Record unit shipments, up 20%. Here's the details:
Q3 Revenue $6.2 Billion, up 20 Percent; Q3 Earnings Per
Share $0.88, up 19 Percent; Record Quarterly
Microprocessor Unit Shipments
Business Wire - October 14, 1997 16:17
INTEL INTC %CALIFORNIA %COMPUTERS %ELECTRONICS %COMED
%EARNINGS V%BW P%BW
SANTA CLARA, Calif.--(BUSINESS WIRE)--Oct. 14, 1997--Driven by both solid
demand in
North America and rapid market acceptance of its newest processors, the Pentium
processor with
MMX technology and the Pentium II processor, Intel Corporation set a record for unit
shipments of
microprocessors in the third quarter, the company said today.
Intel's transition to processors with MMX media enhancement technology accelerated
during the
quarter with well over half of the company's shipments of microprocessors coming
from processors
with MMX technology.
Third quarter revenue was $6.2 billion, up 20 percent from $5.1 billion for the third
quarter of 1996.
Third quarter revenue was up 3 percent from second quarter 1997 revenue of $6.0
billion.
Net income in the third quarter was $1.57 billion, up 20 percent from third quarter
1996 net income of
$1.31 billion, and down 4 percent from second quarter 1997 net income of $1.65
billion.
Earnings per share in the third quarter rose to $0.88 from $0.74 in the third quarter of
1996, an
increase of 19 percent. Earnings per share in the third quarter were down 4 percent
from $0.92 in the
second quarter of 1997, primarily the result of a much weaker than expected Flash
memory market
segment.
"The quarter saw a lot of our energy going into product conversions as the Pentium
processor with
MMX technology continued to ramp and we accelerated shipments of the Pentium II
processor with
its novel high performance bus architecture," said Dr. Andrew S. Grove, chairman and
chief executive
officer. "Our factories were especially responsive to the challenges presented by this
rapid conversion,
by meeting our volume needs with excellent yields of advanced processors."
In the third quarter, the company repurchased a total of 2.5 million shares of Common
Stock at a cost
of $251 million under an ongoing program. Since the program began in 1990, the
company has
repurchased 200.7 million shares at a total cost of $5.9 billion.
During the quarter the company announced its regular quarterly cash dividend of $0.03
per share. The
dividend is payable on December 1, 1997 to stockholders of record on November 1,
1997. Intel has
paid a quarterly dividend for the last five years.
Intel's 1998 Step-Up Warrants (INTCW) expire on March 14, 1998. The warrants
must be
exercised on or before Friday, March 13, 1998. The last day of trading of the
warrants on the
NASDAQ Stock Market will be March 10, 1998.
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 take into account the
potential effects
of future mergers or acquisitions.
-- The company expects revenue for the fourth quarter of 1997 to be slightly up from
third quarter
revenue of $6.2 billion.
-- Gross margin percentage in the fourth quarter is expected to be flat to slightly up
from 58 percent in
the third quarter. In the short-term Intel's gross margin percentage varies primarily with
revenue levels
and product mix.
-- The company still believes that over the long-term the gross margin percentage will
be 50 percent
plus or minus a few points. Intel's long-term gross margin percentage will vary
depending on product
mix.
-- Expenses (R & D plus MG &A) in the fourth quarter are expected to be
approximately 10 to 15
percent higher than expenses of $1.3 billion in the third quarter, primarily as the result
of seasonal
spending on advertising and marketing. Expenses are dependent in part on the level of
revenue.
-- R & D spending is expected to be approximately $2.4 billion for 1997.
-- The company expects interest and other income for the fourth quarter to be
approximately $160
million, assuming no significant changes in cash balances or interest rates and no
unanticipated items.
-- The tax rate in 1997 is expected to remain at 35.5 percent.
-- Capital spending is expected to be approximately $4.5 billion for 1997.
Depreciation is expected to
be approximately $2.2 billion for 1997.
The above statements contained in this outlook are forward-looking statements that
involve a number
of risks and uncertainties. These statements do not take into account the potential
financial effects of
future mergers or acquisitions, including any one time charges, and related operational
risks such as the
company's ability to successfully integrate any acquired businesses, enter new market
segments and
manage the growth of such businesses.
