (formerly codenamed Santa Rosa) that
delivers faster Intel(R) Core(TM) 2 Duo processors,
high-bandwidth 802.11n WiFi connectivity, richer graphics
processing and optional Intel(R) Turbo Memory. Notebook PC
makers are launching more than 230 new designs for consumers
and business users.
-- The company launched the first-ever Intel(R) Core(TM) 2
Extreme processors for mobile, enabling notebook PCs for the
most demanding gamers, digital artists and media enthusiasts.
-- Intel introduced the Intel(R) 3 Series chipset family which
brings new capabilities to today's systems and provides
manufacturers with a socket-compatible migration path to
Intel's upcoming "Penryn" family of processors based on the
industry's first 45nm logic process technology.
-- The company announced it has shipped over 1 million quad-core
microprocessors for servers and enthusiast desktop systems,
expanding its quad-core line-up to 14 different processors.
-- Intel and the One Laptop Per Child association announced plans
to collaborate on education-related technology targeting the
more than 1 billion K-12 students worldwide who will benefit
from access to PCs and the Internet.
-- Intel and Micron Technology announced customer sampling of 16
Gbit NAND flash memories that will use 50nm lithography and
multi-level cell technology to deliver four times the storage
capacity of the companies' existing products.
Risk Factors
-- 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 in the process
of transitioning to its next generation of products on 45nm
process technology, 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 and
introductions, 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
components from suppliers to meet demand. Factors that could
cause demand to be different from Intel's expectations include
customer acceptance of Intel's 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, the level of revenue and profits, and impairments of
long-lived assets.
-- Intel is in the midst of a structure and efficiency program
that 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. The tax rate may be affected by the
closing of acquisitions or divestitures; changes in the
estimates of credits, benefits and deductions; the resolution
of issues arising from tax audits with various tax
authorities, including payment of interest and penalties; 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; gains or losses from equity method
investments; impairment charges related to marketable,
non-marketable and other investments; interest rates; cash
balances; and changes in fair value of derivative instruments.
-- Intel's results could be 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 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 March 31, 2007.
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 Sept. 14 until publication of the company's third-quarter 2007 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 intc.com. A webcast replay and MP3 audio download will also be made available on the site.
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 Centrino and Intel Core are trademarks of Intel Corporation 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 Six Months Ended
Ended
----------------- -----------------
June 30, July 1, June 30, July 1,
2007 2006 2007 2006
-------- -------- -------- --------
NET REVENUE $ 8,680 $ 8,009 $ 17,532 $ 16,949
Cost of sales 4,605 3,838 9,025 7,835
-------- -------- -------- --------
GROSS MARGIN 4,075 4,171 8,507 9,114
-------- -------- -------- --------
Research and development 1,353 1,496 2,753 3,058
Marketing, general and
administrative 1,284 1,593 2,561 3,237
Restructuring and asset impairment
charges 82 -- 157 --
Amortization of acquisition-
related intangibles and costs 6 10 11 29
-------- -------- -------- --------
OPERATING EXPENSES 2,725 3,099 5,482 6,324
-------- -------- -------- --------
OPERATING INCOME 1,350 1,072 3,025 2,790
Gains on equity investments, net (1) 37 28 39
Interest and other, net 180 144 349 298
-------- -------- -------- --------
INCOME BEFORE TAXES 1,529 1,253 3,402 3,127
Provision for taxes 251 368 488 885
-------- -------- -------- --------
NET INCOME $ 1,278 $ 885 $ 2,914 $ 2,242
======== ======== ======== ========
BASIC EARNINGS PER COMMON SHARE $ 0.22 $ 0.15 $ 0.50 $ 0.38
======== ======== ======== ========
DILUTED EARNINGS PER COMMON SHARE $ 0.22 $ 0.15 $ 0.49 $ 0.38
======== ======== ======== ========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
BASIC 5,809 5,801 5,793 5,827
DILUTED 5,917 5,868 5,895 5,911
INTEL CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEET DATA
(In millions)
June 30, Mar. 31, Dec. 30,
2007 2007 2006
--------- --------- ---------
CURRENT ASSETS
Cash and cash equivalents $ 4,709 $ 4,472 $ 6,598
Short-term investments 4,217 3,217 2,270
Trading assets 1,735 1,335 1,134
Accounts receivable, net 2,531 2,780 2,709
Inventories:
Raw materials 583 670 608
Work in process 2,063 2,187 2,044
Finished goods 1,481 1,509 1,662
--------- --------- ---------
4,127 4,366 4,314
Deferred tax assets 1,060 1,060 997
Other current assets 1,269 464 258
--------- --------- ---------
TOTAL CURRENT ASSETS 19,648 17,694 18,280
--------- --------- ---------
Property, plant and equipment, net 17,143 17,617 17,602
Marketable strategic equity securities 350 359 398
Other long-term investments 4,346 4,496 4,023
Goodwill 3,861 3,861 3,861
Other long-term assets 4,946 4,729 4,204
--------- --------- ---------
TOTAL ASSETS $ 50,294 $ 48,756 $48,368
========= ========= =========
CURRENT LIABILITIES
Short-term debt $ 221 $ 139 $ 180
Accounts payable 2,179 2,273 2,256
Accrued compensation and benefits 1,455 1,079 1,644
Accrued advertising 660 704 846
