SANTA CLARA, Calif., July 19, 2005 - Intel Corporation today
announced second-quarter revenue of $9.2 billion, up 15 percent
year-over-year and down 2 percent sequentially.
Second-quarter net income was $2 billion, up 16 percent
year-over-year and down 6 percent sequentially. Earnings per share were
33 cents, up 22 percent from 27 cents in the second quarter of 2004 and
down 6 percent from 35 cents in the first quarter of 2005.
delivered record second-quarter revenue, with growth of 15 percent
versus a year ago led by strong demand for our notebook platforms,"
said Paul Otellini,
president and CEO. "Our investments in new products, advanced silicon
capacity and emerging markets are paying off with growth that is
outpacing the industry. We look forward to the second half of 2005 as
we ramp dual-core microprocessors into high volume, begin production on
our 65nm process technology and deliver innovative new platforms."
results for the previous quarter included an additional week of
business because 2005 is a 53-week fiscal year for the company. As
discussed in the company's June 9 Mid-Quarter Business Update, Intel's
results for the second-quarter included a tax adjustment primarily
related to an increase in estimated research and development credits
for prior years. The reversal of previously accrued taxes increased
second-quarter earnings-per-share by approximately 2 cents. Intel's
results for last year's second quarter included a reversal of
previously accrued taxes that increased earnings-per-share by 1.3 cents.
The following statements are based on current expectations. These
statements are forward-looking, and actual results may differ
materially. Please see the Risk Factors Regarding Forward-Looking
Statements in this release for a description of certain important risk
factors that could cause actual results to differ, and refer to Intel's
annual and quarterly reports on file with the Securities and Exchange
Commission (SEC) for a more complete description of the risks. These
statements do not include the potential impact of any mergers,
acquisitions, divestitures, investments or other business combinations
that may be completed after July 18, 2005.
- Revenue in the third quarter is expected to be between $9.6 billion and $10.2 billion.
- Gross margin percentage for the third quarter is expected to be
approximately 60 percent, plus or minus a couple of points, as compared
to 56.4 percent in the second quarter. The gross margin percentage
expectation for 2005 has been narrowed from 59 percent, plus or minus a
few points, to 59 percent, plus or minus a couple of points. The gross
margin percentage could vary from expectations based on changes in
revenue levels, product mix and pricing; 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; capacity utilization; 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 (R&D plus MG&A) in the third quarter are expected
to be between $2.8 billion and $2.9 billion, higher than $2.5 billion
in the second quarter, primarily driven by increases in research and
development. The company is transferring resources from 65nm start-up
programs to 45nm development and increasing investments in new
platforms. Expenses, particularly certain marketing and compensation
expenses, vary depending on the level of demand for Intel's products
and the level of revenue and profits.
- The R&D spending expectation for 2005 is unchanged at approximately $5.2 billion.
- The capital spending expectation for 2005 has been increased to
approximately $5.9 billion, plus or minus $200 million, as compared to
the previous expectation of $5.4 billion to $5.8 billion, to support
higher expected demand.
- Gains from equity investments and interest and other in the third quarter are expected to be approximately $130 million.
- The tax rate for the third and fourth quarters is expected to be
approximately 30.5 percent. The tax rate expectation does not reflect
the impact of any potential repatriation of cash under the American
Jobs Creation Act (Jobs Act). The company currently expects to finalize
its analysis of whether, and to what extent, foreign earnings might be
repatriated under the Jobs Act in September, which would impact the
third quarter tax rate. The tax rate expectation is based on current
tax law and current expected income and assumes Intel continues to
receive tax benefits for export sales. The tax rate may be affected by
the closing of acquisitions or divestitures; the jurisdiction 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; and the ability to
realize deferred tax assets.
- Depreciation for the third quarter is expected to be between $1
billion and $1.1 billion, approximately flat with the second quarter.
Depreciation for 2005 is now expected to be between $4.3 billion and
$4.4 billion, as compared to the previous expectation of $4.4 billion,
plus or minus $100 million.
- Amortization of acquisition-related intangibles and costs is
expected to be approximately $30 million in the third quarter. The
full-year expectation is now approximately $120 million, slightly below
the previous expectation of $125 million.
