Intel First Quarter Revenue $7.1 Billion
Earnings Per Share $0.57 (Adjusted for 2-for-1 Split) Revenue Up 18% and EPS Up 58% from First Quarter 1998
All of the share and per-share amounts in this release have been adjusted to reflect the 2:1 stock distribution that was paid April 11, 1999 to stockholders of record on March 23, 1999.
Q1 earnings announcement call live at www.intc.com at 2:30 p.m. PST. Replay available shortly after conclusion of conference call.
SANTA CLARA, Calif., April 13, 1999 - Intel Corporation announced first quarter revenue of $7.1 billion and earnings of $2.0 billion or $0.57 per share, adjusted for the 2-for-1 stock split paid on April 11, 1999. Early in the second quarter, Intel shipped its 100 millionth microprocessor based on the P6 microarchitecture.
First quarter revenue of $7.1 billion was up 18 percent from first quarter 1998 revenue of $6.0 billion. First quarter revenue was down 7 percent from fourth quarter 1998 revenue of $7.6 billion.
Net income in the first quarter was $2.0 billion, up 57 percent from first quarter 1998 net income of $1.3 billion. Net income in the first quarter was down 3 percent from fourth quarter 1998 net income of $2.1 billion.
First quarter earnings per share of $0.57 increased 58 percent from $0.36 in the first quarter of 1998. Earnings per share in the first quarter declined 3 percent from $0.59 in the fourth quarter of 1998.
All of the share and per-share amounts in this release have been adjusted to reflect the 2-for-1 stock distribution that was paid April 11, 1999 to stockholders of record on March 23, 1999.
"We are pleased with our substantial year over year growth in profitability resulting from our cost control efforts. As we expected, revenue declined from the prior quarter reflecting a seasonally slower selling period," said Dr. Craig R. Barrett, president and chief executive officer. "We are seeing positive results from the launch of new products across all segments, including the introductions of the Pentium® III and Pentium III Xeon™ processors and higher speed Intel® Celeron™ and mobile Pentium II processors."
During the quarter, the company paid its regular quarterly cash dividend of $0.02 per share, post-split. The dividend was paid on March 1, 1999, to stockholders of record on Feb. 7, 1999. Intel has paid a regular quarterly cash dividend for over six years. Also during the quarter, the board of directors approved an increase, from $0.02 per share to $0.03 per share, in the company's first dividend to be paid after the stock split. This dividend is payable on June 1, 1999, to stockholders of record on May 7, 1999.
In the first quarter, the company repurchased a total of 21 million shares of common stock, at a cost of $1.3 billion, under an ongoing program. Since the program began in 1990, the company has repurchased 609.6 million shares at a total cost of $14.9 billion.
During the quarter, Intel and Level One Communications announced a definitive stock-for-stock merger agreement valued at approximately $2.2 billion under which Intel would acquire Level One. The transaction is subject to regulatory review, Level One stockholder approval and other normal closing conditions.
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 reflect the potential impact of any mergers or acquisitions that may be completed after the date of this release.
** The company expects revenue for the second quarter of 1999 to be flat to slightly down from first quarter revenue of $7.1 billion, due to seasonal factors.
** Gross margin percentage in the second quarter of 1999 is expected to be approximately flat with 59 percent in the first quarter. Intel's gross margin expectation for 1999 is 57 percent, plus or minus a few points. In the short term, Intel's gross margin percentage varies primarily with revenue levels and product mix.
** Expenses (R&D plus MG&A) in the second quarter of 1999 are expected to be approximately 6 to 10 percent higher than first quarter expenses of $1.6 billion, due to higher spending associated with merchandising and increased R&D. Expenses are dependent in part on the level of revenue.
** R&D spending is expected to be approximately $3.0 billion for the full year 1999.
** The company expects interest and other income for the second quarter of 1999 to be approximately $300 million, depending on interest rates, cash balances, the company's ability to realize expected gains, and assuming no unanticipated items.
** The tax rate for 1999 is expected to be 33.0 percent. Tax rate guidance for 1999 has been lowered from previous guidance of 33.5 percent.