In addition to the factors discussed above, among the other factors that could cause
actual results to
differ materially are the following: business conditions and growth in the computing
industry and in the
general economy; changes in customer order patterns, including timing of delivery and
changes in
seasonal fluctuations in PC buying patterns; changes in the mixes of microprocessor
types and speeds,
motherboards, purchased components and other products; competitive factors, such
as rival chip
architectures and manufacturing technologies, competing software-compatible
microprocessors,
acceptance of new products and response to price pressures; risk of inventory
obsolescence due to
shifts in market demand; variations in inventory valuation; excess or shortage of
purchased
components; timing of software industry product introductions; continued success in
technological
advances and their implementation, including the manufacturing ramp; development,
implementation
and initial production of new strategic products and processes; excess or shortage of
manufacturing
capacity; unanticipated costs or other adverse effects associated with processors and
other products
containing errata (deviations from published specifications); risks associated with
foreign operations;
litigation involving intellectual property and consumer issues; level of stock repurchases;
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-Q for the quarter ended June 28, 1997 (Part I, Item 2, Outlook section).
Q3 1997 BUSINESS REVIEW
-- Unit shipments of microprocessors set a record in the third quarter. Chipset units
were up in the
third quarter from the second quarter of 1997.
-- Motherboard units shipped in the third quarter were up from the second quarter of
1997, the result
of higher motherboard units for the Pentium II processor.
-- Embedded processor and microcontroller units shipped were down from the second
quarter.
-- Unit shipments of Fast Ethernet network interface cards, hubs and switches were all
up from the
second quarter.
-- Flash memory units shipped during the quarter were down from the second quarter.
-- Gross margin percentage declined in the third quarter from the second quarter of
1997, primarily the
result of a much weaker than expected Flash memory market segment and the
increased volume of
purchased components used on the S.E.C. cartridge as the Pentium II processor
ramped.
-- Intel's revenue breakdown by major geographic regions is summarized below:
Q3 96 Q2 97 Q3 97
Percent of revenue
by geographic area
Americas 42 44 48
Europe 26 24 24
Asia-Pacific 21 19 19
Japan 11 13 9
-- The Americas region had strong revenue growth from Q2 1997.
Europe and Asia-Pacific both had Q3 revenues that were slightly up
from Q2, while Japan's revenues were sequentially down.
-- Employment at the end of the third quarter of 1997 was 61,000,
up from 57,000 at the end of the second quarter.
NEW PRODUCT HIGHLIGHTS
Processor & Platform Products
-- In September, the company introduced 200- and 233-MHz mobile
versions of the Pentium processor with MMX technology. These new
processors, which are manufactured on Intel's advanced 0.25 micron
process technology, have higher performance than previous generation
mobile processors but consume up to 50 percent less power.
-- Intel introduced a version of the Pentium Pro processor with one
megabyte of integrated Level 2 cache, compared to 512 kilobytes of
Level 2 cache in existing versions. This new processor, which runs
at 200 MHz, is targeted for multiprocessing servers and offers
Intel's highest performance for enterprise server systems.
-- Intel introduced the 440LX AGPset, a highly integrated chip set
featuring Accelerated Graphics Port (AGP) technology. Combined with
the Pentium II processor, the 440LX AGPset lays the foundational
hardware for a new class of Visual Computing PCs.
Networking & Communications Products
-- During the quarter, Intel launched the industry's first family of
single-chip Fast Ethernet adapters. These new adapters, which are
based on Intel's 82558 chip, will help high-performance PCs carry out
network communications tasks up to 30 percent more efficiently than
other adapters and enable advanced PC management functions.
-- Intel announced the Intel Create & Share Camera Pack, an
easy-to-use, all-in-one PC communications, photo and video editing
package that plugs into Pentium-processor based PCs. The camera pack
includes an Intel PC camera, hardware and an integrated suite of
communications and image-editing software.
