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Press release from Business Wire

Intel Reports Third-Quarter Revenue of $13.5 Billion

Tuesday, October 16, 2012

Intel Reports Third-Quarter Revenue of $13.5 Billion16:01 EDT Tuesday, October 16, 2012 SANTA CLARA, Calif. (Business Wire) -- Intel Corporation today reported quarterly revenue of $13.5 billion, operating income of $3.8 billion, net income of $3.0 billion and EPS of $0.58. The company generated approximately $5.1 billion in cash from operations, paid dividends of $1.1 billion and used $1.2 billion to repurchase stock. "Our third-quarter results reflected a continuing tough economic environment," said Paul Otellini, Intel president and CEO. "The world of computing is in the midst of a period of breakthrough innovation and creativity. As we look to the fourth quarter, we're pleased with the continued progress in Ultrabooks and phones and excited about the range of Intel-based tablets coming to market." Q3 2012 Key Financial Information and Business Unit Trends (GAAP, unless otherwise stated) PC Client Group revenue of $8.6 billion, flat sequentially and down 8 percent year-over-year Data Center Group revenue of $2.7 billion, down 5 percent sequentially and up 6 percent year-over-year Other Intel® architecture group revenue of $1.2 billion, up 6 percent sequentially and down 14 percent year-over-year Gross margin of 63.3 percent, 1.3 percentage points above the midpoint of the company's updated expectation of 62 percent. R&D plus MG&A spending $4.6 billion, unchanged. Tax rate of 24 percent, below the company's expectation of approximately 28 percent. Business Outlook Intel's Business Outlook does not include the potential impact of any business combinations, asset acquisitions, divestitures or other investments that may be completed after Oct. 16. Q4 2012 (GAAP, unless otherwise stated) Revenue: $13.6 billion, plus or minus $500 million. Gross margin percentage: 57 percent and 58 percent Non-GAAP (excluding amortization of acquisition-related intangibles), both plus or minus a couple of percentage points. R&D plus MG&A spending: approximately $4.5 billion. Amortization of acquisition-related intangibles: approximately $75 million. Impact of equity investments and interest and other: approximately $75 million. Depreciation: approximately $1.6 billion. Tax Rate: approximately 27 percent. Full-year capital spending: $11.3 billion, plus or minus $300 million. For additional information regarding Intel's results and Business Outlook, please see the CFO commentary at: www.intc.com/results.cfm. Status of Business Outlook Intel's Business Outlook is posted on intc.com and may be reiterated in public or private meetings with investors and others. The Business Outlook will be effective through the close of business Dec. 14 unless earlier updated; except that the Business Outlook for amortization of acquisition-related intangibles, impact of equity investments and interest and other, and tax rate, will be effective only through the close of business on Oct. 23. Intel's Quiet Period will start from the close of business on Dec. 14 until publication of the company's fourth-quarter earnings release, scheduled for Jan. 17, 2013. During the Quiet Period, all of the Business Outlook and other forward-looking statements 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. GAAP Financial Comparison Quarterly               Q3 2012             Q2 2012             vs. Q2 2012 Revenue             $13.5 billion             $13.5 billion             Flat Gross Margin             63.3%             63.4%             Flat Operating Income             $3.8 billion             $3.8 billion             Flat Net Income             $3.0 billion             $2.8 billion             up 5.1% Earnings Per Share             58 cents             54 cents             up 7.4% Non-GAAP Financial Comparison Quarterly           Q3 2012         Q2 2012         vs. Q2 2012 Gross Margin         64.3%         64.4%         Flat Operating Income         $4.1 billion         $4.1 billion         Flat Net Income         $3.1 billion         $3.0 billion         up 4.8% Earnings Per Share         60 cents         57 cents         up 5.3% Non-GAAP results exclude the amortization of acquisition-related intangibleassets and the related income tax effect of these charges. Risk Factors 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. