intel.com
Intel Reports Record Annual And Quarterly Revenue And Eps
Q4 earnings excluding acquisition-related costs* $0.69 per share, up 15% Q4 EPS $0.61, up 3%
Q4 earnings announcement call live on Web site at 2:30 p.m. PST
Conference call replay number (719-457-0820); access # 848652
Replays available shortly after end of conference call through January 21st
*Acquisition-related costs consist of one-time write-offs of purchased in-process research and development and the ongoing amortization of goodwill and other acquisition-related intangibles. Other acquisition-related 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., Jan.13, 2000 -- Intel Corporation announced fourth quarter revenue of $8.2 billion, a new record, up 8 percent from the fourth quarter of 1998 and up 12 percent sequentially. Revenue for 1999 was $29.4 billion, up 12 percent from 1998, and resulted in the company's thirteenth consecutive year of revenue growth. In addition, seasonally strong demand led to record unit shipments of microprocessors, chipsets, motherboards and flash memory.
For 1999, net income excluding acquisition-related costs was $8.1 billion, up 29 percent from 1998 net income of $6.3 billion. 1999 earnings excluding acquisition-related costs were $2.33 per share, an increase of 30 percent from $1.79 in 1998.
Including acquisition-related costs in accordance with generally accepted accounting principles, net income in 1999 was $7.3 billion, up 21 percent from $6.1 billion in 1998. 1999 earnings per share were $2.11, up 22 percent from $1.73 in 1998.
Acquisition-related costs in 1999 consisted of $392 million in one-time charges for purchased in-process research and development and $411 million of amortization of goodwill and other acquisition-related intangibles.
For the fourth quarter, net income excluding acquisition-related costs was $2.4 billion, up 15 percent from the fourth quarter of 1998 and up 26 percent sequentially. Fourth quarter earnings excluding acquisition-related costs were $0.69 per share, an increase of 15 percent from $0.60 in the fourth quarter of 1998, and up 25 percent sequentially.
Including acquisition-related costs in accordance with generally accepted accounting principles, fourth quarter net income was $2.1 billion, up 2 percent from fourth quarter 1998 and up 45 percent sequentially. Earnings per share were $0.61, up 3 percent from $0.59 in the fourth quarter of 1998 and up 45 percent sequentially.
Acquisition-related costs in the fourth quarter consisted of $59 million in one-time charges for purchased in-process research and development and $241 million of amortization of goodwill and other acquisition-related intangibles.
"We are proud of our quarterly and annual records in both revenue and earnings," said Craig R. Barrett, president and chief executive officer. "Notably, these results were achieved as we extended our position as the key building block supplier to the worldwide Internet economy. We are also pleased that our 0.18-micron manufacturing process was our fastest ramping process ever."
"In 2000, we look forward to continued growth in our core microprocessor business, and to the mid-year production of our new Itanium? processor which began sampling in the fourth quarter of last year. We are also excited about the expansion of our new Internet-related businesses," Barrett added. "This year we expect to grow revenues in our networking, communication and wireless businesses by 50 percent or more."
During the quarter Intel acquired DSP Communications, Inc., IPivot, Inc., Parity Software Development Corporation and the Telecom Component Products Division of Stanford Telecommunications, Inc. For the year, Intel acquired 12 companies and businesses for approximately $6 billion, significantly broadening and strengthening the company's networking and communications businesses.
During the quarter, the company paid its quarterly cash dividend of $0.03 per share. The dividend was paid on December 1, 1999, to stockholders of record on November 7, 1999. Intel has paid a regular quarterly cash dividend for over seven years.
During the quarter, the company repurchased a total of 12.5 million shares of common stock, at a cost of $903 million, under an ongoing program. For the year, the company repurchased a total of 71.3 million shares at a total cost of $4.6 billion. Since the program began in 1990, the company has repurchased 659.9 million shares at a total cost of $18.2 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 or acquisitions that may be completed after December 25, 1999.