-- In September, Intel introduced a new adapter for mobile PCs that
combines a 10/100 megabit-per-second Ethernet adapter and a
high-speed 56 kilobits-per-second modem in a single PC card.
Computer Enhancement Products
-- Intel announced its breakthrough multiple-bit-per-cell flash
memory technology, called StrataFlash memory. Intel's StrataFlash
technology stores two pieces of information (or bits) in each memory
cell compared to current memory technologies that store only one.
Intel plans to begin production of a 64-Mbit flash memory chip using
StrataFlash technology in the first quarter of 1998.
Manufacturing Review
-- During the quarter, Intel rapidly expanded manufacturing capacity
for the Pentium II processor and currently has four fabs and three
assembly test facilities ramping this product.
FINANCIAL REVIEW
Income Statement
Q3 1997 net revenue of $6.2 billion was up 20 percent from Q3
1996 revenue of $5.1 billion, driven primarily by higher revenue from
sales of processors and chipsets.
Gross margin percentage in the third quarter was 58 percent,
compared to 57 percent in Q3 of 1996. The slight rise in the gross
margin percentage was primarily the result of a more favorable
product mix in Q3 1997, partially offset by weakness in the Flash
memory market segment in Q3 1997.
Q3 1997 total expenses (R&D and MG&A) of $1.3 billion increased
24 percent from Q3 1996 expenses of $1.0 billion due primarily to
higher levels of R&D spending on process and product development, as
well as advertising and profit dependent spending. Expenses were
20.5 percent of revenues in Q3 1997 versus 19.7 percent in Q3 1996.
During the quarter, interest and other income was $151 million,
up from $91 million in Q3 1996 due primarily to higher cash balances.
Shares and equivalents used in the calculation of earnings per
share are summarized below: (millions of shares)
Q3 96 Q2 97 Q3 97
Average Outstanding 1,644 1,635 1,635
Equivalents 126 162 162
Total 1,770 1,797 1,797
(Note:Q3 1997 equivalents include 60 million equivalent shares
for the approximately 80 million outstanding 1998 Step-Up Warrants,
which expire on March 14, 1998. By Q2 1998, the expiration and
exercise of these warrants is expected to result in a net increase in
total shares and equivalents of approximately 20 million shares.)
Balance Sheet
Intel's net cash position (cash plus short- and long-term
investments less short- and long-term debt) at the end of Q3 was
$10.1 billion, an increase of $1.2 billion during the quarter.
Significant components of the changes in net cash for the third
quarter 1997 and year-to-date are summarized below:
Increase/(Decrease)
(in millions) Three months ended Nine months ended
Sept. 27, 1997 Sept. 27, 1997
Net income $1,574 $5,202
Depreciation 559 1,609
Capital spending (1,159) (2,917)
Working capital
and other, net 327 (219)
Put warrant proceeds, net 49 190
Stock repurchase program (251) (2,372)
Sales of shares to employees,
plus tax benefit and other 179 500
Dividends paid (49) (131)
Total change $1,229 $1,862
Inventories
(in millions)
June 28, 1997 Sept. 27, 1997
Raw material $ 260 $ 257
Work in process 703 849
Finished goods 480 401
Total net inventories $1,443 $1,507
Capital spending was $1.2 billion and depreciation was $559
million in Q3 1997. Accounts receivable decreased by $29 million in
the quarter. The company's average days-sales-outstanding was 43,
a decrease of 4 days from the second quarter of 1997.
During Q3 1997, the company repurchased 2.5 million shares of
common stock at a cost of $251 million under an ongoing program. As
of September 27, 1997 the company's potential put warrant obligation
was $582 million to buy back 6.5 million shares of common stock. Of
the total 280 million shares now authorized for repurchase,
approximately 200.7 million shares have been repurchased and 72.8
million shares of common stock remain available for repurchase under
the stock repurchase program, after reserving for 6.5 million shares
to cover outstanding put warrants.