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will,” “should” and their variations identify forward-looking statements. Statements that refer to or are based on projections, uncertain events or assumptions also identify forward-looking statements. 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 company's expectations. Demand could be different from Intel's expectations due to factors including changes in business and economic conditions, including supply constraints and other disruptions affecting customers; 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. Uncertainty in global economic and financial conditions poses a risk that consumers and businesses may defer purchases in response to negative financial events, which could negatively affect product demand and other related matters. 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 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; 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 capacity utilization; variations in inventory valuation, including variations related to the timing of qualifying products for sale; changes in revenue levels; segment product mix; the timing and execution of the manufacturing ramp and associated costs; start-up costs; excess or obsolete inventory; changes in unit costs; defects or disruptions in the supply of materials or resources; product manufacturing quality/yields; and impairments of long-lived assets, including manufacturing, assembly/test and intangible assets. 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 our marketable equity security portfolio balance is concentrated in ASML Holding, N.V., and declines in value could result in impairment charges, impacting gains or losses on equity securities. Intel's results could be affected 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. 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. 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, disclosure 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 Intel 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. Earnings Webcast Intel will hold a public webcast at 2 p.m. PDT today on its Investor Relations website at www.intc.com. A webcast replay and MP3 download will also be available on the site. Intel plans to report its earnings for the fourth quarter of 2012 on Jan. 17, 2013. Immediately following the earnings report, the company plans to publish a commentary by Stacy J. Smith, senior 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 p.m. PDT at www.intc.com. About Intel 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 newsroom.intel.com and blogs.intel.com. Intel, the Intel logo and Ultrabook 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 INCOME DATA (In millions, except per share amounts)         Three Months Ended Nine Months Ended Sept 29, Oct 1, Sept 29, Oct 1, 2012 2011 2012 2011 NET REVENUE $ 13,457 $ 14,233 $ 39,864 $ 40,112 Cost of sales   4,942   5,215   14,530   15,307 GROSS MARGIN   8,515   9,018   25,334   24,805   Research and development 2,605 2,140 7,519 6,042 Marketing, general and administrative   1,995   2,017   6,099   5,697 R&D AND MG&A 4,600 4,157 13,618 11,739 Amortization of acquisition-related intangibles   74   76   233   188 OPERATING EXPENSES   4,674   4,233   13,851   11,927 OPERATING INCOME 3,841 4,785 11,483 12,878 Gains (losses) on equity investments, net 53 92 81 95 Interest and other, net   27   15   105   221 INCOME BEFORE TAXES 3,921 4,892 11,669 13,194 Provision for taxes   949   1,424   3,132   3,612 NET INCOME $ 2,972 $ 3,468 $ 8,537 $ 9,582   BASIC EARNINGS PER COMMON SHARE $ 0.59 $ 0.67 $ 1.71 $ 1.80 DILUTED EARNINGS PER COMMON SHARE $ 0.58 $ 0.65 $ 1.65 $ 1.75   WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: BASIC 4,996 5,194 