Intel Posts Record Third-Quarter Revenue
-- Revenue $10.1 Billion, up 15 Percent Year-over-Year
-- Operating Income $2.2 Billion, up 64 Percent Year-over-Year
-- Record Microprocessor, Chipset and Flash Unit Shipments
-- Net Income $1.9 Billion
-- EPS 31 Cents
SANTA CLARA, Calif.--(BUSINESS WIRE)--
Intel Corporation today announced third-quarter revenue of $10.1 billion, operating income of $2.2 billion, net income of $1.9 billion and earnings per share (EPS) of 31 cents.
"A combination of great products, strong and growing worldwide demand, and operational efficiency from our ongoing restructuring efforts led to record third-quarter revenue and a 64-percent year-over-year gain in operating income," said Intel President and CEO Paul Otellini. "Looking forward, we see each of these elements continuing to improve into the fourth quarter. We are very pleased with the results and optimistic about our business."
Q3 2007 vs. Q3 2006 vs. Q2 2007
------------------ --------------------- ------------- ---------------
Revenue $10.1 billion +15% +16%
------------------ --------------------- ------------- ---------------
Operating Income $2.2 billion +64% +66%
------------------ --------------------- ------------- ---------------
Net Income $1.9 billion +43% +46%
------------------ --------------------- ------------- ---------------
EPS 31 cents +41% +41%
------------------ --------------------- ------------- ---------------
Results for the third quarter of 2006 included the effects of
divestiture gains of $129 million.
----------------------------------------------------------------------
Financial Review
-- Revenue of $10.1 billion was up 16 percent sequentially,
primarily driven by growth in Mobility and Digital Enterprise
Group processors of 14 percent, with related chipsets and
other products up 19 percent.
-- Total microprocessor units set a record; the average
selling price was flat.
-- Chipset and flash memory units set records.
-- Motherboard units were lower.
-- Gross margin was 52.4 percent, up from 46.9 percent in the
second quarter. The increase was primarily driven by higher
microprocessor volumes, lower 45nm start-up costs and lower
microprocessor unit costs, partially offset by write-offs for
manufacturing costs related to upcoming 45nm processors that
had not yet qualified for valuation during the quarter.
-- Spending was $2.9 billion, higher than $2.6 billion in the
second quarter, primarily driven by higher revenue- and
profit-dependent expenses along with higher R&D spending as
process engineers moved from 45nm start-up activities to 32nm
development.
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 Oct. 15.
Q4 2007 Outlook
-- Revenue: Between $10.5 billion and $11.1 billion.
-- Gross margin: 57 percent plus or minus a couple of points.
-- Spending (R&D plus MG&A): Between $2.8 billion and $3.0
billion.
-- Restructuring and asset impairment charges: Approximately $130
million.
-- Net gains from equity investments and interest and other:
Approximately $150 million.
-- Tax rate: Approximately 29 percent, unchanged.
-- Depreciation: Approximately $1.1 billion.
2007 Outlook
-- Gross margin: 52 percent plus or minus a point, higher than
the previous expectation of 51 percent plus or minus a few
points.
-- R&D: Approximately $5.8 billion, higher than the previous
expectation of approximately $5.7 billion.
-- MG&A: Approximately $5.3 billion, higher than the previous
expectation of approximately $5.1 billion.
-- Capital spending: $4.9 billion plus or minus $200 million,
unchanged.
-- Depreciation: $4.6 billion plus or minus $100 million,
unchanged.
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. 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 Highlights
-- Intel shipped more than 2 million quad core processors during
the quarter and now offers more than 20 quad-core processor
designs.
-- Intel introduced the industry's first quad-core processors
specifically designed for multi-processor (MP) servers,
delivering twice the performance and three times the
performance-per-watt of the company's previous-generation
products. The introduction completes the company's transition
to the energy-efficient Intel(R) Core(TM) microprocessor
architecture.
-- The company launched the next generation of Intel(R) vPro(TM)
processor technology for business desktop PCs featuring
innovations that better protect against hacking and viruses
while giving IT managers new ways to remotely manage and
repair systems.
-- At the Intel Developer Forum (IDF), the company announced that
the world's first 45nm microprocessors, based on Intel's
breakthrough 45nm Hi-k metal gate chip technology, will be
introduced Nov. 12. The company demonstrated its
second-generation 45nm microprocessor architecture, code-named
Nehalem, which is on track for production in the second half
of next year. Intel also announced the production of test
chips based on the company's next-generation, 32nm process
technology, scheduled for 2009.
