Intel Reports Best Quarter Ever
-- Revenue $10.8 billion
-- Gross Margin 67 percent
-- Operating Income $4.0 billion
-- Net Income $2.9 billion
-- EPS 51 cents
SANTA CLARA, Calif.--(BUSINESS WIRE)-- Intel Corporation today reported second-quarter revenue of $10.8 billion, up 34 percent year-over-year. The company reported operating income of $4.0 billion, net income of $2.9 billion and EPS of 51 cents.
"Strong demand from corporate customers for our most advanced microprocessors helped Intel achieve the best quarter in the company's 42-year history," said Paul Otellini, Intel president and CEO. "Our process technology lead plus compelling architectural designs increasingly differentiate Intel-based products in the marketplace. The PC and server segments are healthy and the demand for leading-edge technology will continue to increase for the foreseeable future."
GAAP Financial Comparison
Q2 2010 vs. Q1 2010 vs. Q2 2009
Revenue $10.8 billion up $466 million up $2.7 billion
Operating Income $4.0 billion up $533 million up $4.0 billion
Net Income $2.9 billion up $445 million up $3.3 billion
Earnings Per Share 51 cents up 8 cents up 58 cents
Non-GAAP Financial Comparison
Excluding Q2 2009 European Commission Fine of $1.45 Billion
Q2 2010 vs. Q2 2009
Revenue $10.8 billion up $2.7 billion up 34%
Operating Income $4.0 billion up $2.5 billion up 177%
Net Income $2.9 billion up $1.8 billion up 175%
Earnings Per Share 51 cents up 33 cents up 183%
Q2 2010 Highlights
-- PC Client Group revenue was up 2 percent sequentially, with record
mobile microprocessor revenue.
-- Data Center Group revenue was up 13 percent sequentially, with record
server microprocessor revenue.
-- Intel(R) Atom(TM) microprocessor and chipset revenue of $413 million, up
16 percent sequentially.
-- The average selling price (ASP) for microprocessors was slightly up
sequentially.
-- Gross margin was 67 percent, 3 percentage points higher than the
midpoint of the company's expected range of 62 to 66 percent.
-- R&D plus MG&A spending was $3.25 billion, higher than the company's
prior expectation of approximately $3.1 billion.
-- The net gain from equity investments and interest and other was $204
million, higher than the company's revised expectation of $180 million.
-- The effective tax rate was 31 percent, slightly below the company's
revised expectation of approximately 32 percent.
Business Outlook
The Outlook for the third quarter does not include the effect of any other acquisitions, divestitures or similar transactions that may be completed after July 12.
Q3 2010
-- Revenue: $11.6 billion, plus or minus $400 million.
-- Gross margin: 67 percent, plus or minus a couple percentage points.
-- R&D plus MG&A spending: Approximately $3.2 billion.
-- Impact of equity investments and interest and other: approximately zero.
-- Depreciation: Approximately $1.1 billion.
Full-Year 2010
-- Gross margin: 66 percent, plus or minus a couple percentage points. The
company's prior expectation was 64 percent, plus or minus a couple
percentage points.
-- Spending (R&D plus MG&A): $12.7 billion, plus or minus $100 million. The
company's prior expectation was $12.4 billion, plus or minus $100
million.
-- R&D spending: Approximately $6.6 billion. The company's prior
expectation was approximately $6.4 billion.
-- Tax rate: Approximately 32 percent for the third and fourth quarters,
higher than the company's prior expectation of 31 percent.
-- Depreciation: Approximately $4.4 billion, plus or minus $100 million.
-- Capital spending: $5.2 billion, plus or minus $200 million. The
company's prior expectation was $4.8 billion, plus or minus $100
million.
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 Aug. 27 until publication of the company's third-quarter earnings release, Intel will observe a "Quiet Period" during which the Business Outlook disclosed in the company's news releases and filings with the SEC should be considered as historical, speaking as of prior to the Quiet Period only and not subject to an update by the company.
Risk Factors
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 following to be the important factors that could cause actual results to differ materially from the corporation's expectations.
-- Demand could be different from Intel's expectations due to factors
including changes in business and economic conditions; 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.
-- 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 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 32nm 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 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;
defects or disruptions in the supply of materials or resources; and
Intel's ability to respond quickly to technological developments and to
incorporate new features into its products.
-- The gross margin percentage could vary significantly from expectations
based on changes in revenue levels; product mix and pricing; start-up
costs; 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; the timing and execution of the manufacturing ramp and
associated costs; and capacity utilization.
-- Expenses, particularly certain marketing and compensation expenses, as
well as restructuring and asset impairment charges, vary depending on
the level of demand for Intel's products and the level of revenue and
profits.
-- The tax rate expectation is based on current tax law and current
expected income. The tax rate may be affected by 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, 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 gains or losses on the sale, exchange,
change in the fair value or impairments of debt and equity investments;
interest rates; cash balances; and changes in fair value of derivative
instruments.
-- The majority of Intel's non-marketable equity investment portfolio
balance is concentrated in companies in the flash memory market segment,
and declines in this market segment or changes in management's plans
with respect to Intel's investments in this market segment could result
in significant impairment charges, impacting restructuring charges as
well as gains/losses on equity investments and interest and other.