** Capital spending for 1999 is expected to be approximately $3.0 billion.
** Depreciation and amortization is expected to be approximately $3.3 billion for 1999. Depreciation and amortization for the second quarter of 1999 is expected to be approximately $800 million.
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 factors that could cause actual results to differ materially are the following: business and economic conditions such as the ongoing global financial difficulties, and growth in the computing industry in various geographic regions; changes in customer order patterns, including changes in customer and channel inventory levels and changes due to year 2000 issues; 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 transitions to the Pentium III processor and to the 0.18 micron process technology; excess or shortage of manufacturing capacity; the ability to grow new 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 internal systems or systems of suppliers, infrastructure providers and other 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-K for the year ended Dec. 26, 1998 (Part II, Item 7, Outlook section).
FIRST QUARTER 1999 BUSINESS REVIEW
Intel Architecture Business Group
** Microprocessor unit shipments were down sequentially in the first quarter.
** Motherboard unit shipments were down sequentially in the first quarter.
Computing Enhancement Group
** Chipset unit shipments were down sequentially in the first quarter.
** Embedded processor and microcontroller unit shipments were up sequentially in the first quarter.
** Flash memory unit shipments were up sequentially in the first quarter.
Network Communications Group
** Unit shipments of Fast Ethernet connections and switches were down sequentially in the first quarter.
** Gross margin improved in the first quarter primarily due to the benefits from continuing product cost reduction efforts.
** Expenses during the quarter were down 3 percent from the fourth quarter, consistent with our guidance that spending was expected to be approximately 2 to 4 percent lower than fourth quarter expenses.
** The effective tax rate for the first quarter was 33.0 percent.
FIRST QUARTER 1999 HIGHLIGHTS
Intel Architecture Business Group
** During the quarter, Intel introduced the Pentium III processor at 450 and 500 MHz, optimized for the Internet. The most important advances are the Pentium III processor's Internet Streaming SIMD Extensions - 70 new instructions that enhance the performance of advanced imaging, 3-D, streaming audio, video, and speech recognition applications. The company also announced the Pentium III processor at 550 MHz version with scheduled availability in the second quarter of 1999.
** On March 17, Intel announced its Pentium III Xeon processor family, extending Intel's products further into e-commerce and high-end computing solutions. Intel initially offered a speed of 500 MHz for its Pentium III Xeon family, available in 512 KB, 1 MB, and 2 MB L2 cache versions for two-, four- and eight-way (and higher) servers and workstations. A 550 MHz processor with 512 KB L2 cache for two-way workstations and servers began shipping in early April.
** During the quarter, Intel announced the Intel Celeron processor at 433 MHz, the fastest Intel processor for value desktop PCs. This processor family continues to offer great performance at an exceptional value.
** During the quarter, Intel introduced a family of new processors specifically designed for performance and low-cost mobile PCs. The new mobile Pentium II processors at 333 and 366 MHz are the first Pentium II processors built on a single processor silicon die, providing mobile users with the benefits of higher performance, lower power consumption, and smaller packaging for the thinnest and lightest mobile PCs. The first mobile Intel Celeron processors at 266 and 300 MHz, providing a performance boost for the new burgeoning category of low-cost mobile PCs, were also introduced.
** During the quarter, Intel announced the Profusion chipset for eight-way servers, which extends the standards-based building block approach to high-end servers for complex, business critical and data intensive computing needs. This new chipset is scheduled to be available during the second quarter of 1999, with server systems using the chipset expected to begin shipping in the third quarter.
Computing Enhancement Group
** During the quarter, Intel and Analog Devices, Inc. announced a joint development agreement to design a digital signal processor (DSP) core architecture. The companies will develop a fixed-point, low-power DSP core ideal for processing video, image, voice, and data in emerging embedded communication and computing devices. The joint design group will be formed immediately, with products expected in 2000.