Activity during the quarter related to put warrants and stock
buybacks is as follows:
Increase/(Decrease)
(millions of shares)
Available For Allocated To Net
Stock Buybacks Put Warrants Available
June 28 , 1997 81.8 21.0 60.8
Put warrant sales -- 5.5 (5.5)
Put warrant
expirations -- (20.0) 20.0
Stock buybacks (2.5) -- (2.5)
September 27, 1997 79.3 6.5 72.8
Stockholders' equity increased by $2.5 billion in Q3 1997.
Changes in equity for the third quarter 1997 and year-to-date are
summarized as follows:
Increase/(Decrease)
(in millions) Three months ended Nine months ended
Sept. 27, 1997 Sept. 27,1997
Net income $1,574 $5,202
Put warrant proceeds 49 190
Reclass of put warrant
obligation, net 984 (307)
Repurchase of stock (251) (2,372)
Dividends declared (49) (139)
Sales of shares to employees,
plus tax benefit and other 233 500
Total increase $2,540 $3,074
Copies of this earnings release and Intel's 1996 annual report
can be obtained via the Internet (www.intc.com) or by calling Intel's
transfer agent, Harris Trust and Savings Bank, at 800/298-0146.
Intel, the world's largest chip maker, is also a leading
manufacturer of personal computer, networking, and communications
products. Additional information is available at
www.intel.com/pressroom .
Note To Editors: Other brands and names are property of
their respective owners.
INTEL CORPORATION
CONSOLIDATED SUMMARY FINANCIAL STATEMENTS
(Millions, except per share amounts)
INCOME 3 Months Ended
Sept. 27, Sept. 28,
1997 1996
NET REVENUES $ 6,155 $ 5,142
Cost of sales 2,604 2,201
Research and development 586 449
Marketing, general and administrative 676 565
Operating costs and expenses 3,866 3,215
OPERATING INCOME 2,289 1,927
Interest and other 151 91
INCOME BEFORE TAXES 2,440 2,018
Income taxes 866 706
NET INCOME $ 1,574 $ 1,312
EARNINGS PER SHARE $ 0.88 $ 0.74
COMMON SHARES AND EQUIVALENTS 1,797 1,770
9 Months Ended
Sept. 27, Sept. 28,
1997 1996
NET REVENUES $18,563 $14,407
Cost of sales 7,254 6,772
Research and development 1,742 1,288
Marketing, general and
administrative 2,073 1,600
Operating costs and expenses 11,069 9,660
OPERATING INCOME 7,494 4,747
Interest and other 571 248
INCOME BEFORE TAXES 8,065 4,995
Income taxes 2,863 1,748
NET INCOME $ 5,202 $ 3,247
EARNINGS PER SHARE $ 2.89 $ 1.84
COMMON SHARES AND EQUIVALENTS 1,798 1,769
BALANCE SHEET At At
Sept. 27, Dec. 28,
1997 1996
CURRENT ASSETS
Cash and short-term investments $ 8,960 $ 7,994
Accounts receivable, net 3,921 3,723
Inventories 1,507 1,293
Deferred tax assets and other 752 674
Total current assets 15,140 13,684
Property, plant and equipment, net 9,745 8,487
Long-term investments 1,815 1,353
Other assets 501 211
TOTAL ASSETS $27,201 $23,735
CURRENT LIABILITIES
Short-term debt $ 297 $ 389
Accounts payable and accrued
liabilities 3,539 3,014
Deferred income on shipments
to distributors 517 474
Income taxes payable 811 986
Total current liabilities 5,164 4,863
LONG-TERM DEBT 386 728
DEFERRED TAX LIABILITIES 1,123 997
PUT WARRANTS 582 275
STOCKHOLDERS' EQUITY
Common Stock and
capital in excess of par value 3,389 2,897
Retained earnings 16,557 13,975
Total stockholders' equity 19,946 16,872
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $27,201 $23,735
Note To Editors: Intel Investor Relations Website: www.intc.com Q3 earnings
announcement call live
on website at 2:30 p.m. PDT Replay available starting at 4:15 p.m. PDT
CONTACT: Intel Corporation
Doug Lusk, 408/765-1480 (Investor Relations)
Tom Waldrop, 408/765-8478 (Press Relations)
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