-- Intel's results could be impacted 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'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. 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 SEC filings, including the report on Form 10-Q for the quarter ended March 27, 2010.
Earnings Webcast
Intel will hold a public webcast at 2:30 p.m. PDT today on its Investor Relations website at www.intc.com. A webcast replay and MP3 download will also be made available on the site.
Intel plans to report its earnings for the third quarter of 2010 on Tuesday, Oct. 12, 2010. Immediately following the earnings report, the company plans to publish a commentary by Stacy J. Smith, vice president and chief financial officer, at www.intc.com/results.cfm. A public webcast of Intel's earnings conference call will follow at 2:30 p.m. PDT at www.intc.com.
Intel (NASDAQ: INTC) is a world leader in computing innovation. The company designs and builds the essential technologies that serve as the foundation for the world's computing devices. Additional information about Intel is available at www.intel.com/pressroom and blogs.intel.com.
Intel, the Intel logo, and Intel Atom 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 STATEMENT OF OPERATIONS DATA
(In millions, except per share amounts)
Three Months Ended Six Months Ended
June 26, June 27, June 26, June 27,
2010 2009 2010 2009
NET REVENUE $ 10,765 $ 8,024 $ 21,064 $ 15,169
Cost of sales 3,530 3,945 7,300 7,852
GROSS MARGIN 7,235 4,079 13,764 7,317
Research and development 1,666 1,303 3,230 2,620
Marketing, general and administrative 1,584 1,248 3,098 2,446
R&D AND MG&A 3,250 2,551 6,328 5,066
European Commission fine - 1,447 - 1,447
Restructuring and asset impairment - 91 - 165
charges
Amortization of acquisition-related 4 2 7 4
intangibles
OPERATING EXPENSES 3,254 4,091 6,335 6,682
OPERATING INCOME (LOSS) 3,981 (12 ) 7,429 635
Gains (losses) on equity investments, 193 (69 ) 162 (182 )
net
Interest and other, net 11 31 40 126
INCOME (LOSS) BEFORE TAXES 4,185 (50 ) 7,631 579
Provision for taxes 1,298 348 2,302 348
NET INCOME (LOSS) $ 2,887 $ (398 ) $ 5,329 $ 231
BASIC EARNINGS (LOSS) PER COMMON $ 0.52 $ (0.07 ) $ 0.96 $ 0.04
SHARE
DILUTED EARNINGS (LOSS) PER COMMON $ 0.51 $ (0.07 ) $ 0.94 $ 0.04
SHARE
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
BASIC 5,563 5,595 5,546 5,584
DILUTED 5,711 5,595 5,696 5,656
INTEL CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEET DATA
(In millions)
June 26, March 27, Dec. 26,
2010 2010 2009
CURRENT ASSETS
Cash and cash equivalents $ 5,514 $ 4,988 $ 3,987
Short-term investments 6,715 5,927 5,285
Trading assets 6,074 5,427 4,648
Accounts receivable, net 2,430 2,192 2,273
Inventories:
Raw materials 407 464 437
Work in process 1,637 1,473 1,469
Finished goods 1,301 1,049 1,029
3,345 2,986 2,935
Deferred tax assets 1,206 1,423 1,216
Other current assets 1,180 781 813
TOTAL CURRENT ASSETS 26,464 23,724 21,157
Property, plant and equipment, net 16,946 17,028 17,225
Marketable equity securities 916 926 773
Other long-term investments 3,947 4,326 4,179
Goodwill 4,481 4,452 4,421
Other long-term assets 4,937 5,317 5,340
TOTAL ASSETS $ 57,691 $ 55,773 $ 53,095
CURRENT LIABILITIES
Short-term debt $ 215 $ 330 $ 172
Accounts payable 2,126 1,912 1,883
Accrued compensation and benefits 1,962 1,377 2,448
Accrued advertising 958 843 773
Deferred income on shipments to distributors 582 653 593
Income taxes payable - 916 86
Other accrued liabilities 2,094 2,881 1,636
TOTAL CURRENT LIABILITIES 7,937 8,912 7,591
Long-term income taxes payable 174 174 193
Long-term debt 2,058 2,052 2,049
Long-term deferred tax liabilities 586 707 555
Other long-term liabilities 1,095 1,028 1,003
Stockholders' equity:
Preferred stock - - -
Common stock and capital in excess of par value 15,741 15,466 14,993
Accumulated other comprehensive income (loss) 231 414 393
Retained earnings 29,869 27,020 26,318
TOTAL STOCKHOLDERS' EQUITY 45,841 42,900 41,704
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 57,691 $ 55,773 $ 53,095
INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
(In millions)
Q2 2010 Q1 2010 Q2 2009
GEOGRAPHIC REVENUE:
Asia-Pacific $6,166 $5,888 $4,409
57% 57% 55%