5,006 5,317 DILUTED 5,153 5,340 5,181 5,466 INTEL CORPORATION CONSOLIDATED SUMMARY BALANCE SHEET DATA (In millions)           Sept 29, June 30, Dec 31, 2012 2012 2011 CURRENT ASSETS Cash and cash equivalents $ 3,520 $ 5,223 $ 5,065 Short-term investments 2,483 3,981 5,181 Trading assets 4,462 4,444 4,591 Accounts receivable, net 3,938 3,544 3,650 Inventories: Raw materials 614 655 644 Work in process 2,363 2,068 1,680 Finished goods   2,342   2,181   1,772 5,319 4,904 4,096 Deferred tax assets 1,633 1,517 1,700 Other current assets   1,659   2,172   1,589 TOTAL CURRENT ASSETS   23,014   25,785   25,872   Property, plant and equipment, net 27,157 25,976 23,627 Marketable equity securities 3,924 599 562 Other long-term investments 469 568 889 Goodwill 9,623 9,442 9,254 Identified intangible assets, net 6,221 5,974 6,267 Other long-term assets   4,033   4,008   4,648 TOTAL ASSETS $ 74,441 $ 72,352 $ 71,119   CURRENT LIABILITIES Short-term debt $ 56 $ 92 $ 247 Accounts payable 3,188 3,269 2,956 Accrued compensation and benefits 2,320 2,020 2,948 Accrued advertising 1,096 1,060 1,134 Deferred income 1,954 1,915 1,929 Other accrued liabilities   3,339   2,182   2,814 TOTAL CURRENT LIABILITIES   11,953   10,538   12,028   Long-term debt 7,100 7,093 7,084 Long-term deferred tax liabilities 2,904 2,775 2,617 Other long-term liabilities 3,215 3,167 3,479 Stockholders' equity: Preferred stock — — — Common stock and capital in excess of par value 19,278 18,883 17,036 Accumulated other comprehensive income (loss) (501) (857) (781) Retained earnings   30,492   30,753   29,656 TOTAL STOCKHOLDERS' EQUITY   49,269   48,779   45,911 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 74,441 $ 72,352 $ 71,119 INTEL CORPORATION SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION (In millions)             Q3 2012Q2 2012Q3 2011 GEOGRAPHIC REVENUE: Asia-Pacific $7,695 $7,773 $8,050 57% 58% 57% Americas $2,852 $2,883 $3,017 21% 21% 21% Europe $1,775 $1,652 $1,814 13% 12% 13% Japan $1,135 $1,193 $1,352 9% 9% 9%   CASH INVESTMENTS: Cash and short-term investments $6,003 $9,204 $10,933 Trading assets - marketable debt securities (1) 4,462 4,444 4,259 Total cash investments $10,465 $13,648 $15,192   TRADING ASSETS: Trading assets - equity securities (2) — — $6 Total trading assets - sum of 1+2 $4,462 $4,444 $4,265   CURRENT DEFERRED INCOME: Deferred income on shipments of components to distributors $791 $765 $833 Deferred income from software and services group 1,163 1,150 1,084 Total current deferred income $1,954 $1,915 $1,917   SELECTED CASH FLOW INFORMATION: Depreciation $1,625 $1,572 $1,273 Share-based compensation $276 $280 $250 Amortization of intangibles $268 $267 $256 Capital spending ($2,887) ($2,662) ($2,713) Investments in non-marketable equity instruments ($163) ($79) ($274) Equity investment in ASML Holding N.V. ($3,218) — — Stock repurchase program ($1,165) ($1,100) ($4,000) Proceeds from sales of shares to employees & excess tax benefit $299 $552 $340 Dividends paid ($1,125) ($1,057) ($1,102) Net cash (used)/received for acquisitions/divestitures ($110) ($282) ($186)   EARNINGS PER COMMON SHARE INFORMATION: Weighted average common shares outstanding - basic 4,996 5,022 5,194 Dilutive effect of employee equity incentive plans 93 108 93 Dilutive effect of convertible debt 64 69 53 Weighted average common shares outstanding - diluted 5,153 5,199 5,340   STOCK BUYBACK: Shares repurchased 46 41 186 Cumulative shares repurchased (in billions) 4.2 4.2 3.9 Remaining dollars authorized for buyback (in billions) $6.3 $7.5 $14.2   OTHER INFORMATION: Employees (in thousands) 104.7 102.8 99.9 INTEL CORPORATION SUPPLEMENTAL OPERATING GROUP RESULTS (In millions)               Three Months Ended Nine Months Ended Sept 29, Oct 1, Sept 29, Oct 1,   2012   2011 2012   2011 Net Revenue PC Client Group $ 8,633 $ 9,417 $ 25,768 $ 26,359 Data Center Group 2,654 2,512 7,911 7,412 Other Intel Architecture Group   1,177   1,368   3,360   3,906 Intel Architecture Group   12,464   13,297   37,039   37,677   Software and Services Group 588 541 1,745 1,292 All other   