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To: Jim McMannis who wrote (25889)	4/14/1998 4:24:00 PM
From: FJB	Read Replies (1) \| Respond to of 33344

The company expects revenue for the second quarter of 1998 to be flat to slightly down with first quarter revenue of $6.0 billion. The company expects sequential revenue growth to resume in the second half of 1998. Gross margin percentage in the second quarter of 1998 is expected to be down a few points from 54 percent in the first quarter, primarily the result of purchased components used on the SEC cartridge for the Pentium II processor. The company expects the quarterly gross margin percentage to reach its lowest level for the year in the second quarter. Intel's gross margin expectation for 1998 is 52 percent, plus or minus a few points. 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 second quarter of 1998 are expected to be approximately 3 to 5 percent higher than first quarter expenses of $1.3 billion. The $1.3 billion represents first quarter expenses excluding $165 million for in process R&D associated with the acquisition of Chips and Technologies, Inc. Expenses are dependent in part on the level of revenue. Additionally, the company expects to reduce headcount by approximately 3,000 people over the next 6 months predominantly through attrition, augmented by localized reductions in workforce. Where such reductions occur, every attempt will be made to place affected employees in other parts of the company. R & D spending is expected to be approximately $2.8 billion for 1998, up from $2.3 billion in 1997 and down from previous guidance of $3.0 billion. This estimate includes approximately $165 million for in process R&D associated with the acquisition of Chips and Technologies, Inc. The company expects interest and other income for the second quarter of 1998 to be approximately $160 million assuming no significant changes in interest rates or expected cash balances, and no unanticipated items. The tax rate for the remaining quarters of 1998 is expected to be 33.0 percent. Tax rate guidance for 1998 has been lowered from previous guidance of 34.0 percent. Capital spending for 1998 is expected to be approximately $5.0 billion, up from $4.5 billion in 1997, but down from previous guidance for the year of $5.3 billion. Depreciation is expected to be approximately $2.9 billion for 1998, up from $2.2 billion in 1997 and higher than previous guidance for 1998 of $2.7 billion. Depreciation in the second quarter of 1998 is expected to be approximately $690 million. intel.com