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Intel Earnings Report
Date: Wednesday April 18, 2001
Category: Web News
Manufacturer Link: Intel
Intel Corporation today announced first quarter revenue of $6.7 billion, down 16 percent from the first quarter of 2000 and down 23 percent sequentially.
 

Intel Reports First Quarter Revenue of $6.7 Billion

First Quarter Earnings Excluding Acquisition-Related Costs* $0.16 Per Share
First Quarter Earnings Per Share $0.07

Intel Investor Relations Web site: www.intc.com
Q1 earnings announcement call live on Web site at 2:30 p.m. PDT
Conference call replay number (719) 457-0820; access #601126
Replay available shortly after end of conference call through April 24

*Acquisition-related costs consist of one-time write-offs of purchased in-process research and development and goodwill, and the ongoing amortization of goodwill and other acquisition-related intangibles and costs. Intangibles include, for example, the value of the acquired companies' developed technology, trademarks and workforce-in-place. Earnings excluding acquisition-related costs differ from earnings presented according to generally accepted accounting principles because they exclude these costs.

SANTA CLARA, Calif., April 17, 2001 -- Intel Corporation today announced first quarter revenue of $6.7 billion, down 16 percent from the first quarter of 2000 and down 23 percent sequentially.

For the first quarter, net income, excluding acquisition-related costs, was $1.1 billion, down 64 percent from the first quarter of 2000 and down 58 percent sequentially. First quarter earnings, excluding acquisition-related costs, were $0.16 per share, a decrease of 63 percent from $0.43 in the first quarter of 2000 and down 58 percent sequentially. Last year's first quarter earnings per share includes a reversal of previously accrued taxes that reduced that quarter's tax provision by $600 million, and improved first quarter 2000 results by $0.09 per share. The reversal was related to the company's previous announcement that the Internal Revenue Service had closed its examination of the its tax returns up to and including 1998.

Including acquisition-related costs, in accordance with generally accepted accounting principles, first quarter net income was $485 million, down 82 percent from first quarter of 2000 and down 78 percent sequentially. Earnings per share were $0.07, down 82 percent from $0.39 in the first quarter of 2000 and down 78 percent sequentially.

Acquisition-related costs in the first quarter consisted of $75 million in one-time charges for purchased in-process research and development and $585 million of amortization and write-offs of goodwill and other acquisition-related intangibles and costs.

"Our microprocessor business appears to have stabilized and we expect to see normal seasonal patterns going forward from our current business level," said Craig R. Barrett, president and chief executive officer. "In our communications businesses, we are experiencing continued softness. Looking beyond the current environment, we believe our aggressive investment in new manufacturing technologies and the development of cost-competitive, leading-edge products is the winning strategy."

During the quarter, the company announced and completed the acquisitions of Xircom Inc. and ICP Vortex Computersysteme GmbH, and announced the acquisition of VxTel Inc. Background on acquisitions can be found in the first quarter highlights section of this release.

During the quarter, the company paid its quarterly cash dividend of $0.02 per share. The dividend was paid on March 1, 2001, to stockholders of record on Feb. 7, 2001. Intel has paid a regular quarterly cash dividend for more than eight years.

During the quarter, the company repurchased a total of 29.4 million shares of common stock, at a cost of $1.0 billion, under an ongoing program. Since the program began in 1990, the company has repurchased 1.4 billion shares at a total cost of $23.2 billion.

BUSINESS OUTLOOK

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not include the potential impact of any mergers, acquisitions or other business combinations that may be completed after March 31, 2001.

Beginning this quarter, Intel will have a mid-quarter Business Update to the Outlook provided below. This quarter's Business Update is scheduled for June 7.

Continuing uncertainty in global economic conditions make it particularly difficult to predict product demand and other related matters.

** Revenue in the second quarter of 2001 is expected to be between $6.2 billion and $6.8 billion.

** Gross margin percentage in the second quarter of 2001 is expected to be 49 percent, plus or minus a couple of points, down from 51.7 percent in the first quarter. Intel's gross margin expectation for the full-year 2001 is 50 percent, plus or minus a few points. Gross margin percentage varies primarily with revenue levels, product mix, product pricing, changes in unit costs and timing of factory ramps and associated costs.