Americas $2,173 $1,906 $1,698
20% 18% 21%
Europe $1,294 $1,404 $1,153
12% 14% 14%
Japan $1,132 $1,101 $764
11% 11% 10%
CASH INVESTMENTS:
Cash and short-term investments $12,229 $10,915 $9,021
Trading assets - marketable debt securities (1) 5,543 5,427 2,284
Total cash investments $17,772 $16,342 $11,305
TRADING ASSETS:
Trading assets - equity securities (2) $531 - $319
Total trading assets - sum of 1+2 $6,074 $5,427 $2,603
SELECTED CASH FLOW INFORMATION:
Depreciation $1,086 $1,080 $1,211
Share-based compensation $232 $248 $258
Amortization of intangibles $63 $61 $75
Capital spending ($1,048) ($928) ($981)
Investments in non-marketable equity instruments ($100) ($69) ($83)
Proceeds from sales of shares to employees, tax $218 $230 $1
benefit & other
Dividends paid ($877) ($870) ($784)
Net cash received/(used) for ($33) ($37) -
divestitures/acquisitions
EARNINGS PER COMMON SHARE INFORMATION:
Weighted average common shares outstanding - basic 5,563 5,529 5,595
Dilutive effect of employee equity incentive plans 96 101 -
Dilutive effect of convertible debt 52 51 -
Weighted average common shares outstanding - diluted 5,711 5,681 5,595
STOCK BUYBACK:
Cumulative shares repurchased (in billions) 3.4 3.4 3.3
Remaining dollars authorized for buyback (in $5.7 $5.7 $7.4
billions)
OTHER INFORMATION:
Employees (in thousands) 80.4 79.9 80.5
INTEL CORPORATION
SUPPLEMENTAL OPERATING GROUP RESULTS
($ in millions)
Three Months Ended Six Months Ended
Q2 2010 Q2 2009 Q2 2010 Q2 2009
Net Revenue
PC Client Group
Microprocessor revenue $ 6,155 $ 4,567 $ 12,068 $ 8,816
Chipset, motherboard and other 1,684 1,432 3,445 2,544
revenue
7,839 5,999 15,513 11,360
Data Center Group
Microprocessor revenue 1,797 1,208 3,349 2,220
Chipset, motherboard and other 317 276 636 528
revenue
2,114 1,484 3,985 2,748
Other Intel Architecture groups 417 328 792 654
Intel Architecture group revenue 10,370 7,811 20,290 14,762
Other operating groups 386 172 755 321
Corporate 9 41 19 86
TOTAL NET REVENUE $ 10,765 $ 8,024 $ 21,064 $ 15,169
Operating income (loss)
PC Client Group $ 3,428 $ 1,297 $ 6,571 $ 1,998
Data Center Group 1,064 434 1,899 700
Other Intel Architecture groups (18 ) (60 ) (47 ) (136 )
Intel Architecture group 4,474 1,671 8,423 2,562
operating income
Other operating groups (21 ) (35 ) (42 ) (188 )
Corporate (472 ) (1,648 ) (952 ) (1,739 )
TOTAL OPERATING INCOME (LOSS) $ 3,981 $ (12 ) $ 7,429 $ 635
INTEL CORPORATION
SUPPLEMENTAL RECONCILIATIONS OF GAAP TO NON-GAAP RESULTS
In addition to disclosing financial results calculated in accordance with
United States (U.S.) generally accepted accounting principles (GAAP), this
earnings release contains non-GAAP financial measures that exclude the charge
incurred in the second quarter of 2009 as a result of the European Commission
(EC) fine in the amount of EUR1.06 billion, or about $1.45 billion.
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 from these results should be carefully evaluated.
Management believes the non-GAAP financial measures are appropriate for both
its own assessment of, and to show the reader, how our performance compares
to other periods. Set forth below are reconciliations of the non-GAAP
financial measures to the most directly comparable GAAP financial measures.
(In millions, except per-share amounts)
Three Months Ended Six Months Ended
June 26, June 27, June 26, June 27,
2010 2009 2010 2009
GAAP OPERATING INCOME (LOSS) $ 3,981 $ (12 ) $ 7,429 $ 635
Adjustment for EC fine - 1,447 - 1,447
OPERATING INCOME EXCLUDING EC FINE $ 3,981 $ 1,435 $ 7,429 $ 2,082
GAAP NET INCOME (LOSS) $ 2,887 $ (398 ) $ 5,329 $ 231
Adjustment for EC fine - 1,447 - 1,447
NET INCOME EXCLUDING EC FINE $ 2,887 $ 1,049 $ 5,329 $ 1,678
GAAP DILUTED EARNINGS (LOSS) PER $ 0.51 $ (0.07 ) $ 0.94 $ 0.04
COMMON SHARE
Adjustment for EC fine - 0.25 - 0.26
DILUTED EARNINGS PER COMMON SHARE $ 0.51 $ 0.18 (1) $ 0.94 $ 0.30
EXCLUDING EC FINE
(1) Calculated based on common shares of 5,678 for three months ended June
27, 2009, which is the number of common shares that would have been used in
the calculation of diluted earnings per common share if the Company had GAAP
net income.
Source: Intel Corporation
Released Jul 13, 2010 • 4:15 PM EDT