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INTC News Intel Fourth-Quarter Revenue $9.7 Billion

SANTA CLARA, Calif.--(BUSINESS WIRE)--Intel Corporation today announced fourth-quarter revenue of $9.7 billion, operating income of $1.5 billion, net income of $1.5 billion and earnings per share (EPS) of 26 cents. Excluding the effects of share-based compensation, the company posted operating income of $1.8 billion, net income of $1.7 billion and EPS of 30 cents.

Fourth-quarter results included a gain from the sale of certain assets of the company’s communications and application processor business to Marvell Technology Group partially offset by impairments, including an impairment for the related decision to place the company’s Fab 23 facility in Colorado Springs, Colo., up for sale. The gain and impairments resulted in a net increase to EPS of approximately 2.5 cents. Fourth-quarter restructuring charges related to the company’s structure and efficiency program were in line with the company’s expectations and decreased EPS by approximately 1.5 cents.

“Intel’s product and technology leadership yielded a strong fourth quarter with higher selling prices and record unit shipments in the fastest growing segments of the market,” said Intel President and CEO Paul Otellini.

For 2006, Intel achieved revenue of $35.4 billion, operating income of $5.7 billion, net income of $5 billion and EPS of 86 cents. Intel paid record cash dividends of $2.3 billion and used $4.6 billion to repurchase 226.6 million shares of common stock.

Financial Review

Fourth-quarter gross margin was 49.6 percent, as compared to 49.1 percent in the third quarter. Gross margin included the positive impact of higher microprocessor units and selling prices that were partially offset by higher factory underutilization charges along with flash memory write-downs and NAND start-up costs. The company used $150 million for share repurchases and announced the approval of a 12.5 percent increase in the quarterly cash dividend to 11.25 cents per share beginning with the dividend expected to be declared in the first quarter of 2007.

Structure and Efficiency Review

In September, the company announced decisions and targets resulting from a structure and efficiency analysis. The company ended 2006 with a workforce of 94,100 people, lower than 102,500 in the second quarter of 2006 and slightly below the target of 95,000 people. The company is on track to generate spending and manufacturing cost savings of approximately $2 billion in 2007 exclusive of restructuring costs.

Key Product Trends (Sequential)

• Total microprocessor units set a record. The ASP was higher, driven primarily by a mix shift to leading-edge processors in all segments along with growth in mobile as a percentage of the PC microprocessor mix.
• Chipset units were flat.
• Motherboard units were lower.
• Flash memory units set a record.

Fourth-Quarter Sales Patterns

Revenue was higher in all regions and greater than the seasonal average in the Asia-Pacific and Americas regions.

Recent Events

• Intel completed the development of its next-generation 45nm process technology which is scheduled for production in the second half of 2007, ramping to three 300mm factories in 2008. Intel also produced samples of Penryn, the company’s first 45nm processor, and booted the Windows Vista(1), Mac OS X(1), Windows XP(1) and Linux operating systems using first silicon.
• In the fourth quarter, new records were set for total microprocessor unit sales as well as server, mobile and flash unit sales. Server and mobile microprocessor revenue also exceeded previous records.
• The company shipped more than 70 million 65nm microprocessors during 2006 and ramped dual-core technology to greater than 50 percent of fourth-quarter shipments.
• Intel launched the industry’s first quad-core microprocessors for volume servers and PCs, further extending the performance records established by the Intel® Core™ microarchitecture. The company is now shipping nine different quad-core processors for servers, workstations and PCs, including a new Intel® Core™2 Quad processor for mainstream PCs.
• Since launch, Intel’s dual- and quad-core processors based on the Intel Core microarchitecture have received more than 50 awards from publications and magazine editors worldwide.
• Apple(1) announced a new Apple TV product that uses a low-power Intel processor and chipset to help stream premium music, TV shows, movies and photos from personal computers to widescreen TVs. DirecTV introduced an HD-DVR player that allows music and pictures stored on Intel® Viiv™ brand PCs to be wirelessly transmitted to TVs.
• Intel demonstrated its first mobile WiMAX silicon which is being designed into solutions that will give future laptops and mobile devices broadband access over both WiFi and WiMAX networks, automatically seeking the best available connections.
• Intel began volume shipments of the industry’s first 65nm NOR flash chips featuring multi-level cell technology that stores two bits of data in each transistor. The new flash chip provides cell phone designers with a gigabit of storage for data such as megapixel-quality photos and MPEG-4 video clips.

Business Outlook and Risk Factors Regarding Forward-Looking Statements

The following expectations do not include the potential impact of any mergers, acquisitions, divestitures or other business combinations that may be completed after Jan. 15.

Q1 2007 Outlook

• Revenue: Expected to be between $8.7 billion and $9.3 billion.
• Gross margin: 49 percent, plus or minus a couple of points.
• Spending (R&D plus MG&A): Between $2.6 billion and $2.7 billion. In addition, the company expects a first-quarter restructuring charge of approximately $50 million.
• Net gains from equity investments and interest and other: Approximately $130 million.
• Tax rate: Approximately 30 percent.
• Depreciation: Between $1.2 billion and $1.3 billion.