405   395   1,080   1,143 TOTAL NET REVENUE $ 13,457 $ 14,233 $ 39,864 $ 40,112     Operating income (loss) PC Client Group $ 3,337 $ 4,014 $ 10,236 $ 10,841 Data Center Group 1,212 1,221 3,744 3,647 Other Intel Architecture Group   (235)   (140)   (882)   (209) Intel Architecture Group $ 4,314 $ 5,095   13,098   14,279   Software and Services Group 4 18 25 (48) All other   (477)   (328)   (1,640)   (1,353) TOTAL OPERATING INCOME $ 3,841 $ 4,785 $ 11,483 $ 12,878 In the second quarter of 2012, we reorganized our smartphone, tablet, and mobile communication businesses within the other Intel architecture operating group to enable us to move faster and with greater collaboration and synergies in the market segment for mobile devices. As part of the reorganization, the former Netbook and Tablet Group has been separated into the following new operating groups: Netbook Group, Tablet Group, and Service Provider Group. Additionally, the former Ultra-Mobility Group is now the Phone Group. The other Intel architecture operating group continues to include the Intelligent Systems Group and Intel Mobile Communications. The other Intel architecture operating group aggregation has not changed. Our operating groups shown above are comprised of the following:     • PC Client Group: Delivering platforms designed for the notebook and desktop (including high-end enthusiast PCs) market segments; and wireless connectivity products.   • Data Center Group: Delivering platforms designed for the server, workstation, and storage computing market segments; and wired network connectivity products.   • Other Intel Architecture Group consist of the following: • Intelligent Systems Group: Delivering platforms designed for embedded applications. • Netbook Group: Delivering platforms designed for the netbook market segment. • Intel Mobile Communications: Delivering mobile phone components such as baseband processors, radio frequency transceivers, and power management chips.   • Tablet Group: Delivering platforms designed for the tablet market segment. • Phone Group: Delivering platforms designed for the smartphone market segment. • Service Provider Group: Delivering gateway and set top box components. • Software and Services Group consists of the following: • McAfee: A wholly owned subsidiary delivering software products for endpoint security, network and content security, risk and compliance, and consumer and mobile security. • Wind River Software Group: A wholly owned subsidiary delivering software optimized products for the embedded and mobile market segments. • Software and Services Group: Delivering software products and services that promote Intel Architecture as the platform of choice for software development.   All Other consists of the following: • Non-Volatile Memory Solutions Group: Delivering NAND flash memory products for use in a variety of devices. • Corporate: Revenue, expenses and charges such as: • A portion of profit-dependent compensation and other expenses not allocated to the operating groups. • Divested businesses and results of seed businesses that support our initiatives. • Acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill. INTEL CORPORATION SUPPLEMENTAL PLATFORM REVENUE INFORMATION         Q3 2012 Q3 2012 Q3 YTD 2012 compared to Q2 2012 compared to Q3 2011 compared to Q3 YTD 2011 PC Client Platform Unit Volumes 1% (4%) 1% Average Selling Prices (1%) (4%) (2%)   Data Center Platform Unit Volumes 1% 4% 0% Average Selling Prices (7%) 1% 7%   PC Client Group Notebook and Desktop Platform Key Drivers -Notebook platform average selling prices decreased 8% from Q3'11 -Desktop platform volume decreased 6% from Q3'11 -Notebook platform average selling prices decreased 6% from the first nine months of 2011 to the first nine months of 2012 -Notebook platform volumes increased 4% from the first nine months of 2011 to the first nine months of 2012 -Desktop platform volume decreased 3% from the first nine months of 2011 to the first nine months of 2012 INTEL CORPORATION SUPPLEMENTAL RECONCILIATIONS OF GAAP TO NON-GAAP RESULTS           In addition