In 1999, the Internet revolution continued to reshape how the world does business. Accordingly, we worked to transform Intel: from being at the center of the PC industry to being at the center of the Internet economy. We developed new strategic business directions that position us to supply key building blocks at many points within the Internet infrastructure, from networks to chips. Even as we were expanding the company's focus, our core microprocessor business provided us with a solid growth rate. We ended the year with record sales of $29.4 billion, an increase of 12%. This was our 13th straight year of revenue growth. Net income was up 21% to $7.3 billion including acquisition-related costs; without acquisition-related costs, it would have been up 29% to $8.1 billion. Our performance was strong around the world, with 57% of our sales coming from outside the U.S. The Asian markets have started to recover, and European sales were solid. As the developing economies expand, we expect even stronger growth worldwide. 1999 was an extraordinarily busy year, with significant output from all of our product groups. To our frustration, our execution was less than perfect, leading to delays in the introduction of several products. Despite these issues, we ended the year with a very strong roster of achievements: We accomplished the largest microprocessor product introduction in our history, with 15 new Pentium® III and Pentium® III Xeon™ processors introduced at once. This was supported by chipsets and motherboards that help computer makers bring systems based on the new chips to market quickly. We ramped our new 0.18-micron manufacturing process faster than any other process in our history. We were able to generate high yields quickly in our factories by following our "copy exactly" strategy: our new 0.18-micron manufacturing fabs are virtual replicas of the development fab where the process was perfected. Our strategy in microprocessors has worked extremely well, allowing us to provide chips for all major computing price/performance points. In 1999, we adjusted our costs and our investment strategy to be consistent with our segmentation plans, and as a result we experienced strong unit shipment growth across microprocessor market segments. We purchased 12 companies for about $6 billion, augmenting our capabilities in a number of key product areas. Companies acquired included Shiva, Softcom, Dialogic, Level One Communications, NetBoost, IPivot and DSP Communications. The Intel Capital program had a boom year, with equity investments in areas of strategic importance to Intel. We ended the year with an investment portfolio valued at about $8 billion. At the end of 1999, we held stakes in more than 350 companies around the world, dedicated to the evolving Internet economy—from physical infrastructure to content. These investments substantially augmented our participation in the online revolution. We produced successful sample versions of the Itanium™ processor, based on the revolutionary new IA-64 architecture designed to meet the needs of powerful Internet servers. We expect this architecture to be as important to the Internet infrastructure in the future as the current Intel architecture has been to PC computing for the last 15 to 20 years. Our goal is to make the IA-64 architecture the main engine of the Internet in the next decade, starting with the Itanium processor, which we expect to be in production in mid-2000. We were pleased to have Intel included in the Dow Jones Industrial Average* in November 1999; this reflects the importance of technology in the overall U.S. economy. We were gratified to be ranked #8 on Fortune magazine's list of most admired companies, and honored to be rated #4 among U.S. companies with the best corporate reputations, according to research by Harris Interactive Incorporated and the Reputation Institute. Just as the PC was the growth engine for computing in the last decade, the Internet will be the growth engine for computing in the next decade. The Internet runs on chips. From the networking silicon that directs electronic signals around the globe, to the high-performance servers that house every Web page and e-mail message, to the microprocessors in the PCs and other devices used to get online, the Internet relies on silicon. This reliance builds directly on our experience and core strengths. Our four key business areas are: In our core business, we focus on delivering quality microprocessors for a wide range of computing needs. Our Pentium III microprocessor is the fastest ramping processor ever, excellent for performance desktop PCs and entry-level servers and workstations. We also supply the Intel® Celeron® processor, enabling entry-level PC buyers to get reliable Intel technology for less than $1,000; a variety of processors customized for mobile computing solutions; and a line of flash memory products for handheld wireless devices. With the boom in networking and communications, we have made it a priority to develop and acquire expanded capabilities in the networking silicon business. We have purchased several companies with strong expertise in this area and have developed the Intel® Internet Exchange™ architecture, a powerful, flexible new platform for silicon-based networking products. We are also expanding our offering of system-level communications products that help build the network infrastructure. Within five years, we expect there to be tens of millions of servers worldwide, most based on Intel architecture. Many servers harness the power of two, four, eight or more Intel processors each, making them a very significant growth opportunity. We have invested about half of our microprocessor R&D budget on initiatives in this area, including the IA-64 architecture and the Pentium III Xeon processor family, specifically designed for mid-range and high-end servers and workstations. Part of our strategy is to make it easier for server makers to design their products around Intel architecture, so we provide chipsets, boards and system-level products that incorporate Intel components for servers at various levels of integration. The e-Business revolution provides a key opportunity to help companies develop and run e-Commerce systems. We do more than $1 billion in business each month over the Internet, and according to the July 1999 issue of PC Computing magazine, we are the world's largest business-to-business e-Commerce site. Through Intel® Online Services, we sell our own technology and products in a service form to other companies that may not have the expertise or resources to handle a booming e-Commerce operation in house. These new strategies leverage our core business and position us well to serve the Internet economy. These strategic areas are described in further detail on the following pages. We look forward to the challenges in this new environment and expect to grow as Internet computing continues to expand.
		* Legal Information © 2000 Intel Corporation Content published April 12, 2000.