2007 Outlook

• Gross margin: 50 percent, plus or minus a few points.
• R&D: Approximately $5.4 billion.
• MG&A: Approximately $5.3 billion.
• Capital spending: $5.5 billion plus or minus $200 million. The forecast includes significantly higher equipment spending for the ramp of Intel’s next-generation 45nm process technology that will be more than offset by savings in a variety of areas.
• Tax rate: Approximately 30 percent.
• Depreciation: $4.8 billion plus or minus $100 million.

The above statements and any others in this document that refer to plans and expectations for the first quarter, the year and the future are forward-looking statements that involve a number of risks and uncertainties. Many factors could affect Intel’s actual results, and variances from Intel’s current expectations regarding such factors could cause actual results to differ materially from those expressed in these forward-looking statements. Intel presently considers the factors set forth below to be the important factors that could cause actual results to differ materially from the Corporation’s published expectations:

• Intel operates in intensely competitive industries that are characterized by a high percentage of costs that are fixed or difficult to reduce in the short term, significant pricing pressures, and product demand that is highly variable and difficult to forecast. Revenue and the gross margin percentage are affected by the timing of new Intel product introductions and the demand for and market acceptance of Intel's products; actions taken by Intel's competitors, including product offerings, marketing programs and pricing pressures and Intel’s response to such actions; Intel’s ability to respond quickly to technological developments and to incorporate new features into its products; and the availability of sufficient components from suppliers to meet demand. Factors that could cause demand to be different from Intel's expectations include customer acceptance of Intel and competitors’ products; changes in customer order patterns, including order cancellations; changes in the level of inventory at customers; and changes in business and economic conditions.
• The gross margin percentage could vary significantly from expectations based on changes in revenue levels; product mix and pricing; capacity utilization; variations in inventory valuation; excess or obsolete inventory; manufacturing yields; changes in unit costs; impairments of long-lived assets, including manufacturing, assembly/test and intangible assets; and the timing and execution of the manufacturing ramp and associated costs, including start-up costs.
• Expenses, particularly certain marketing and compensation expenses, vary depending on the level of demand for Intel's products, the level of revenue and profits and impairments of long-lived assets.
• Intel is in the midst of a structure and efficiency program which is resulting in several actions that could have an impact on expected expense levels and gross margin.
• The tax rate expectation is based on current tax law and current expected income and assumes Intel continues to receive tax benefits for export sales. The tax rate may be affected by the closing of acquisitions or divestitures; the jurisdictions in which profits are determined to be earned and taxed; changes in the estimates of credits, benefits and deductions; the resolution of issues arising from tax audits with various tax authorities; and the ability to realize deferred tax assets.
• Gains or losses from equity securities and interest and other could vary from expectations depending on equity market levels and volatility; gains or losses realized on the sale or exchange of securities; impairment charges related to marketable, non-marketable and other investments; interest rates; cash balances; and changes in fair value of derivative instruments.
• Dividend declarations and the dividend rate are at the discretion of Intel’s board of directors, and plans for future dividends may be revised by the board. Intel’s dividend and stock buyback programs could be affected by changes in its capital spending programs, changes in its cash flows and changes in the tax laws, as well as by the level and timing of acquisition and investment activity.
• Intel’s results could be affected by the amount, type, and valuation of share-based awards granted as well as the amount of awards cancelled due to employee turnover and the timing of award exercises by employees.
• Intel's results could be impacted by unexpected economic, social, political and physical/infrastructure conditions in the countries in which Intel, its customers or its suppliers operate, including military conflict and other security risks, natural disasters, infrastructure disruptions, health concerns and fluctuations in currency exchange rates.
• Intel's results could be affected by adverse effects associated with product defects and errata (deviations from published specifications), and by litigation or regulatory matters involving intellectual property, stockholder, consumer, antitrust and other issues, such as the litigation and regulatory matters described in Intel's SEC reports.

A more detailed discussion of these and other factors that could affect Intel’s results is included in Intel’s SEC filings, including the report on Form 10-Q for the quarter ended Sept. 30.

Status of Business Outlook

During the quarter, Intel’s corporate representatives may reiterate the Business Outlook during private meetings with investors, investment analysts, the media and others. From the close of business on March 2 until publication of the company’s first-quarter 2007 earnings release, Intel will observe a “Quiet Period” during which the Business Outlook disclosed in the company’s press releases and filings with the SEC should be considered to be historical, speaking as of prior to the Quiet Period only and not subject to update by the company.

Earnings Webcast

Intel will hold a public webcast at 2:30 p.m. PST today on its Investor Relations Web site at www.intc.com, with a replay available until Jan. 30.

Intel, the world leader in silicon innovation, develops technologies, products and initiatives to continually advance how people work and live. Additional information about Intel is available at www.intel.com/pressroom.

Intel, the Intel logo, Intel Core and Intel Viiv are trademarks or registered trademarks of Intel Corporation or its subsidiaries in the United States and other countries.

(1) Other names and brands may be claimed as the property of others.