** During the quarter, Intel announced its new Intel Easy BGA flash memory chip scale package (CSP). Intel Easy BGA meets the needs of a diverse market of manufacturers for such applications as embedded CPUs, set top boxes, Point-of-Sale terminals, printers, medical equipment, aircraft applications, Global Positioning Satellites (GPS), wireless LANs, high-speed modems or Network Interface Cards.
** During the quarter, Intel announced new platform solutions featuring the Intel Celeron processors, running at 300 and 366 MHz, for communications, transaction terminal, and industrial computing embedded systems.
Network Communications Group
** During the quarter, Intel completed the merger with Shiva Corporation, effective February 27. This acquisition is aimed at expanding Intel's networking product line with remote access and virtual private networking (VPN) solutions for the small to medium enterprise market segment. Shiva has been renamed Intel Network Systems, Inc.
** During the quarter, Intel announced two new CardBus mobile adapters that combine RealPort Integrated PC Card* functionality with the power of the new Intel 82559 Fast Ethernet controller. The Intel PRO/100 CardBus II and the Intel PRO/100 LAN+Modem56 CardBus II are the latest members of Intel's new family of 10/100 Fast Ethernet adapters and LOM (LAN-on-Motherboard) solutions, designed to boost network performance, increase manageability, and reduce network support costs.
** During the quarter, Intel introduced the Intel InBusiness™ 8-Port 10/100 Switch. For small businesses not already networked, or businesses planning to expand their network, this switch offers a high-speed solution for sharing e-mail, increased Internet access, printers, files, and applications. This product will help small business customers affordably increase network performance and protect their network investments.
Corporate Strategic Investments
** On March 4, Intel Corporation and Level One Communications announced a definitive stock-for-stock merger agreement valued at approximately $2.2 billion under which Intel would acquire Level One. A total of approximately 37.2 million shares of Intel stock would be issued to consummate the tax-free merger (including the presumed conversion of Level One's outstanding convertible subordinated notes). The acquisition is aimed at bringing customers advanced networking capabilities by offering increased bandwidth and functionality through silicon integration.
** Early in the quarter, Samsung Electronics Co. Ltd. and Intel Corporation announced that Intel would invest $100 million in Samsung. The investment in Samsung is part of Intel's strategy to support the development and supply of next generation memory products and to help drive PC industry growth by accelerating the adoption of Direct RDRAM, a high speed memory interface technology.
Manufacturing Review
** During the quarter, Intel began production of its first product manufactured on 0.18 micron process technology. The first product produced on this new process is a mobile version of the Pentium II processor, which is expected to ship in the second quarter. The company plans to manufacture and ship new members of the Pentium III processor family manufactured on 0.18 micron process technology in the second half of 1999.
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 1998 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 personal computer, networking and communications products. Additional information about Intel is available at www.intel.com/pressroom.
* Other brands and names are property of their respective owners.
***ARM and StrongARM are trademarks of Advanced RISC Machines, Ltd.
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INTEL CORPORATION
CONSOLIDATED SUMMARY FINANCIAL STATEMENTS
(In millions, except per share amounts)
INCOME Three Months Ended
March 27, 1999 March 28, 1998
NET REVENUE $ 7,103 $ 6,001
Cost of sales 2,912 2,749
Research and development 663 595
Marketing, general and administrative 891 711
Purchased in-process research and development - 165
Operating costs and expenses 4,466 4,220
OPERATING INCOME 2,637 1,781
Interest and other 347 200
INCOME BEFORE TAXES 2,984 1,981
Income taxes 985 708
