INTEL Reports First Quarter Revenue of $6.7 Billion
Business Editors/High-Tech Writers
SANTA CLARA, Calif.--(BUSINESS WIRE)--April 17, 2001--
First Quarter Earnings Excluding Acquisition-Related Costs(1)
$0.16 Per Share; First Quarter Earnings Per Share $0.07
-- Intel Investor Relations Web site: www.intc.com
-- Q1 earnings announcement call live on Web site at 2:30 p.m.
PDT
-- Conference call replay number 719/457-0820; access No. 601126
-- Replay available shortly after end of conference call through
April 24
Intel Corporation today announced first quarter revenue of $6.7
billion, down 16 percent from the first quarter of 2000 and down 23
percent sequentially.
For the first quarter, net income, excluding acquisition-related
costs, was $1.1 billion, down 64 percent from the first quarter of
2000 and down 58 percent sequentially. First quarter earnings,
excluding acquisition-related costs, were $0.16 per share, a decrease
of 63 percent from $0.43 in the first quarter of 2000 and down 58
percent sequentially. Last year's first quarter earnings per share
includes a reversal of previously accrued taxes that reduced that
quarter's tax provision by $600 million, and improved first quarter
2000 results by $0.09 per share. The reversal was related to the
company's previous announcement that the Internal Revenue Service had
closed its examination of the its tax returns up to and including
1998.
Including acquisition-related costs, in accordance with generally
accepted accounting principles, first quarter net income was $485
million, down 82 percent from first quarter of 2000 and down 78
percent sequentially. Earnings per share were $0.07, down 82 percent
from $0.39 in the first quarter of 2000 and down 78 percent
sequentially.
Acquisition-related costs in the first quarter consisted of $75
million in one-time charges for purchased in-process research and
development and $585 million of amortization and write-offs of
goodwill and other acquisition-related intangibles and costs.
"Our microprocessor business appears to have stabilized and we
expect to see normal seasonal patterns going forward from our current
business level," said Craig R. Barrett, president and chief executive
officer. "In our communications businesses, we are experiencing
continued softness. Looking beyond the current environment, we believe
our aggressive investment in new manufacturing technologies and the
development of cost-competitive, leading-edge products is the winning
strategy."
During the quarter, the company announced and completed the
acquisitions of Xircom Inc. and ICP Vortex Computersysteme GmbH, and
announced the acquisition of VxTel Inc. Background on acquisitions can
be found in the first quarter highlights section of this release.
During the quarter, the company paid its quarterly cash dividend
of $0.02 per share. The dividend was paid on March 1, 2001, to
stockholders of record on Feb. 7, 2001. Intel has paid a regular
quarterly cash dividend for more than eight years.
During the quarter, the company repurchased a total of 29.4
million shares of common stock, at a cost of $1.0 billion, under an
ongoing program. Since the program began in 1990, the company has
repurchased 1.4 billion shares at a total cost of $23.2 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, acquisitions or other business combinations that may be
completed after March 31, 2001.
Beginning this quarter, Intel will have a mid-quarter Business
Update to the Outlook provided below. This quarter's Business Update
is scheduled for June 7.
Continuing uncertainty in global economic conditions make it
particularly difficult to predict product demand and other related
matters.
-- Revenue in the second quarter of 2001 is expected to be
between $6.2 billion and $6.8 billion.
-- Gross margin percentage in the second quarter of 2001 is
expected to be 49 percent, plus or minus a couple of points,
down from 51.7 percent in the first quarter. Intel's gross
margin expectation for the full-year 2001 is 50 percent, plus
or minus a few points. Gross margin percentage varies
primarily with revenue levels, product mix, product pricing,
changes in unit costs and timing of factory ramps and
associated costs.
-- Expenses (R&D, excluding in-process R&D, plus MG&A) in the
second quarter of 2001 are expected to be between $2.2 billion
and $2.3 billion. Expenses may vary from this expectation
depending, in part, on revenue and profits.
-- R&D spending, excluding in-process R&D, is expected to be
approximately $4.2 billion in 2001.
