Intel Reports Fourth-Quarter and Annual Results
Fourth-Quarter Revenue $8.2 Billion, down 19 Percent Sequentially Gross Margin 53 Percent, down 6 Points Sequentially Operating Income $1.5 Billion, down 50 Percent Sequentially Quarterly Net Income $234 Million; EPS 4 Cents 2008 Revenue $37.6 Billion, down 2 Percent Year-over-Year or up Slightly Adjusted for Divestitures Gross Margin 55 Percent, up 3.5 Points Year-over-Year Operating Income $9 Billion, up 9 Percent Year-over-Year Annual Net Income $5.3 Billion; EPS 92 Cents
SANTA CLARA, Calif.--(BUSINESS WIRE)-- Intel Corporation today reported fourth-quarter revenue of $8.2 billion, operating income of $1.5 billion, net income of $234 million and earnings per share (EPS) of 4 cents. The results included a billion-dollar negative impact from the previously announced reduction in the carrying value of the company's Clearwire investments.
For 2008, Intel posted revenue of $37.6 billion, operating income of $9 billion, net income of $5.3 billion and EPS of 92 cents. Intel generated approximately $11 billion in cash from operations, paid cash dividends of $3.1 billion and used $7.1 billion to repurchase 324 million shares of common stock.
"The economy and the industry are in the process of resetting to a new baseline from which growth will resume," said Paul Otellini, Intel president and CEO. "While the environment is uncertain, our fundamental business strategies are more focused than ever. Intel will continue to extend its manufacturing leadership, drive product innovation, develop new markets and implement operating efficiencies that have already taken more than $3 billion out of our ongoing cost structure since 2006. Intel has weathered difficult times in the past, and we know what needs to be done to drive our success moving forward. Our new technologies and new products will help us ignite market growth and thrive when the economy recovers."
Quarterly Results Summary
Q4 2008 vs. Q4 2007 vs. Q3 2008
Revenue $8.2 billion -23% -19%
Operating Income $1.5 billion -49% -50%
Net Income $234 million -90% -88%
EPS 4 cents -89% -89%
Annual Results Summary
2008 vs. 2007
Revenue $37.6 billion -2%
Operating Income $9 billion +9%
Net Income $5.3 billion -24%
EPS 92 cents -22%
Key Financial Information (Sequential)
-- Microprocessor and chipset units were significantly lower versus the
third quarter.
-- Revenue from Intel(R) Atom(TM) microprocessors and chipsets was $300
million, up 50 percent.
-- The total microprocessor average selling price (ASP) was flat.
-- Excluding shipments of Intel Atom microprocessors, the ASP was higher.
-- Gross margin of 53.1 percent was lower than 58.9 percent in the third
quarter. The decrease was primarily due to higher factory
underutilization charges and higher inventory write-offs.
-- Spending was $2.6 billion, lower than $2.9 billion in the third quarter,
driven by lower revenue- and profit-related expenses along with targeted
spending reductions.
-- The net loss from equity investments and interest and other was $1.1
billion, higher than the forecast of a $50-million loss, primarily due
to a billion-dollar reduction in the carrying value of the company's
investments in Clearwire.
-- The effective tax rate was 36.6 percent, higher than the expectation of
approximately 29 percent.
Key Financial Information (Annual)
-- Revenue was down 2 percent year-over-year. Adjusted for divestitures,
revenue was up slightly in 2008.
-- Intel had record microprocessor units, server revenue and mobile
microprocessor revenue.
-- Chipset and wireless connectivity products set new unit and revenue
records.
-- Gross margin was 55.5 percent, up from 52 percent in 2007.
-- Intel removed more than $800 million of cost from the company in 2008
under the structure and efficiency program launched in 2006. Cumulative
spending reductions under the program to date exceeded $3 billion.
Business Outlook
Intel's Business Outlook does not include the potential impact of any mergers, acquisitions, divestitures or other business combinations that may be completed after Jan. 14. Current uncertainty in global economic conditions makes it particularly difficult to predict product demand and other related matters and makes it more likely that Intel's actual results could differ materially from expectations. Consequently, the company is providing less quantitative guidance than in previous quarters.
Q1 2009:
-- Due to economic uncertainty and limited visibility, Intel is not
providing a revenue outlook at this time. For internal purposes, the
company is currently planning for revenue in the vicinity of $7 billion.
-- Gross margin: The percentage is expected to decline to the low 40s
primarily due to higher underutilization charges and 32nm start-up
costs. Gross margin is subject to changes in demand levels and pricing
that could impact inventory write-offs, mix and unit costs, and
potentially create several additional points of margin variability.
-- Spending (R&D plus MG&A): Approximately $2.5 billion.
-- Restructuring and asset impairment charges: Approximately $160 million.