to disclosing financial results in accordance with United States (U.S.) generally accepted accounting principles (GAAP), this document contains non-GAAP financial measures that we believe are helpful in understanding and comparing our past financial performance and our expectations for future results. The non-GAAP financial measures disclosed by the company exclude the amortization of acquisition-related intangible assets, as well as the related income tax effect. Amortization of acquisition-related intangible assets consists of the amortization of developed technology, trade names, and customer relationships acquired in connection with business combinations. We record charges relating to the amortization of these intangibles in our GAAP financial statements. Amortization charges for our acquisition-related intangible assets are inconsistent in size and are significantly impacted by the timing and valuation of our acquisitions. Consequently, our non-GAAP adjustment excludes these charges to facilitate an evaluation of our current operating performance and comparisons to our past operating performance.   Set forth below are reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures. The non-GAAP financial measures disclosed by the company have limitations and should not be considered a substitute for, or superior to, financial measures prepared in accordance with GAAP, and the financial results prepared in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes the non-GAAP financial measures are appropriate for period to period comparisons in our budget, planning and evaluation processes, and to show the reader how our performance compares to other periods.   (In millions, except per share amounts) Three Months Ended Nine Months Ended Sept 29, Oct 1, Sept 29, Oct 1, 2012 2011 2012 2011   GAAP GROSS MARGIN $ 8,515 $ 9,018 $ 25,334 $ 24,805 Adjustment for the amortization of acquisition-related intangibles 141   135 420   345 NON-GAAP GROSS MARGIN $ 8,656 $ 9,153 $ 25,754 $ 25,150   GAAP GROSS MARGIN PERCENTAGE 63.3% 63.4% 63.6% 61.8% Adjustment for the amortization of acquisition-related intangibles 1.0%   0.9% 1.0%   0.9% NON-GAAP GROSS MARGIN PERCENTAGE 64.3% 64.3% 64.6% 62.7%   GAAP OPERATING INCOME $ 3,841 $ 4,785 $ 11,483 $ 12,878 Adjustment for the amortization of acquisition-related intangibles 215   211 653   533 NON-GAAP OPERATING INCOME $ 4,056 $ 4,996 $ 12,136 $ 13,411   GAAP NET INCOME $ 2,972 $ 3,468 $ 8,537 $ 9,582 Adjustment for: Amortization of acquisition-related intangibles 215 211 653 533 Income tax effect   (72)   (45)   (219)   (114) NON-GAAP NET INCOME $ 3,115 $ 3,634 $ 8,971 $ 10,001   GAAP DILUTED EARNINGS PER COMMON SHARE $ 0.58 $ 0.65 $ 1.65 $ 1.75 Adjustment for: Amortization of acquisition-related intangibles 0.04 0.04 0.13 0.10 Income tax effect   (0.02)   (0.01)   (0.05)   (0.02) NON-GAAP DILUTED EARNINGS PER COMMON SHARE $ 0.60 $ 0.68 $ 1.73 $ 1.83 INTEL CORPORATION SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP OUTLOOK       Set forth below is a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure. The non-GAAP financial measure disclosed by the company has limitations and should not be considered a substitute for, or superior to, the financial measure prepared in accordance with GAAP, and the financial outlook prepared in accordance with GAAP and the reconciliations from this outlook should be carefully evaluated. Please refer to "Supplemental Reconciliation of GAAP to non-GAAP Results" in this document for a detailed explanation of the adjustment made to the comparable GAAP measures, the ways management uses the non-GAAP measures, and the reasons why management believes the non-GAAP measures provide useful information for investors. Q4 2012 Outlook GAAP GROSS MARGIN PERCENTAGE 57% +/- a couple percentage points Adjustment for the amortization of acquisition-related intangibles 1% NON-GAAP GROSS MARGIN PERCENTAGE 58% +/- a couple percentage points Intel CorporationReuben GallegosInvestor Relations408-765-5374reuben.m.gallegos@intel.comorJon CarvillMedia Relations503-696-5069jon.carvill@intel.com