** The company expects revenue for the first quarter of 2000 to be slightly down from fourth quarter revenue of $8.2 billion, due to seasonal factors.
** Gross margin percentage in the first quarter of 2000 is expected be approximately flat with the fourth quarter. Intel's gross margin expectation for 2000 is 61 percent, plus or minus a few points, compared to 59.7 percent for all of 1999. In the short term, Intel's gross margin percentage varies primarily with revenue levels and product mix as well as changes in unit costs.
** Expenses (R&D, excluding in-process R&D, plus MG&A) in the first quarter of 2000 are expected to be down 3 to 5 percent from fourth quarter expenses of $2.0 billion, primarily due to seasonally lower advertising expenses. Expenses are dependent in part on the level of revenue.
** R&D spending, excluding in-process R&D, is expected to be approximately $3.8 billion for 2000, up from $3.1 billion in 1999. The higher spending is driven primarily by the full year impact of acquisitions and investments in new businesses as well as increased investment in Intel architecture related businesses.
** The company expects interest and other income for the first quarter of 2000 to be approximately $500 million, depending on interest rates, cash balances, equity market levels, the realization of expected gains on the sale of equities in the company's investment portfolio, and assuming no unanticipated items.
** The tax rate for 2000 is expected to be approximately 31.7 percent, excluding the impact of acquisition-related costs from both prior and future mergers or acquisitions.
** Capital spending for 2000 is expected to be approximately $5.0 billion, up from $3.4 billion in 1999. The higher anticipated capital spending is the result primarily of expenditures related to the development of next generation 0.13-micron process technology for both 300 mm and 200 mm, in addition to increased spending on new fab construction and equipment purchases to add 0.18-micron capacity.
** Depreciation is expected to be approximately $870 million in the first quarter and $3.4 billion for the full year 2000.
** Amortization of goodwill and other acquisition-related intangibles is expected to be approximately $310 million in the first quarter and $1.2 billion for the full year 2000.
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, among other factors that could cause actual results to differ materially are the following: business and economic conditions and growth in the computing industry 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; insufficient, 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, including the transition to the 0.18-micron process technology; excess or shortage of manufacturing capacity; the ability to grow new networking, communications, wireless and other Internet-related businesses and successfully integrate and operate any acquired businesses; unanticipated costs or other adverse effects associated with processors and other products containing errata (deviations from published specifications); impact on the company's business due to systems of third parties adversely affected by year 2000 problems; claims due to year 2000 issues allegedly related to the company's products or year 2000 remediation efforts; 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-Q for the quarter ended September 25, 1999 (Part I, Item 2, Outlook section).
FOURTH QUARTER 1999 BUSINESS REVIEW
Intel Architecture Business Group
** Microprocessor and chipset unit shipments both set new records in the fourth quarter.
** Motherboard unit shipments were up sequentially in the fourth quarter and set a new record.
Wireless Communications and Computing Group
** Flash memory unit shipments in the fourth quarter set a new record and resulted in a record year for flash units.
Network Communications Group
** Unit shipments of Fast Ethernet connections were flat sequentially in the fourth quarter. For 1999 Fast Ethernet connections were up from 1998.
** Embedded processor and microcontroller unit shipments were down sequentially in the fourth quarter. For 1999 units were up from 1998.
Communication Products Group
** Unit shipments of switches were up sequentially in the fourth quarter. For 1999 units were up from 1998.
Financial Review
** Due to the successful ramp and market acceptance of 0.18 microprocessors, average selling prices of microprocessors improved slightly in the fourth quarter.
** Gross margin percentage in the fourth quarter was slightly higher than previous guidance primarily due to stronger than expected revenue growth.
** Interest and other was $508 million in the fourth quarter, higher than previous guidance of $280 million, due to higher than expected gains on sales of equity investments.