-- Net loss from equity investments and interest and other: Approximately
$130 million.
-- Depreciation: Approximately $1.2 billion.
Full-Year 2009:
-- Spending (R&D plus MG&A): Between $10.4 billion and $10.6 billion.
-- R&D: Approximately $5.4 billion.
-- Capital spending: Expected to be flat to slightly down from 2008.
-- Depreciation: $4.8 billion plus or minus $100 million.
-- Tax rate: Approximately 27 percent.
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 Feb. 27 until publication of the company's first-quarter 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 an update by the company.
Risk Factors
The above statements and any others in this document that refer to plans and expectations for the first 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.
-- Current uncertainty in global economic conditions pose a risk to the
overall economy as consumers and businesses may defer purchases in
response to tighter credit and negative financial news, which could
negatively affect product demand and other related matters.
Consequently, demand could be different from Intel's expectations due to
factors including changes in business and economic conditions, including
conditions in the credit market that could affect consumer confidence;
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. 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 supply of components from suppliers to meet demand.
-- The gross margin percentage could vary significantly from expectations
based on changes in revenue levels; capacity utilization; excess or
obsolete inventory; product mix and pricing; variations in inventory
valuation, including variations related to the timing of qualifying
products for sale; 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, 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.
-- The recent financial crisis affecting the banking system and financial
markets and the going concern threats to investment banks and other
financial institutions have resulted in a tightening in the credit
markets, a reduced level of liquidity in many financial markets, and
extreme volatility in fixed income, credit and equity markets. There
could be a number of follow-on effects from the credit crisis on Intel's
business, including insolvency of key suppliers resulting in product
delays; inability of customers to obtain credit to finance purchases of
our products and/or customer insolvencies; counterparty failures
negatively impacting our treasury operations; increased expense or
inability to obtain short-term financing of Intel's operations from the
issuance of commercial paper; and increased impairments from the
inability of investee companies to obtain financing. Gains or losses
from equity securities and interest and other could also vary from
expectations depending on gains or losses realized on the sale or
exchange of securities; gains or losses from equity method investments;
impairment charges related to debt securities as well as equity and
other investments; interest rates; cash balances; and changes in fair
value of derivative instruments. The current volatility in the financial
markets and overall economic uncertainty increases the risk that the
actual amounts realized in the future on our debt and equity investments
will differ significantly from the fair values currently assigned to
them.
-- The majority of our 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 our 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 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 Sept. 27, 2008. The company's revenue plan noted above under "Business Outlook" is a statement as of this date, is not a part of Outlook, and is not subject to updating by the company in the period prior to the Quiet Period.
Earnings Webcast
Intel will hold a public webcast at 2:30 p.m. PST today on its Investor Relations Web site at www.intc.com. A webcast replay and MP3 download will also be made available on the site.
Intel (NASDAQ: INTC), 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 and http://blogs.intel.com
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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 INCOME STATEMENT DATA
(In millions, except per share amounts)
Three Months Ended Twelve Months Ended
Dec. 27, Dec. 29, Dec. 27, Dec. 29,
2008 2007 2008 2007
NET REVENUE $ 8,226 $ 10,712 $ 37,586 $ 38,334
Cost of sales 3,857 4,486 16,742 18,430
GROSS MARGIN 4,369 6,226 20,844 19,904
Research and development 1,316 1,481 5,722 5,755
Marketing, general and 1,263 1,464 5,458 5,417
administrative