-- Capital spending for 2001 is expected to be approximately $7.5
billion. The company will use its financial strength to invest
in key areas such as 0.13-micron process technology, which
will enable the company to cost-effectively produce
leading-edge microprocessors beginning later this year, and
300 mm process technology, which is expected to lead to
approximately 30 percent microprocessor die cost-per-unit
reductions in 2002 and beyond.
-- Gains from equity investments and interest and other for the
second quarter of 2001 are expected to be approximately $115
million. This expectation assumes no net gains from the sale
of equity investments and will vary depending on equity market
levels and volatility, the realization of expected gains on
investments, including gains on investments acquired by third
parties, determination of impairment reserves, interest rates,
cash balances, mark-to-market of derivative instruments, and
assuming no unanticipated items.
-- The tax rate for 2001 is expected to be approximately 29.8
percent, excluding the impact of acquisition-related costs,
lower than the previous expectation of 30.3 percent.
-- Depreciation is expected to be approximately $1.0 billion in
the second quarter and $4.1 billion for the full year 2001.
-- Amortization of goodwill and other acquisition-related
intangibles and costs is expected to be approximately $520
million in the second quarter and $2.1 billion for the full
year 2001.
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, other factors that could cause actual results to differ
materially include the following: business and economic conditions and
growth in the computing and communications industries 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; 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; excess manufacturing capacity; the ability to grow
new networking, communications, wireless and other Internet-related
businesses and successfully integrate and operate any acquired
businesses; impact of events outside the United States such as the
business impact of fluctuating currency rates or unrest or political
instability in a locale, such as unrest in Israel; unanticipated costs
or other adverse effects associated with processors and other products
containing errata (deviations from published specifications);
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. 30, 2000 (Part I, Item 2, Outlook
section).
Status of Business Outlook and scheduled Business Update:
Intel expects that its corporate representatives will meet
privately during the quarter with investors, the media, investment
analysts and others. At these meetings, Intel may reiterate the
Outlook published in this press release. At the same time, Intel will
keep this press release and Outlook publicly available on its Web site
(www.intc.com). Prior to the Business Update and related Quiet Periods
(described below), the public can continue to rely on the Outlook on
the Web site as being Intel's current expectations on matters covered,
unless Intel publishes a notice stating otherwise.
Intel intends to publish a Business Update press release on June
7, 2001, and hold a related analysts' conference call (available for
listening by webcast). From June 2, 2001, until publication of the
Business Update, Intel will observe a "Quiet Period." During the Quiet
Period, the Outlook, as provided in this press release and the
company's 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. During the Quiet
Period, Intel representatives will not comment concerning the Outlook
or Intel's financial results or expectations.
A Quiet Period, operating in similar fashion with regard to the
Business Update and the company's SEC filings, will begin June 16,
2001, and will extend until the day when Intel's next quarterly
Earnings Release is published, presently scheduled for July 17, 2001.
FIRST QUARTER 2001 BUSINESS REVIEW
Intel Architecture Group
-- Microprocessor unit shipments were lower than the fourth
quarter.
-- Chipset unit shipments were lower than the fourth quarter.
-- Motherboard unit shipments were lower than the fourth quarter.
Wireless Communications and Computing Group
-- Flash memory unit shipments were lower than the fourth
quarter.
Intel Communications Group (formerly the Network Communications
and Communications Products Groups)
-- Unit shipments of Fast Ethernet and Gigabit Ethernet
connections were lower than the fourth quarter.
-- Unit shipments of network processing components, which include
embedded Pentium(R) III processors, network processors and I/O
processors, were lower than the fourth quarter.
-- Unit shipments of microcontrollers were lower than the fourth
quarter.
Financial Review
-- Average selling prices of microprocessors in the first quarter
were lower than the fourth quarter.
-- Gross margin percentage in the first quarter was 51.7 percent,
meeting revised expectations and down from fourth quarter
gross margin percentage of 63 percent, primarily due to the
significant sequential drop in first quarter revenue.