-- Also at IDF, Intel announced that its 2008 notebook PC
platform, code-named Montevina, will include 25-watt dual-core
processors that enable even thinner and lighter designs.
Several leading PC makers announced plans to ship Intel
Montevina-based notebooks with WiMAX technology next year.
Nokia announced plans to include Intel WiMAX silicon in its
Internet tablet products, scheduled for 2008.
-- Intel acquired Havok, a leading developer of the software used
by digital artists to animate movies and computer games. The
acquisition will help Intel to accelerate its capabilities in
visual computing and graphics.
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, including
conditions in the credit market that could affect consumer
confidence and result in lower than expected demand for our
products.
-- 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; 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 fixed income and
equity market 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 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 June 30, 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 Nov. 30 until publication of the company's fourth-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 an 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 and at blogs.intel.com.
Intel, the Intel logo, Core and vPro 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 Nine Months Ended
------------------- -------------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2007 2006 2007 2006
--------- --------- --------- ---------
NET REVENUE $ 10,090 $ 8,739 $ 27,622 $ 25,688
Cost of sales 4,806 4,445 13,831 12,280
--------- --------- --------- ---------
GROSS MARGIN 5,284 4,294 13,791 13,408
--------- --------- --------- ---------
Research and development 1,526 1,389 4,279 4,447
Marketing, general and
administrative 1,383 1,425 3,944 4,662
Restructuring and asset
impairment charges 125 98 282 98
Amortization of acquisition-
related intangibles and costs 3 8 14 37
--------- --------- --------- ---------
OPERATING EXPENSES 3,037 2,920 8,519 9,244
--------- --------- --------- ---------
OPERATING INCOME 2,247 1,374 5,272 4,164
Gains on equity investments,
net 148 168 176 207
Interest and other, net 211 272 560 570
--------- --------- --------- ---------
INCOME BEFORE TAXES 2,606 1,814 6,008 4,941
Provision for taxes 746 513 1,234 1,398
--------- --------- --------- ---------
NET INCOME $ 1,860 $ 1,301 $ 4,774 $ 3,543
========= ========= ========= =========
BASIC EARNINGS PER COMMON
SHARE $ 0.32 $ 0.23 $ 0.82 $ 0.61
========= ========= ========= =========
DILUTED EARNINGS PER COMMON
SHARE $ 0.31 $ 0.22 $ 0.81 $ 0.60
========= ========= ========= =========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
BASIC 5,837 5,769 5,808 5,808
DILUTED 5,967 5,832 5,919 5,885
INTEL CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEET DATA
(In millions)
Sept. 29, June 30, Dec. 30,
2007 2007 2006
--------- -------- --------
CURRENT ASSETS
Cash and cash equivalents $ 5,844 $ 4,709 $ 6,598
Short-term investments 4,952 4,217 2,270
Trading assets 2,225 1,735 1,134
Accounts receivable, net 2,933 2,531 2,709
Inventories:
Raw materials 538 583 608
Work in process 1,650 2,063 2,044
Finished goods 1,353 1,481 1,662
--------- -------- --------
3,541 4,127 4,314
Deferred tax assets 1,088 1,060 997
Other current assets 846 1,269 258
--------- -------- --------
TOTAL CURRENT ASSETS 21,429 19,648 18,280
--------- -------- --------
Property, plant and equipment, net 16,985 17,143 17,602
Marketable strategic equity securities 1,061 350 398
Other long-term investments 4,081 4,346 4,023
Goodwill 3,917 3,861 3,861
Other long-term assets 5,446 4,946 4,204
--------- -------- --------
TOTAL ASSETS $ 52,919 $50,294 $48,368
========= ======== ========
CURRENT LIABILITIES
Short-term debt $ 137 $ 221 $ 180
Accounts payable 2,338 2,179 2,256
Accrued compensation and benefits 1,750 1,455 1,644
Accrued advertising 702 660 846
Deferred income on shipments to
distributors 628 535 599
Other accrued liabilities 2,065 1,414 1,192
Income taxes payable 40 - 1,797
--------- -------- --------
TOTAL CURRENT LIABILITIES 7,660 6,464 8,514