** Expenses (R&D, excluding in-process R&D, plus MG&A) in the second quarter of 2001 are expected to be between $2.2 billion and $2.3 billion. Expenses may vary from this expectation depending, in part, on revenue and profits.

** R&D spending, excluding in-process R&D, is expected to be approximately $4.2 billion in 2001.

** Capital spending for 2001 is expected to be approximately $7.5 billion. The company will use its financial strength to invest in key areas such as 0.13-micron process technology, which will enable the company to cost-effectively produce leading-edge microprocessors beginning later this year, and 300 mm process technology, which is expected to lead to approximately 30 percent microprocessor die cost-per-unit reductions in 2002 and beyond.

** Gains from equity investments and interest and other for the second quarter of 2001 are expected to be approximately $115 million. This expectation assumes no net gains from the sale of equity investments and will vary depending on equity market levels and volatility, the realization of expected gains on investments, including gains on investments acquired by third parties, determination of impairment reserves, interest rates, cash balances, mark-to-market of derivative instruments, and assuming no unanticipated items.

** The tax rate for 2001 is expected to be approximately 29.8 percent, excluding the impact of acquisition-related costs, lower than the previous expectation of 30.3 percent.

** Depreciation is expected to be approximately $1.0 billion in the second quarter and $4.1 billion for the full year 2001.

** Amortization of goodwill and other acquisition-related intangibles and costs is expected to be approximately $520 million in the second quarter and $2.1 billion for the full year 2001.

The statements by Craig R. Barrett and the above statements contained in this Outlook are forward-looking statements that involve a number of risks and uncertainties. In addition to factors discussed above, other factors that could cause actual results to differ materially include the following: business and economic conditions and growth in the computing and communications industries in various geographic regions; changes in customer order patterns; changes in the mixes of microprocessor types and speeds, purchased components and other products; competitive factors, such as rival chip architectures and manufacturing technologies, competing software-compatible microprocessors and acceptance of new products in specific market segments; pricing pressures; development and timing of introduction of compelling software applications; excess or obsolete inventory and variations in inventory valuation; continued success in technological advances, including development and implementation of new processes and strategic products for specific market segments; execution of the manufacturing ramp; excess manufacturing capacity; the ability to grow new networking, communications, wireless and other Internet-related businesses and successfully integrate and operate any acquired businesses; impact of events outside the United States such as the business impact of fluctuating currency rates or unrest or political instability in a locale, such as unrest in Israel; unanticipated costs or other adverse effects associated with processors and other products containing errata (deviations from published specifications); litigation involving antitrust, intellectual property, consumer and other issues; and other risk factors listed from time to time in the company's SEC reports, including but not limited to the report on Form 10-K for the year ended Dec. 30, 2000 (Part I, Item 2, Outlook section).


Status of Business Outlook and scheduled Business Update:

Intel expects that its corporate representatives will meet privately during the quarter with investors, the media, investment analysts and others. At these meetings, Intel may reiterate the Outlook published in this press release. At the same time, Intel will keep this press release and Outlook publicly available on its Web site (www.intc.com). Prior to the Business Update and related Quiet Periods (described below), the public can continue to rely on the Outlook on the Web site as being Intel's current expectations on matters covered, unless Intel publishes a notice stating otherwise.

Intel intends to publish a Business Update press release on June 7, 2001, and hold a related analysts' conference call (available for listening by webcast). From June 2, 2001, until publication of the Business Update, Intel will observe a "Quiet Period." During the Quiet Period, the Outlook, as provided in this press release and the company's filings with the SEC on Forms 10-K and 10-Q, should be considered to be historical, speaking as of prior to the Quiet Period only and not subject to update by the company. During the Quiet Period, Intel representatives will not comment concerning the Outlook or Intel's financial results or expectations.

A Quiet Period, operating in similar fashion with regard to the Business Update and the company's SEC filings, will begin June 16, 2001, and will extend until the day when Intel's next quarterly Earnings Release is published, presently scheduled for July 17, 2001.

FIRST QUARTER 2001 BUSINESS REVIEW

Intel Architecture Group
** Microprocessor unit shipments were lower than the fourth quarter.

** Chipset unit shipments were lower than the fourth quarter.

** Motherboard unit shipments were lower than the fourth quarter.


Wireless Communications and Computing Group
** Flash memory unit shipments were lower than the fourth quarter.