** The effective tax rate for the fourth quarter was approximately 35 percent, or approximately 33 percent excluding the impact of acquisition-related costs.
FOURTH QUARTER AND RECENT HIGHLIGHTS
Intel Architecture Business Group
** On October 25, Intel introduced 15 new Pentium© III and Pentium© III Xeon? processors, all built using advanced Intel 0.18-micron process technology that enables faster processor speeds, new performance enhancing features and lower power consumption. The launch was the broadest in company history, addressing the desktop, mobile, server and workstation segments.
** During the quarter, Intel introduced two new chipsets with support for Direct RDRAM memory. The Intel© 820 chipset optimizes the performance of Pentium III processor-based PCs for the performance desktop market segment and the Intel 840 chipset serves the workstation and server market segments.
** In December, Intel introduced the Pentium III processor at 800 MHz, providing the industry's fastest processor for desktop PCs. Intel also added a 750 MHz version of the processor.
** In December, Intel began delivering prototype Itanium processor-based servers and workstations, further assisting system manufacturers, operating system vendors and application developers in completing the development and testing of products targeted for Intel's Itanium processor. Production systems based on the Itanium processor are scheduled to ship in the second half of 2000.
** On January 4, Intel introduced the Intel Celeron processor 533 MHz, providing Intel's highest performance for the value desktop PC segment.
** On January 12, Intel introduced the Pentium III Xeon? processor at 800 MHz targeting the rapidly growing segments for workstations and "front-end" servers -- a class of single- and dual-processor Internet servers for e-business functions such as Web site hosting and e-commerce authentication.
** In October, Intel and Nokia announced an agreement to develop set-top solutions that will allow broadcasters to deliver Internet-enhanced television services along with Internet services. The first products are expected to be introduced in the second half of 2000.
** In December, Intel conducted the first public technology demonstration of forthcoming hardware and software products based on Bluetooth* wireless technology. These Intel products will enable computer manufacturers to add new wireless communications capabilities to portable computers and other PC-related products scheduled to be introduced beginning in mid-2000.
** On January 5, Intel outlined its Web appliance strategy to provide three major components -- appliance management capabilities, services package building blocks, and a family of Intel-branded Web appliances designed for accessing the Internet -- to telecom operators and service providers, who will offer them to consumers.
Wireless Communications and Computing Group
** In November, Intel completed a $1.6 billion acquisition of DSP Communications, Inc. (DSPC), a leading supplier of digital cellular communications products including chipsets, reference designs, software and other key technologies. Subsequently, during the quarter, Intel's Computing Enhancement Group (CEG) became the Wireless Communications and Computing Group (WCCG), bringing additional focus on opportunities in the growing cellular and wireless communications areas. DSP Communications, Inc. reports as a wholly owned subsidiary within the Cellular Communications Division of WCCG, which also manages Intel's flash business, handheld computing and digital signal processing activities. Networking-related embedded controllers and microprocessors within the former CEG have been relocated within the Networking and Communications Group.
** In October, Intel and ARM Ltd. announced a licensing agreement enabling Intel to develop solutions based on current and future versions of the ARM*** architecture. Intel's StrongARM*** implementation of the ARM architecture utilizes Intel's microarchitecture and low power technologies, while remaining fully compatible with software available for ARM cores, to service the portable, handheld and applied computing market segments.
** In November, Intel announced the formation of the Intel Wireless Competence Center (IWCC) in Stockholm. The IWCC will help support Intel in working with other industry leaders to develop technologies and products for high-bandwidth, wireless Internet applications.
Network Communications Group
** In November, Intel and Nortel Networks announced plans to enable networking equipment vendors to build a new generation of equipment utilizing Nortel's Open IP Environment and the Intel Internet Exchange? (IX) architecture. The IXP1200 network processor from Level One Communications, an Intel company, will power the advanced, low-cost, software programmable networking equipment.