--------- -------- --------
Long-term taxes payable 814 814 --
Deferred tax liabilities 454 235 265
Long-term debt 1,853 1,848 1,848
Other long-term liabilities 1,167 1,235 989
Stockholders' equity:
Preferred stock -- -- --
Common stock and capital in excess of
par value 10,695 9,597 7,825
Accumulated other comprehensive income
(loss) 232 (96) (57)
Retained earnings 30,044 30,197 28,984
--------- -------- --------
TOTAL STOCKHOLDERS' EQUITY 40,971 39,698 36,752
--------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 52,919 $50,294 $48,368
========= ======== ========
INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
(In millions)
Q3 2007 Q2 2007 Q3 2006
--------- --------- ---------
GEOGRAPHIC REVENUE:
Asia-Pacific $ 5,205 $ 4,457 $ 4,314
52% 51% 49%
Americas $ 2,067 $ 1,823 $ 1,891
20% 21% 22%
Europe $ 1,824 $ 1,485 $ 1,611
18% 17% 18%
Japan $ 994 $ 915 $ 923
10% 11% 11%
CASH INVESTMENTS:
Cash and short-term investments $ 10,796 $ 8,926 $ 7,123
Trading assets - marketable debt
securities (1) 1,732 1,256 677
--------- --------- ---------
Total cash investments $ 12,528 $ 10,182 $ 7,800
TRADING ASSETS:
Trading assets - equity securities
offsetting deferred compensation (2) $ 493 $ 479 $ 419
Total trading assets - sum of 1+2 $ 2,225 $ 1,735 $ 1,096
TOTAL STRATEGIC EQUITY INVESTMENTS $ 4,928 $ 3,800 $ 2,981
SELECTED CASH FLOW INFORMATION:
Depreciation $ 1,098 $ 1,153 $ 1,193
Share-based compensation $ 227 $ 237 $ 335
Amortization of intangibles and other
acquisition-related costs $ 65 $ 60 $ 63
Capital spending ($1,088) ($1,278) ($1,188)
Stock repurchase program ($750) ($100) ($500)
Proceeds from sales of shares to
employees, tax benefit & other $ 908 $ 814 $ 281
Dividends paid ($657) ($652) ($577)
Net cash received(used) for
divestitures/acquisitions ($42) $ 0 $ 152
SHARE-BASED COMPENSATION CHARGES:
Cost of sales $ 60 $ 64 $ 103
Research and development $ 93 $ 94 $ 107
Marketing, general and administrative $ 74 $ 79 $ 125
EARNINGS PER SHARE INFORMATION:
Weighted average common shares
outstanding - basic 5,837 5,809 5,769
Dilutive effect of employee equity
incentive plans 79 57 12
Dilutive effect of convertible debt 51 51 51
--------- --------- ---------
Weighted average common shares
outstanding - diluted 5,967 5,917 5,832
STOCK BUYBACK:
Shares repurchased 30 5 27
Cumulative shares repurchased 2,885 2,855 2,824
Remaining dollars authorized for buyback
(in billions) $ 16.0 $ 16.8 $ 17.4
OTHER INFORMATION:
Employees (in thousands) 88.1 90.3 99.9
INTEL CORPORATION
SUPPLEMENTAL OPERATING RESULTS AND OTHER INFORMATION
($ in millions)
Three Months Nine Months
Ended Ended
--------------- ---------------
OPERATING SEGMENT INFORMATION: Q3 2007 Q3 2006 Q3 2007 Q3 2006
-------------------------------------- ------- ------- ------- -------
Digital Enterprise Group
Microprocessor revenue 3,880 3,521 10,906 10,751
Chipset, motherboard and other
revenue 1,324 1,425 3,695 3,963
Net revenue 5,204 4,946 14,601 14,714
Operating income 1,370 655 3,118 2,581
-------------------------------------- ------- ------- ------- -------
Mobility Group
Microprocessor revenue 2,832 2,239 7,671 6,544
Chipset and other revenue 1,139 809 2,903 2,172
Net revenue 3,971 3,048 10,574 8,716
Operating income 1,321 1,156 3,952 3,057
-------------------------------------- ------- ------- ------- -------
Flash Memory Group
Net revenue 553 507 1,516 1,587
Operating loss (142) (139) (716) (433)
-------------------------------------- ------- ------- ------- -------
All Other
Net revenue 362 238 931 671
Operating loss (302) (298) (1,082) (1,041)
-------------------------------------- ------- ------- ------- -------
Total
Net revenue 10,090 8,739 27,622 25,688
Operating income 2,247 1,374 5,272 4,164
-------------------------------------- ------- ------- ------- -------
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 flash memory assets to a new
flash memory company, Numonyx, that we plan to form with
STMicroelectronics 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 and charges include:
-- a portion of profit-dependent bonuses 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 Oct 16, 2007 • 4:14 PM EDT