Deferred income on shipments to
distributors 535 611 599
Other accrued liabilities 1,414 1,820 1,192
Income taxes payable -- -- 1,797
--------- --------- ---------
TOTAL CURRENT LIABILITIES 6,464 6,626 8,514
--------- --------- ---------
Long-term taxes payable 814 1,320 --
Deferred tax liabilities 235 234 265
Long-term debt 1,848 1,848 1,848
Other long-term liabilities 1,235 1,202 989
Stockholders' equity:
Preferred stock -- -- --
Common stock and capital in excess of
par value 9,597 8,598 7,825
Accumulated other comprehensive income
(loss) (96) (92) (57)
Retained earnings 30,197 29,020 28,984
--------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY 39,698 37,526 36,752
--------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 50,294 $ 48,756 $48,368
========= ========= =========
INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
(In millions)
Q2 2007 Q1 2007 Q2 2006
-------- -------- --------
GEOGRAPHIC REVENUE:
Asia-Pacific $4,457 $4,432 $4,015
51% 50% 50%
Americas $1,823 $1,727 $1,713
21% 20% 22%
Europe $1,485 $1,722 $1,375
17% 19% 17%
Japan $915 $971 $906
11% 11% 11%
CASH INVESTMENTS:
Cash and short-term investments $8,926 $7,689 $6,421
Trading assets - marketable debt securities
(1) 1,256 877 828
-------- -------- --------
Total cash investments $10,182 $8,566 $7,249
TRADING ASSETS:
Trading assets - equity securities
offsetting deferred compensation (2) $479 $458 $394
Total trading assets - sum of 1+2 $1,735 $1,335 $1,222
TOTAL STRATEGIC EQUITY INVESTMENTS $3,800 $3,599 $2,491
SELECTED CASH FLOW INFORMATION:
Depreciation $1,153 $1,187 $1,156
Share-based compensation $237 $284 $332
Amortization of intangibles and other
acquisition-related costs $60 $64 $59
Capital spending ($1,278) ($1,361) ($1,757)
Stock repurchase program ($100) ($400) ($1,000)
Proceeds from sales of shares to employees,
tax benefit & other $814 $604 $163
Dividends paid ($652) ($650) ($582)
SHARE-BASED COMPENSATION CHARGES:
Cost of sales $64 $78 $66
Research and development $94 $114 $126
Marketing, general and administrative $79 $92 $140
EARNINGS PER SHARE INFORMATION:
Weighted average common shares outstanding -
basic 5,809 5,777 5,801
Dilutive effect of employee equity incentive
plans 57 46 16
Dilutive effect of convertible debt 51 51 51
-------- -------- --------
Weighted average common shares outstanding -
diluted 5,917 5,874 5,868
STOCK BUYBACK:
Shares repurchased 5 19 54
Cumulative shares repurchased 2,855 2,850 2,797
Remaining dollars authorized for buyback (in
billions) $16.8 $16.9 $17.9
OTHER INFORMATION:
Employees (in thousands) 90.3 91.8 102.5
INTEL CORPORATION
SUPPLEMENTAL OPERATING RESULTS AND OTHER INFORMATION
($ in millions)
Three Months Six Months
Ended Ended
---------------- ---------------
OPERATING SEGMENT INFORMATION: Q2 2007 Q2 2006 Q2 2007 Q2 2006
----------------------------------------------------------------------
Digital Enterprise Group
Microprocessor revenue 3,465 3,338 7,026 7,230
Chipset, motherboard and other
revenue 1,178 1,283 2,371 2,538
Net revenue 4,643 4,621 9,397 9,768
Operating income 817 751 1,748 1,926
----------------------------------------------------------------------
Mobility Group
Microprocessor revenue 2,398 1,958 4,839 4,305
Chipset and other revenue 898 731 1,764 1,363
Net revenue 3,296 2,689 6,603 5,668
Operating income 1,250 851 2,631 1,901
----------------------------------------------------------------------
Flash Memory Group
Net revenue 494 536 963 1,080
Operating loss (291) (169) (574) (294)
----------------------------------------------------------------------
All Other
Net revenue 247 163 569 433
Operating loss (426) (361) (780) (743)
----------------------------------------------------------------------
Total
Net revenue 8,680 8,009 17,532 16,949
Operating income 1,350 1,072 3,025 2,790
----------------------------------------------------------------------
Our operating segments include the Digital Enterprise Group, Mobility
Group, Flash Memory Group, Digital Home Group, and Digital Health
Group. The Digital Home Group and Digital Health Group operating
segments are included within the "all other" category. In the first
quarter of 2007, the Channel Platforms Group began directly
supporting our operating segments. We adjusted prior-period amounts
to reflect certain minor reorganizations. In the second quarter of
2007, we agreed to sell certain NOR assets related to our Flash
Memory Group operating segment to a new flash memory company that we
plan to form with STMicroelectronics N.V. and Francisco Partners L.P.
We have sales and marketing, manufacturing, finance, and
administration groups. Expenses for these groups are generally
allocated to the operating segments and the expenses are included in
the operating results reported above. Additionally, in the first
quarter of 2007, we began allocating share-based compensation to the
operating segments and adjusted results to reflect this change.
Revenue for the "all other" category primarily relates to
microprocessors and related chipsets sold by the Digital Home Group.
The "all other" category also includes certain corporate-level
operating expenses and charges. These expenses/charges include:
-- a portion of profit-dependent bonus and other expenses not
allocated to the operating segments;
-- results of operations of seed businesses that support our
initiatives;
-- acquisition-related costs, including amortization and any
impairment of acquisition-related intangibles and goodwill;
-- charges for purchased in-process research and development; and
-- amounts included within restructuring and asset impairment
charges on the consolidated summary income statement data.
Source: Intel Corporation
Released Jul 17, 2007 • 4:15 PM EDT