Full News on Intel:
Q3 Revenue $6.2 Billion, up 20 Percent; Q3 Earnings Per Share $0.88, up 19
Percent; Record Quarterly Microprocessor Unit Shipments
BusinessWire, Tuesday, October 14, 1997 at 16:34
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:
*T
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
*T
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)
KEYWORD: CALIFORNIA
INDUSTRY KEYWORD: COMPUTERS/ELECTRONICS COMED EARNINGS
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