** During the quarter, Intel announced the establishment of the Massachusetts Development Center in Hudson. The Center will serve as the regional focal point for the design of the IXP1200 Network Processor, PCI Bridges and StrongARM software and systems.
** In November, Intel introduced a higher-performance Intel AnyPoint? Phoneline Home Network product that delivers bandwidth of up to 10 megabits-per-second (Mbps) over existing phone lines. On January 6, Intel announced plans to introduce wireless products within the AnyPoint product line in the Spring of 2000.
** On January 6, Intel launched the Intel PRO/DSL 3100 Modem, based on two new industry standards, that allows access to the Internet at speeds up to 150 times faster than the fastest analog modems. The Intel PRO/DSL 3100 Modem marks Intel's first step to deliver standards-based broadband access technology aimed at providing residential and small business users faster access to the Internet.
Communication Products Group
** In October, Intel completed its previously announced acquisition of privately held IPivot, Inc. for approximately $500 million in cash. IPivot designs and manufactures special-function equipment for Internet commerce that allows information to be transmitted more quickly, efficiently, securely and reliably.
** In November, Intel and its Dialogic subsidiary announced plans to accelerate industry adoption of open computer telephony (CT) by simplifying CT software development. The actions included the acquisition of Parity Software Development Corporation, an agreement for Intel and Artisoft, Inc. to cooperate on CT-related projects, and two further investments by the Intel Communications Fund.
New Business Group
** During the quarter, Intel Online Services selected the site of its third production data center, near Reading, England, 30 miles from London. The facility, encompassing 100,000 square feet and housing up to 10,000 servers when fully equipped, is expected to be operational in the first half of this year. Intel Online Services' second production data center, in Fairfax County, Virginia, is on-target to be operational this quarter and is expected to have a capacity of up to 8,000 servers.
** In October, Intel introduced Intel Internet Authentication Services (IAS), an online credential services business that enables trusted health communications and transactions on the Internet.
** In November, Intel introduced the Intel Software Integrity System, a software solution for securing online distribution of premium digital content such as music, video, documents and books.
** On January 6, Intel and Mattel introduced the Intel Play? Me2Cam Computer Video Camera, a PC-enhanced toy that lets a child's body movements control the game's action. The Intel Play Me2Cam camera is the second product launched under the Intel Play brand, and extends a new line of PC-enhanced toys designed and developed jointly by Mattel and Intel.
Intel Capital
Intel's strategic investment program, formerly known as Corporate Business Development, has been newly named Intel Capital. Intel Capital focuses on making equity investments and acquisitions to grow the Internet economy worldwide, including Internet infrastructure, content and services. Intel Capital invests in companies to establish innovative technologies, develop industry standard solutions, drive Internet growth and advance the computing platform in support of Intel's strategic interests.
As of the end of the quarter, Intel Capital's strategic equity portfolio included over 350 companies worldwide. The portfolio includes securities of both publicly traded and private companies as follows:
December 25, 1999 (in millions) Carrying Value
Marketable securities $7,121
Non-marketable securities 904
Total portfolio $8,025
As of December 25, 1999, the total carrying value of the portfolio included approximately $5.8 billion of appreciation on the marketable securities. During the quarter, the company recognized gains of $327 million on sales of portfolio securities.
Marketable securities are carried at current market value in the balance sheet. Non-marketable securities are carried at the lower of cost or market value and are included in Other Assets. Total portfolio value will vary based on a number of factors, including market fluctuations, investments, dispositions and changes in marketable status.
For more information on Intel Capital's strategy and portfolio please visit www.intel.com/capital.
Technology and Manufacturing Review
** During the quarter, Intel rapidly ramped 0.18-micron process production in four fabs, and introduced 17 different processors based on this technology for desktop, mobile, server and workstation markets. In addition, this process technology allowed the company to ship the recently announced Pentium III processors at 800 and 750 MHz ahead of schedule. The company also introduced its first processors using Flip Chip PGA package technology, which extends Intel's flip chip organic packaging capabilities by offering compactness, high performance and cost effectiveness in a socketable form. Over the course of the year Intel will offer most of its 0.18-micron processors in this Flip Chip package.