Intel Communications Group (formerly the Network Communications and Communications Products Groups)
** Unit shipments of Fast Ethernet and Gigabit Ethernet connections were lower than the fourth quarter.

** Unit shipments of network processing components, which include embedded Pentium® III processors, network processors and I/O processors, were lower than the fourth quarter.

** Unit shipments of microcontrollers were lower than the fourth quarter.


Financial Review
** Average selling prices of microprocessors in the first quarter were lower than the fourth quarter.

** Gross margin percentage in the first quarter was 51.7 percent, meeting revised expectations and down from fourth quarter gross margin percentage of 63 percent, primarily due to the significant sequential drop in first quarter revenue.

** Expenses (R&D, excluding in-process R&D, plus MG&A) in the first quarter were $2.2 billion, down 11 percent from fourth quarter expenses. First quarter expenses were higher than revised expectations that they would be down approximately 15 percent sequentially, primarily due to lower than expected spending reductions because of prior commitments in hiring and discretionary spending.

** Gains on equity investments and interest and other were $264 million in the first quarter, higher than previous expectations of $180 million. Interest and other includes a $45 million pre-tax gain from adopting the Statement of Financial Accounting Standards No. 133 on accounting for derivatives and hedging. This gain is primarily due to the mark-to-market of Intel Capital equity derivatives. With the adoption, approximately $1.4 billion of investments were reclassified to trading assets, primarily from short-term investments.

Intel Capital had no net gains on equity investments, after recognizing gains of $428 million, which were fully offset by impairment reserves.

** The effective tax rate was approximately 29.8 percent in the first quarter, excluding the impact of acquisition-related costs.

**Amortization of goodwill and other acquisition-related intangibles and costs was $585 million, higher than previous expectations of $465 million, primarily due to a write-off of goodwill related to certain acquisitions and the impact of acquisitions completed after the March 8 release.


FIRST QUARTER AND RECENT HIGHLIGHTS

Intel Architecture Group
** In January, the company introduced two new ultra-low-power mobile PC microprocessors, including the industry's first mobile processor to operate under 1 volt while consuming less than half a watt of power. Enabled by Intel's advanced processor design and power-reduction technologies, the Intel® Ultra Low Voltage mobile Pentium® III processor 500 MHz featuring Intel® SpeedStep™ technology and the Intel® Ultra Low Voltage mobile Celeron™ processor 500 MHz are designed to deliver high performance, minimal power consumption and extended battery life for the smallest mobile PCs.

** In February, the company announced the Intel® Low Voltage mobile Pentium® III processor 700 MHz featuring Intel® SpeedStep™ technology. The processor delivers outstanding performance, low power consumption and extended battery life to new categories of mini-notebooks weighing less than 3 pounds.

** In March, the company announced it has begun shipments of its 900 MHz large cache Intel® Pentium® III Xeon™ processors. Featuring 2 MB of "on-die" level-two (L2) cache, the processors deliver new levels of performance for high-end, Intel-based server platforms based on 4-way and 8-way multiprocessing systems.

** Also in March, the company introduced the mobile Intel® Pentium® III processor at 1 Gigahertz (GHz) featuring Intel SpeedStep™ technology. The new processor is the world's fastest mobile PC processor and is designed for full-size and thin-and-light notebooks, the most popular categories of mobile PCs.

** In April, the company released the Intel® Celeron™ processor at 850 MHz, the company's fastest offering for desktop value PCs.

Wireless Communications and Computing Group
** In February, the company announced that Sonera, a leading European mobile communications and services provider, endorsed the Intel® Personal Internet Client Architecture (Intel PCA) in an effort to accelerate the development of applications for next-generation, Internet-ready wireless devices. Additionally, Sonera Venture Capital and the Intel Communications Fund announced they would cooperate in identifying investment opportunities in companies with technologies that help shape and grow next-generation Internet applications for wireless devices.

**Also in February, Intel introduced a new addition to the company's flash memory family, the Intel Persistent Storage Manager (PSM), version 3.0 software. Coupled with Intel® StrataFlash™ memory, PSM serves as a flash file and media manager that enables code execution, file storage and registry back-up. The software is specifically aimed at handheld devices using Microsoft's Windows* CE operating system.

** In February, the company announced it would provide high-performance flash memory to Cisco Systems for a variety of communications technologies and Siemens AG for next-generation, Internet-ready cell phones and wireless devices.