-- Expenses (R&D, excluding in-process R&D, plus MG&A) in the
first quarter were $2.2 billion, down 11 percent from fourth
quarter expenses. First quarter expenses were higher than
revised expectations that they would be down approximately 15
percent sequentially, primarily due to lower than expected
spending reductions because of prior commitments in hiring and
discretionary spending.
-- Gains on equity investments and interest and other were $264
million in the first quarter, higher than previous
expectations of $180 million. Interest and other includes a
$45 million pre-tax gain from adopting the Statement of
Financial Accounting Standards No. 133 on accounting for
derivatives and hedging. This gain is primarily due to the
mark-to-market of Intel Capital equity derivatives. With the
adoption, approximately $1.4 billion of investments were
reclassified to trading assets, primarily from short-term
investments.
Intel Capital had no net gains on equity investments, after
recognizing gains of $428 million, which were fully offset by
impairment reserves.
-- The effective tax rate was approximately 29.8 percent in the
first quarter, excluding the impact of acquisition-related
costs.
-- Amortization of goodwill and other acquisition-related
intangibles and costs was $585 million, higher than previous
expectations of $465 million, primarily due to a write-off of
goodwill related to certain acquisitions and the impact of
acquisitions completed after the March 8 release.
FIRST QUARTER AND RECENT HIGHLIGHTS
Intel Architecture Group
-- In January, the company introduced two new ultra-low-power
mobile PC microprocessors, including the industry's first
mobile processor to operate under 1 volt while consuming less
than half a watt of power. Enabled by Intel's advanced
processor design and power-reduction technologies, the
Intel(R) Ultra Low Voltage mobile Pentium(R) III processor 500
MHz featuring Intel(R) SpeedStep(TM) technology and the
Intel(R) Ultra Low Voltage mobile Celeron(TM) processor 500
MHz are designed to deliver high performance, minimal power
consumption and extended battery life for the smallest mobile
PCs.
-- In February, the company announced the Intel(R) Low Voltage
mobile Pentium(R) III processor 700 MHz featuring Intel(R)
SpeedStep(TM) technology. The processor delivers outstanding
performance, low power consumption and extended battery life
to new categories of mini-notebooks weighing less than 3
pounds.
-- In March, the company announced it has begun shipments of its
900 MHz large cache Intel(R) Pentium(R) III Xeon(TM)
processors. Featuring 2 MB of "on-die" level-two (L2) cache,
the processors deliver new levels of performance for high-end,
Intel-based server platforms based on 4-way and 8-way
multiprocessing systems.
-- Also in March, the company introduced the mobile Intel(R)
Pentium(R) III processor at 1 Gigahertz (GHz) featuring Intel
SpeedStep(TM) technology. The new processor is the world's
fastest mobile PC processor and is designed for full-size and
thin-and-light notebooks, the most popular categories of
mobile PCs.
-- In April, the company released the Intel(R) Celeron(TM)
processor at 850 MHz, the company's fastest offering for
desktop value PCs.
Wireless Communications and Computing Group
-- In February, the company announced that Sonera, a leading
European mobile communications and services provider, endorsed
the Intel(R) Personal Internet Client Architecture (Intel PCA)
in an effort to accelerate the development of applications for
next-generation, Internet-ready wireless devices.
Additionally, Sonera Venture Capital and the Intel
Communications Fund announced they would cooperate in
identifying investment opportunities in companies with
technologies that help shape and grow next-generation Internet
applications for wireless devices.
-- Also in February, Intel introduced a new addition to the
company's flash memory family, the Intel Persistent Storage
Manager (PSM), version 3.0 software. Coupled with Intel(R)
StrataFlash(TM) memory, PSM serves as a flash file and media
manager that enables code execution, file storage and registry
back-up. The software is specifically aimed at handheld
devices using Microsoft's Windows(2) CE operating system.
-- In February, the company announced it would provide
high-performance flash memory to Cisco Systems for a variety
of communications technologies and Siemens AG for
next-generation, Internet-ready cell phones and wireless
devices.
-- In March, the company announced IBM would provide software
designed to work with the Intel Personal Internet Client
Architecture (Intel PCA) for wireless devices and other
Internet appliances. The two companies will work together to
deliver standards-based hardware and software solutions for
next-generation, Internet-ready household devices.