** During the quarter, Intel disclosed upgrades to two existing fabs. The company plans to spend approximately $800 million over the next few years to increase capacity for Fab 17 located in Hudson, Massachusetts and install Intel leading edge processes. Intel will manufacture networking and communications chips, microprocessors, and other logic devices using the company's latest 0.18-micron process technology. Intel will also retrofit Fab 5 in Oregon in order to manufacture flash products on a 0.18-micron process technology. This facility was previously planned to be decommissioned but will now be upgraded to accept 200 mm equipment.
FINANCIAL INFORMATION
The financial review section is in the tables following this release. Along with the income statement and balance sheet information, this additional information is also available from the investor 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, Harris Trust and Savings Bank, 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.
***StrongARM and ARM are registered trademarks of ARM Ltd.
Investor Relations Web Site:
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Intel Corporate News Press Releases
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Contact the Intel Press Relations Manager
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INTEL CORPORATION
CONSOLIDATED SUMMARY FINANCIAL STATEMENTS
(In millions, except per share amounts)
INCOME Three Months
Ended
--------------------------------------------------------------------------------
Twelve Months
Ended
--------------------------------------------------------------------------------
Dec. 25, 1999
--------------------------------------------------------------------------------
Dec. 26, 1998
--------------------------------------------------------------------------------
Dec. 25, 1999
--------------------------------------------------------------------------------
Dec. 26, 1998
--------------------------------------------------------------------------------
NET REVENUE $ 8,212
--------------------------------------------------------------------------------
$ 7,614
--------------------------------------------------------------------------------
$ 29,389
--------------------------------------------------------------------------------
$ 26,273
--------------------------------------------------------------------------------
Cost of sales 3,176 3,160 11,836 12,088
Research and development 877 674 3,111 2,509
Marketing, general and administrative 1,105 928 3,872 3,076
Amortization of goodwill and other acquisition-relate intangibles 241 16 411 56
Purchased in-process research and development 59
--------------------------------------------------------------------------------
-
--------------------------------------------------------------------------------
392
--------------------------------------------------------------------------------
165
--------------------------------------------------------------------------------
Operating costs and expenses 5,458
--------------------------------------------------------------------------------
4,778
--------------------------------------------------------------------------------
19,622
--------------------------------------------------------------------------------
17,894
--------------------------------------------------------------------------------
OPERATING INCOME 2,754 2,836 9,767 8,379
Interest and other 508
--------------------------------------------------------------------------------
244
--------------------------------------------------------------------------------
$ 1,461
--------------------------------------------------------------------------------
758
--------------------------------------------------------------------------------
INCOME BEFORE TAXES 3,262 3,080 11,228 9,137
Income taxes 1,154
--------------------------------------------------------------------------------
1,016
--------------------------------------------------------------------------------
$ 3,914
--------------------------------------------------------------------------------
3,069
--------------------------------------------------------------------------------
NET INCOME $ 2,108
--------------------------------------------------------------------------------
$ 2,064
--------------------------------------------------------------------------------
$ 7,314
--------------------------------------------------------------------------------
$ 6,068
--------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE $ 0.63
--------------------------------------------------------------------------------
$ 0.62
--------------------------------------------------------------------------------
$ 2.20
--------------------------------------------------------------------------------
$ 1.82
--------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE $ 0.61
--------------------------------------------------------------------------------
$ 0.59
--------------------------------------------------------------------------------
$ 2.11
--------------------------------------------------------------------------------
$ 1.73
--------------------------------------------------------------------------------