SECOND-QUARTER REVIEW AND RECENT HIGHLIGHTS
- Intel used $2.5 billion in cash to repurchase 98.9 million shares
of its common stock during the quarter under an ongoing program.
- The company paid a cash dividend of 8 cents per share on June 1 to stockholders of record on May 7.
- Gains from equity investments and interest and other in the second
quarter were $105 million. The amount included $22 million in net
losses from equity investments driven by $133 million in impairments,
primarily due to a $105-million impairment of Intel's investment in
Micron Technology to reflect the difference between the cost basis of
the investment and the stock price at the end of the quarter. The
impairments were partially offset by gains from dispositions.
- In June 2005, the U.S. Internal Revenue Service proposed certain
adjustments related to the amounts reflected as a tax benefit for
export sales in Intel's 2001 and 2002 tax returns. The company does not
agree with these adjustments and is in the process of appealing similar
adjustments with respect to Intel's 1999 and 2000 tax returns (see
Intel's SEC filing on Form 10-Q for the quarter ended April 2, 2005).
If the IRS were to prevail with respect to the 2001 and 2002 proposed
adjustments, Intel's federal income tax due for these years would
increase by approximately $400 million, plus interest.
Key Product Trends (Sequential)
- Total microprocessor units were at record levels. The average
selling price was slightly lower primarily due to an increase in Xbox*
processor shipments along with slightly lower computing processor
- Chipset units were higher.
- Motherboard units were lower.
- Flash memory units were higher and at record levels, with lower average selling prices.
- Wireless connectivity units set a record.
- Wired connectivity units were lower.
For business PCs, the company
introduced the first Intel Professional Business Platform, which is
based on the recently introduced Intel Pentium 4 processor with
Hyper-Threading Technology 600 sequence, the new Intel 945G Express
Chipset, and the Intel PRO/1000 PM network connection. The new
platform brings the company's advanced security, management and
collaboration technologies to mainstream business PCs. Enhancements
include the introduction of Intel Active Management Technology (AMT),
designed to help IT managers monitor and manage all Intel AMT-enabled
PCs on their networks.
company introduced five new Intel Celeron D processors with 64-bit
computing capability for the value PC segment. Intel now has 64-bit
capability available throughout its desktop and server microprocessor
For servers, Intel introduced an entry-level
server platform based on the dual-core Intel Pentium D processor and
the Intel E7230 chipset. The first of Intel's dual-core platforms for
servers, it supports DDR2 memory, PCI Express* I/O and software RAID.
company also introduced two Intel Itanium 2 processors with a 667 MHz
front side bus. Itanium-based server bandwidth can be increased by 65
percent using the new bus architecture, which also supports Intel's
forthcoming dual-core Itanium processor, codenamed Montecito. A test
system based on Montecito set a new 4-way performance record of 45
gigaflops on the LINPACK floating-point performance benchmark during
the quarter, exceeding the previous record of 27.5 gigaflops held by a
According to the latest
TOP500* ranking, Intel processors are used in two-thirds of the world's
fastest supercomputers. The Top500 list now includes 254 systems based
on Intel Xeon™ and 64-bit Intel Xeon processors and 79 systems based
on Intel Itanium processors.
infrastructure, Intel announced its second generation of AdvancedTCA*
(Advanced Telecom Computing Architecture) products. The company added
three new communication server blades and related technologies that
help manufacturers and service providers more easily design and build
standards-based IP Multimedia Subsystem (IMS) equipment and services.
In addition, Intel and Alcatel announced plans to bring AdvancedTCA
platforms to mobile service providers, with Alcatel planning to deliver
single-board solutions based on the Intel Pentium M processor in
Intel's latest notebook PC platform based on
Intel Centrino™ Mobile Technology has become the company's
fastest-ramping mobile platform ever, accounting for over 50 percent of
performance mobile shipments in the first full quarter after launch.