Restructuring and asset impairment 251 234 710 516
charges
OPERATING EXPENSES 2,830 3,179 11,890 11,688
OPERATING INCOME 1,539 3,047 8,954 8,216
Gains (losses) on equity (1,192 ) (19 ) (1,756 ) 157
investments, net
Interest and other, net 22 233 488 793
INCOME BEFORE TAXES 369 3,261 7,686 9,166
Provision for taxes 135 990 2,394 2,190
NET INCOME $ 234 $ 2,271 $ 5,292 $ 6,976
BASIC EARNINGS PER COMMON SHARE $ 0.04 $ 0.39 $ 0.93 $ 1.20
DILUTED EARNINGS PER COMMON SHARE $ 0.04 $ 0.38 $ 0.92 $ 1.18
WEIGHTED AVERAGE SHARES
OUTSTANDING:
BASIC 5,562 5,841 5,663 5,816
DILUTED 5,623 5,988 5,748 5,936
INTEL CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEET DATA
(In millions)
Dec. 27, Sept. 27, Dec. 29,
2008 2008 2007
CURRENT ASSETS
Cash and cash equivalents $ 3,350 $ 3,704 $ 7,307
Short-term investments 5,331 4,583 5,490
Trading assets 3,162 3,917 2,566
Accounts receivable, net 1,712 2,737 2,576
Inventories:
Raw materials 608 583 507
Work in process 1,577 1,427 1,460
Finished goods 1,559 1,388 1,403
3,744 3,398 3,370
Deferred tax assets 1,390 1,430 1,186
Other current assets 1,182 1,654 1,390
TOTAL CURRENT ASSETS 19,871 21,423 23,885
Property, plant and equipment, net 17,544 17,026 16,918
Marketable equity securities 352 401 987
Other long-term investments 2,924 3,820 4,398
Goodwill 3,932 3,924 3,916
Other long-term assets 6,092 6,125 5,547
TOTAL ASSETS $ 50,715 $ 52,719 $ 55,651
CURRENT LIABILITIES
Short-term debt $ 102 $ 467 $ 142
Accounts payable 2,390 2,507 2,361
Accrued compensation and benefits 2,015 1,858 2,417
Accrued advertising 807 882 749
Deferred income on shipments to distributors 463 656 625
Other accrued liabilities 2,041 3,698 2,277
TOTAL CURRENT LIABILITIES 7,818 10,068 8,571
Long-term income taxes payable 736 782 785
Deferred tax liabilities 46 36 411
Long-term debt 1,886 1,889 1,980
Other long-term liabilities 1,141 1,033 1,142
Stockholders' equity:
Preferred stock - - -
Common stock and capital in excess of par 12,944 12,744 11,653
value
Accumulated other comprehensive income (loss) (393 ) (136 ) 261
Retained earnings 26,537 26,303 30,848
TOTAL STOCKHOLDERS' EQUITY 39,088 38,911 42,762
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 50,715 $ 52,719 $ 55,651
INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
(In millions)
Q4 2008 Q3 2008 Q4 2007
GEOGRAPHIC REVENUE:
Asia-Pacific $4,062 $5,389 $5,338
49% 53% 50%
Americas $1,555 $1,887 $2,098
19% 19% 19%
Europe $1,629 $1,883 $2,231
20% 18% 21%
Japan $980 $1,058 $1,045
12% 10% 10%
CASH INVESTMENTS:
Cash and short-term investments $8,681 $8,287 $12,797
Trading assets - marketable debt securities (1) 2,863 3,508 2,074
Total cash investments $11,544 $11,795 $14,871
TRADING ASSETS:
Trading assets - equity securities
offsetting deferred compensation (2) $299 $409 $492
Total trading assets - sum of 1+2 $3,162 $3,917 $2,566
SELECTED CASH FLOW INFORMATION:
Depreciation $1,157 $1,059 $1,108
Share-based compensation $192 $197 $204
Amortization of intangibles $62 $68 $63
Capital spending ($1,765) ($1,374) ($1,273)
Investments in non-marketable equity instruments ($1,127) ($120) ($180)
Stock repurchase program - ($2,117) ($1,500)
Proceeds from sales of shares to employees, tax $2 $277 $844
benefit & other
Dividends paid ($778) ($783) ($658)
EARNINGS PER SHARE INFORMATION:
Weighted average common shares outstanding - basic 5,562 5,603 5,841
Dilutive effect of employee equity incentive plans 10 38 96
Dilutive effect of convertible debt 51 51 51
Weighted average common shares outstanding - 5,623 5,692 5,988
diluted
STOCK BUYBACK:
Shares repurchased - 93 57
Cumulative shares repurchased (in billions) 3.3 3.3 2.9
Remaining dollars authorized for buyback (in $7.4 $7.4 $14.5
billions)
OTHER INFORMATION:
Employees (in thousands) 83.9 83.5 86.3
INTEL CORPORATION
SUPPLEMENTAL OPERATING RESULTS AND OTHER INFORMATION
($ in millions)
Three Months Ended Twelve Months Ended
OPERATING SEGMENT Q4 2008 Q4 2007 Q4 2008 Q4 2007
INFORMATION:
Digital Enterprise Group
Microprocessor revenue 3,665 4,489 16,078 15,945
Chipset, motherboard and other 835 1,472 4,554 5,359
revenue
Net revenue 4,500 5,961 20,632 21,304
Operating income 1,222 2,182 6,462 5,295
Mobility Group
Microprocessor revenue 2,584 2,989 11,439 10,660
Chipset and other 917 1,118 4,209 4,021
revenue
Net revenue 3,501 4,107 15,648 14,681
Operating income 933 1,683 5,199 5,611
All Other
Net revenue 225 644 1,306 2,349
Operating loss (616) (818) (2,707) (2,690)
Total
Net revenue 8,226 10,712 37,586 38,334
Operating income 1,539 3,047 8,954 8,216
Source: Intel Corporation
Released Jan 15, 2009 • 4:15 PM EST