Intel Communications Group
-- In January, Intel announced it had entered into a definitive
agreement under which Intel, through a wholly-owned
subsidiary, would acquire Xircom Inc., for $25 per share in an
all-cash tender offer valued at approximately $748 million.
The acquisition, which was completed in March, complements
Intel's existing desktop PC and server-based network access
businesses by enabling Intel to provide new products for
notebook and mobile computing uses.
-- In February, the company introduced seven optical networking
semiconductor products that enable telecommunications
equipment manufacturers to create new systems that extend the
reach of optical networks, add intelligence to those networks
and deliver new services.
-- In February, Intel began sampling the world's first
single-chip Gigabit Ethernet controller, an advanced
semiconductor device used to help direct the flow of data
across networks. The new single-chip controller will help
accelerate the deployment of Gigabit Ethernet networks by
greatly simplifying the design process for systems designers.
-- In February, the company announced it had entered into a
definitive agreement to acquire privately held VxTel Inc. in a
cash transaction worth approximately $550 million. VxTel is a
semiconductor company that has developed unique Voice over
Packet (VoP) products that help deliver high-quality voice and
data communications over next-generation optical networks. The
transaction was completed in April.
New Business Group
-- In March, the company confirmed that it would supply 250,000
Intel Dot.Station(TM) Web appliances to AOL Avant as part of
its Internet bundle for consumers in Spain.
-- Also in March, Intel(R) Online Services, Inc. announced a new
marketing program for application service providers (ASPs).
The Intel Online Services ASP Accelerator Program provides
comprehensive marketing programs and a service foundation that
allows ASPs to differentiate their businesses.
Technology and Manufacturing Review
-- In March, the company announced that its researchers have
developed and delivered the first industry-standard format
photomasks (also called "masks") for Extreme Ultra Violet
(EUV) lithography. This marks a significant milestone in the
demonstration of EUV as the next-generation lithography
standard for the semiconductor industry.
-- Also in March, Intel announced that it had manufactured its
first silicon chips using its 0.13-micron process technology
and 300 mm wafer development in fab D1C. This fab, which is
located in Hillsboro, Ore., is the first in the industry to
produce fully-functional computer chips built using advanced
0.13-micron process technology on the new, larger 300 mm
wafers. Intel remains on track to bring chips built on these
advanced technologies into the marketplace at the beginning of
next year. The company expects microprocessor die costs per
unit to be 30 percent less on 300m wafers than today's 200 mm
wafers.
Intel Capital
Intel Capital, Intel's strategic investment program, makes equity
investments to grow the Internet economy on a worldwide basis, in
support of Intel's strategic interests. Intel Capital invests in
companies to establish innovative technologies, develop industry
standard solutions, drive Internet growth and advance the computing
platform. Intel Capital also manages acquisitions.
Two specific areas of focus for Intel Capital are the Intel
Communications Fund and the Intel 64 Fund. The Intel Communications
Fund is a $500 million fund focused on supporting the Intel(R)
Internet Exchange(TM) Architecture, CT Media(TM) and the company's
wireless communications efforts. The Intel 64 Fund is a $253 million
equity fund created by Intel and other corporate investors to
accelerate the development of solutions for Intel's 64-bit
architecture. The funds continue to achieve their goals. As of the end
of the quarter, Intel Capital's strategic equity portfolio included
more than 575 companies worldwide. The portfolio includes securities
of both publicly-traded and private companies as follows:
-0-
*T
March 31, 2001 (in millions) Carrying Value
---------------------------- --------------
Marketable equity securities $1,266
Other equity investments $2,032
------
Total portfolio $3,298
======
*T
As of March 31, 2001, the total carrying value of the portfolio
included approximately $48 million of net unrealized appreciation on
the marketable equity securities. Marketable equity securities include
the Intel Capital portfolio holdings classified as trading assets or
as marketable strategic equity securities and they are carried at
current market value in the balance sheet. Other equity investments
are classified as other assets in the balance sheet. They include
non-marketable securities carried at the lower of cost or
Apr-17-2001 20:16 GMT
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