NET INCOME $ 1,999 $ 1,273
BASIC EARNINGS PER SHARE $ 0.60 $ .39
DILUTED EARNINGS PER SHARE $ 0.57 $ .36
COMMON SHARES OUTSTANDING 3,324 3,281
COMMON SHARES ASSUMING DILUTION 3,478 3,549
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BALANCE SHEET At Mar. 27, 1999 At Dec. 26,
1998
CURRENT ASSETS
Cash and short-term investments $10,589 $7,626
Accounts receivable 3,319 3,527
Inventories:
Raw materials 232 206
Work in process 797 795
Finished goods 679 581
1,708 1,582
Deferred tax assets and other 833 740
Total current assets 16,449 13,475
Property, plant and equipment, net 11,492 11,609
Long-term investments 3,867 5,365
Other assets 1,285 1,022
TOTAL ASSETS $33,093 $31,471
CURRENT LIABILITIES
Short-term debt $ 182 $ 159
Accounts payable and accrued liabilities 3,921 4,081
Deferred income on shipments to distributors 690 606
Income taxes payable 1,423 958
Total current liabilities 6,216 5,804
LONG-TERM DEBT 699 702
DEFERRED TAX LIABILITIES 1,452 1,387
PUT WARRANTS - 201
STOCKHOLDERS' EQUITY
Common Stock and capital in excess of par value 5,025 4,822
Retained earnings 19,701 18,555
Total stockholders' equity 24,726 23,377
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $33,093 $31,471
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INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
(In millions)
Q1 '99 Q1 '98 Q4 '98
GEOGRAPHIC REVENUES:
Americas 42% 43% 43%
Europe 28% 29% 30%
Asia-Pacific 22% 20% 21%
Japan 8% 8% 6%
SELECTED CASH FLOW INFORMATION:
Depreciation $792 $630 $769
Capital spending $675 ($1,129) ($629)
Stock repurchase program ($1,297) ($1,792) ($1,537)
Proceeds of sales of shares to employees, tax benefit & other $345 $287 $243
Proceeds of Step-Up Warrants $0 $1,620 $0
Dividends paid ($67) ($49) ($67)
Net cash used for acquisition of Chips and Tech. Q1 '98, Digital Q2 and Digital adj. Q4 '98, Shiva Q1 '99) ($132) ($321) $40
SHARE INFORMATION (adjusted for stock splits):
Average common shares outstanding 3,324 3,281 3,325
Dilutive effect of:
Stock options 154 178 153
Step-Up Warrants - 90 -
Common shares assuming dilution 3,478 3,549 3,478
STOCK BUYBACK:
BUYBACK ACTIVITY:
Shares repurchased 21.0 44.2 33.0
Cumulative shares repurchased 609.6 471.1 588.6
PUT WARRANT ACTIVITY:
Put warrant sales - - -
Put warrant expirations (5.0) (19.6) (10.0)
Put warrant exercises - (3.4) -
Put warrants outstanding - 29.6 5.0
BUYBACK SUMMARY:
Shares authorized for buyback 760.0 560.0 760.0
Increase in authorization - 200.0 -
Cumulative shares repurchased (609.6) (471.1) (588.6)
Put warrants outstanding - (29.6) (5.0)
Shares available for buyback 150.4 259.3 166.4
OTHER INFORMATION:
Employees (in thousands) 64.8 65.6 64.5
Days sales outstanding 38 43 39
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INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
(In millions)
Q1 '99 Q1 '98
OPERATING SEGMENT INFORMATION:
Intel Architecture Business Group:
Revenues 5,879 4,931
Operating profit 2,830 1,938
Computing Enhancement Group:
Revenues 1,026 946
Operating profit (loss) 111 (54)
All other:
Revenues 198 124
Operating (loss) (304) (103)
Total:
Revenues 7,103 6,001
Operating profit 2,637 1,781
(1) Under new operating segment disclosure requirements issued by the Financial Accounting Standards Board, Intel has two reportable segments: Intel Architecture Business Group and Computing Enhancement Group.
The Intel Architecture Business Group includes microprocessors, motherboards, and other related board-level products focused on mobile and desktop products, servers and workstations. Board-level products include certain server chipsets and chipsets sold on motherboards.
The Computing Enhancement Group includes chipsets; embedded products, including processors based on the StrongARM® architecture; microcontrollers; flash memory products and graphics chips.
"All other" includes certain corporate-level operating expenses (primarily the amount by which profit-dependent bonus expenses differ from a targeted level recorded by the segments) and reserves for deferred income on shipments to distributors not allocated to operating segments. The "all other" category also includes the operating segments that are not separately reportable: Network Communications Group and New Business Group. |