** In March, the company announced IBM would provide software designed to work with the Intel Personal Internet Client Architecture (Intel PCA) for wireless devices and other Internet appliances. The two companies will work together to deliver standards-based hardware and software solutions for next-generation, Internet-ready household devices.

Intel Communications Group
** In January, Intel announced it had entered into a definitive agreement under which Intel, through a wholly-owned subsidiary, would acquire Xircom Inc., for $25 per share in an all-cash tender offer valued at approximately $748 million. The acquisition, which was completed in March, complements Intel's existing desktop PC and server-based network access businesses by enabling Intel to provide new products for notebook and mobile computing uses.

** In February, the company introduced seven optical networking semiconductor products that enable telecommunications equipment manufacturers to create new systems that extend the reach of optical networks, add intelligence to those networks and deliver new services.

** In February, Intel began sampling the world's first single-chip Gigabit Ethernet controller, an advanced semiconductor device used to help direct the flow of data across networks. The new single-chip controller will help accelerate the deployment of Gigabit Ethernet networks by greatly simplifying the design process for systems designers.

** In February, the company announced it had entered into a definitive agreement to acquire privately held VxTel Inc. in a cash transaction worth approximately $550 million. VxTel is a semiconductor company that has developed unique Voice over Packet (VoP) products that help deliver high-quality voice and data communications over next-generation optical networks. The transaction was completed in April.

New Business Group
** In March, the company confirmed that it would supply 250,000 Intel Dot.Station™ Web appliances to AOL Avant as part of its Internet bundle for consumers in Spain.

** Also in March, Intel® Online Services, Inc. announced a new marketing program for application service providers (ASPs). The Intel Online Services ASP Accelerator Program provides comprehensive marketing programs and a service foundation that allows ASPs to differentiate their businesses.

Technology and Manufacturing Review
** In March, the company announced that its researchers have developed and delivered the first industry-standard format photomasks (also called "masks") for Extreme Ultra Violet (EUV) lithography. This marks a significant milestone in the demonstration of EUV as the next-generation lithography standard for the semiconductor industry.

** Also in March, Intel announced that it had manufactured its first silicon chips using its 0.13-micron process technology and 300 mm wafer development in fab D1C. This fab, which is located in Hillsboro, Ore., is the first in the industry to produce fully-functional computer chips built using advanced 0.13-micron process technology on the new, larger 300 mm wafers. Intel remains on track to bring chips built on these advanced technologies into the marketplace at the beginning of next year. The company expects microprocessor die costs per unit to be 30 percent less on 300m wafers than today's 200 mm wafers.

Intel Capital
Intel Capital, Intel's strategic investment program, makes equity investments to grow the Internet economy on a worldwide basis, in support of Intel's strategic interests. Intel Capital invests in companies to establish innovative technologies, develop industry standard solutions, drive Internet growth and advance the computing platform. Intel Capital also manages acquisitions.

Two specific areas of focus for Intel Capital are the Intel Communications Fund and the Intel 64 Fund. The Intel Communications Fund is a $500 million fund focused on supporting the Intel® Internet Exchange™ Architecture, CT Media™ and the company's wireless communications efforts. The Intel 64 Fund is a $253 million equity fund created by Intel and other corporate investors to accelerate the development of solutions for Intel's 64-bit architecture. The funds continue to achieve their goals.

As of the end of the quarter, Intel Capital's strategic equity portfolio included more than 575 companies worldwide. The portfolio includes securities of both publicly-traded and private companies as follows:

March 31, 2001 (in millions) Carrying Value
Marketable equity securities $1,266
Other equity investments $2,032
Total portfolio $3,298

As of March 31, 2001, the total carrying value of the portfolio included approximately $48 million of net unrealized appreciation on the marketable equity securities.

Marketable equity securities include the Intel Capital portfolio holdings classified as trading assets or as marketable strategic equity securities and they are carried at current market value in the balance sheet. Other equity investments are classified as other assets in the balance sheet. They include non-marketable securities carried at the lower of cost or market value and equity derivatives carried at current market value. Total portfolio value will vary based on a number of factors, including market fluctuations, investments, dispositions and changes in the marketable status of securities.

For more information on Intel Capital's strategy and portfolio please visit www.intel.com/capital.