Formerly codenamed Sonoma, the platform offers greater performance and
new capabilities for consumer and business applications while
maintaining long battery life. Intel's notebook platforms continue to
see strong year-over-year growth, with double-digit increases in mobile
chipsets with integrated graphics as well as WiFi, where Intel has
become the No. 1 silicon supplier according to ABI Research.
next-generation wireless broadband technology, Intel announced plans
with Sprint, Huawei Technologies, Nokia and Arraycomm designed to help
advance the development, deployment and adoption of WiMAX networks. For
example, Intel and Sprint announced a collaboration to advance WiMAX
technology for high-capacity wireless broadband coverage and services
in metropolitan areas. Intel and Huawei plan to enable carrier-grade
networks using WiMAX technology. Intel and ArrayComm announced plans to
incorporate additional technologies into the IEEE 802.16 specification
to support smart antenna technology that can improve overall WiMAX
network range, capacity and coverage quality.
memory, the company continued to see strong design win momentum for its
Intel StrataFlash memories in cellular phone designs. The company
generated ongoing growth in flash shipments to the embedded market
segment which contributed to overall flash unit shipments being at
record levels for the quarter.
processors for phones and consumer electronics devices saw continued
strong demand, with double-digit year-over-year growth. A new cellular
phone design based on the Intel PXA800F baseband chipset for GSM/GPRS
networks was introduced during the quarter by O2, a major European
carrier. Intel's next-generation baseband chipset for GPRS/EDGE/UMTS
networks, code-named Hermon, is scheduled to be introduced later in the
For home PCs, Intel introduced a desktop
platform based on the new dual-core Intel Pentium D processor which
is designed to provide consumers with the ability to do more with their
digital content simultaneously. The new platform includes the Intel
945 Express Chipset family which supports consumer electronics-like
features such as surround-sound audio, high-definition video and
enhanced 3-D graphics.
took a number of key steps to help accelerate the availability of
premium entertainment content in the digital home. Intel invested in
ClickStar, an online service intended to allow consumers to view
premium movies in the home. ClickStar was formed by Revelations
Entertainment, a partnership between actor Morgan Freeman and producer
Intel also announced a collaboration with the
Yoshimoto Kogyo talent agency of Japan and invested in Bellrock Media,
its digital content production and delivery company in the United
States. Intel invested in Mobilians, a Korean company that is
developing payment services and technologies for purchasing online
content using mobile phones.
Technology and Manufacturing
Intel continued the
development of its forthcoming 65nm process technology and began
providing customers with samples of microprocessors codenamed Yonah,
Presler and Dempsey, the company's first 65nm dual-core microprocessors
for notebook, desktop and server platforms, respectively. Intel's
industry-leading 65nm process technology will enable cost-effective
production of dual-core processors, with platforms ramping into high
volume in 2006.
and Corning announced plans to develop photomask substrates for Extreme
Ultraviolet (EUV) lithography. The substrates are needed to develop
low-defect photomasks for high-volume 32nm production using EUV
STATUS OF BUSINESS OUTLOOK AND MID-QUARTER BUSINESS UPDATE
During the quarter, Intel's corporate representatives may reiterate the
Business Outlook during private meetings with investors, investment
analysts, the media and others. Intel intends to publish a Mid-Quarter
Business Update on Sept. 8. From the close of business on Sept. 2 until
publication of the Update, Intel will observe a "Quiet Period" during
which the Business Outlook disclosed in the company's press releases
and 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. For more information about the
Business Outlook, Update and related Quiet Periods, please refer to the
Business Outlook section of Intel's Web site at www.intc.com.
RISK FACTORS REGARDING FORWARD-LOOKING STATEMENTS
The statements 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 factors accompanying certain
of such statements above and set forth below to be the important
factors that could cause actual results to differ materially from
Intel's published expectations. A more detailed discussion of these
factors, as well as other factors that could affect Intel's results, is
contained in Intel's SEC filings, including the report on Form 10-Q for
the quarter ended April 2, 2005.
- Intel operates in intensely competitive industries. Revenue and the
gross margin percentage are affected by the demand for and market
acceptance of Intel's products, the availability of sufficient
inventory to meet demand, pricing pressures and actions taken by
Intel's competitors. Factors that could cause demand to be different
from Intel's expectations include changes in customer order patterns,
including order cancellations; changes in the level of inventory at
customers; and changes in business and economic conditions.
- Gains or losses from equity securities and interest and other could
vary from expectations depending on equity market levels and
volatility; gains or losses realized on the sale or exchange of
securities; 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 impacted by unexpected economic, social
and political conditions in the countries in which Intel, its customers
or its suppliers operate, including security risks, possible
infrastructure disruptions and fluctuations in foreign currency
- Intel's results could also 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.
Source: Intel Press Release