COMMON SHARES OUTSTANDING 3,336 3,325 3,324 3,336
COMMON SHARES ASSUMING DILUTION 3,484 3,478 3,470 3,517
Note: Certain prior amounts have been reclassified to conform with the current presentation
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PRO FORMA INFORMATION EXCLUDING ACQUISITION-RELATED COSTS
The following pro forma supplemental information excludes the effect of amortization of goodwill and other acquisition-related intangibles as well as in-process research and development. As these acquisition-related costs are substantially all non-deductible for income tax purposes, the only change to the tax provision in arriving at the pro forma net income is a small increase for the impact of deferred taxes related to the amortization of identifiable intangibles. This pro forma information is not prepared in accordance with generally accepted accounting principles
Three Months
Ended
--------------------------------------------------------------------------------
Twelve Months
Ended
--------------------------------------------------------------------------------
Dec. 25, 1999
--------------------------------------------------------------------------------
Dec. 26, 1998
--------------------------------------------------------------------------------
Dec. 25, 1999
--------------------------------------------------------------------------------
Dec. 26, 1998
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Pro forma operating costs and expenses $ 5,158 $ 4,762 $ 18,819 $ 17,673
Pro forma operating income $ 3,054 $ 2,852 $ 10,570 $ 8,600
Net income excluding acquisition-related costs $ 2,397 $ 2,080 $ 8,098 $ 6,289
Basic earnings per share excluding acquisition-related costs $ 0.72 $ 0.63 $ 2.44 $ 1.89
Diluted earnings per share excluding acquisition-related costs $ 0.69 $ 0.60 $ 2.33 $ 1.79
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INTEL CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEET DATA
(In millions, except per share amounts)
BALANCE SHEET Dec. 25, 1999
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Sept. 25, 1999
--------------------------------------------------------------------------------
Dec. 25, 1998
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CURRENT ASSETS
Cash and short-term investments $11,788 $11,891 $7,626
Accounts receivable 3,700 3,494 3,527
Inventories:
Raw materials 183 204 206
Work in process 755 840 795
Finished goods 540
--------------------------------------------------------------------------------
582
--------------------------------------------------------------------------------
581
--------------------------------------------------------------------------------
1,487
--------------------------------------------------------------------------------
1,626
--------------------------------------------------------------------------------
1,1582
--------------------------------------------------------------------------------
Deferred tax assets and other 853
--------------------------------------------------------------------------------
905
--------------------------------------------------------------------------------
740
--------------------------------------------------------------------------------
Total current assets 17,819 17,916 13,475
Property, plant and equipment, net 11,715 11,594 11,609
Marketable strategic equity securities 7,121 4,102 1,757
Other long-term investments 790 857 3,608
Goodwill and other acquisition-related intangibles 4,934 3,114 111
Other assets 1,470
--------------------------------------------------------------------------------
1,355
--------------------------------------------------------------------------------
911
--------------------------------------------------------------------------------
TOTAL ASSETS $ 43,849
--------------------------------------------------------------------------------
$ 38,938
--------------------------------------------------------------------------------
$ 31,471
--------------------------------------------------------------------------------
CURRENT LIABILITIES
Short-term debt $230 $164 $159
Accounts payable and accrued liabilities 4,565 4,459 4,081
Deferred income on shipments to distributors 609 596 606
Income taxes payable 1,695
--------------------------------------------------------------------------------
1,170
--------------------------------------------------------------------------------
958
--------------------------------------------------------------------------------
Total current liabilities 7,099 6,389 5,804
LONG-TERM DEBT 955 884 702
DEFERRED TAX LIABILITIES 3,130 2,222 1,387
PUT WARRANTS 130 261 201
STOCKHOLDERS' EQUITY
Common Stock and capital in excess of par value 7,316 7,215 4,822
Other stockholders' equity 25,219
--------------------------------------------------------------------------------
21,967
--------------------------------------------------------------------------------
18,555
--------------------------------------------------------------------------------
Total stockholders' equity 32,535
--------------------------------------------------------------------------------
29,182
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