FINANCIAL INFORMATION

The financial review section is in the tables following this release. Along with the income statement and balance sheet information, additional information is available from the investor relations Web site at www.intc.com in a spreadsheet format that can be downloaded.

Copies of this earnings release and Intel's annual report can be obtained via the Internet at www.intc.com or by calling Intel's transfer agent, Computershare Investor Services, L.L.C., at (800) 298-0146.

Intel, the world's largest chip maker, is also a leading manufacturer of computer, networking and communications products. Additional information about Intel is available at www.intel.com/pressroom.

* Third party marks and brands are property of their respective holders.

INTEL CORPORATION

CONSOLIDATED SUMMARY INCOME STATEMENT DATA

(In millions, except per share amounts)

             
     

Three Months Ended

 

 

Mar. 31

 

Apr. 1

 

 

2001


 

2000


 

NET REVENUE

$ 6,677


 

$ 7,993


 

Cost of sales

 

3,225

 

2,989

 

Research and

         
 

development

 

995

 

951

 

Marketing, general

         
 

and administrative

 

1,155

 

1,124

 

Amortization of

         
 

goodwill and other

         
 

acquisition-related

         
 

intangibles and costs

 

585

 

313

 

Purchased in-process

         
 

research and

         
 

development

 

75


 

62


 

Operating costs and

         
 

expenses

 

6,035


 

5,439


 

OPERATING

         
 

INCOME

 

642

 

2,554

 

Gains on equity investments

 

-

 

449

 

Interest and other

 

264


 

191


 

INCOME BEFORE

         
 

TAXES

 

906

 

3,194

 

Income taxes

 

421


 

498


 

NET INCOME

$ 485


 

$ 2,696


 

BASIC EARNINGS

         
 

PER SHARE

 

$ 0.07


 

$ 0.40


 

DILUTED EARNINGS

         

PER SHARE

 

$ 0.07


 

$ 0.39


 

COMMON SHARES

         
 

OUTSTANDING

 

6,721

 

6,683

COMMON SHARES

         
 

ASSUMING

         
 

DILUTION

 

6,899

 

6,995

 
             

Note: Certain prior period amounts have been reclassified to conform with the current presentation.


 

 

 

 

 

 

 

             
             
PRO FORMA INFORMATION EXCLUDING
ACQUISITION-RELATED COSTS
     
             

The following pro forma supplemental information excludes the effect of acquisition-related costs. This pro forma information is not prepared in accordance with generally accepted accounting principles.

           
     

Three Months Ended

 
     

Mar. 31

 

Apr. 1

 
     

2001


 

2000


 

Pro forma operating

         
 

costs and

         
 

expenses

 

$ 5,375

 

$ 5,064

 

Pro forma operating

         
 

income

 

$ 1,302

 

$ 2,929

 

Net income excluding

         
 

acquisition-related

         
 

costs

 

$ 1,099

 

$ 3,038

 

Basic earnings per

         
 

share excluding

         
 

acquisition-related

         
 

costs

 

$ 0.16

 

$ 0.45

 

Diluted earnings per

         
 

share excluding

         
 

acquisition-related

         
 

costs

 

$ 0.16

 

$ 0.43

 

                 

INTEL CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEET DATA

(In millions)

                 
                 

     

Mar. 31,

 

Dec. 30,

     

2001


 

2000


CURRENT ASSETS

           

Cash and short-term

           
 

investments

     

$ 10,058

 

$ 13,473

Trading assets

     

1,545

 

350

Accounts receivable

3,432

 

4,129

Inventories:

           
 

Raw materials

406

 

384

 

Work in process

     

1,367

 

1,057

 

Finished goods

     

879


 

800


           

2,652

 

2,241

Deferred tax assets

           
 

and other

     

1,052


 

957


 

Total current assets

18,739

 

21,150

                 

Property, plant and

           
 

equipment, net

     

16,774

 

15,013

Marketable strategic

           
 

equity securities

     

1,159

 

1,915

Other long-term

           
 

investments

     

1,141

 

1,797

Goodwill and other

           
 

acquisition-related

           
 

intangibles

     

6,071

 

5,941

Other assets

2,365


 

2,129


 

TOTAL ASSETS

$ 46,249


 

$ 47,945


   

           

CURRENT

           
 

LIABILITIES

           

Short-term debt

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