Intel Press Release

Intel Fourth–Quarter Revenue $10.2 Billion; EPS 40 Cents

  • Record quarterly and annual revenue and operating income
  • Record quarterly unit shipments of mobile, desktop and server microprocessors

SANTA CLARA, Calif., Jan. 17, 2006 - Intel Corporation today announced fourth–quarter revenue of $10.2 billion, operating income of $3.3 billion, net income of $2.5 billion and earnings per share (EPS) of 40 cents. Revenue was below the company’s updated expectation of $10.4 billion to $10.6 billion primarily due to lower than expected desktop processor unit shipments and prices.

“2005 was our third consecutive year of double–digit revenue and earnings growth, leading to the best operating results in the company’s history,” said Intel President and CEO Paul Otellini. “Although we fell below our expectations for the fourth quarter, we enter 2006 with exciting new products like the Intel® Core™ Duo and Viiv™. Our industry–leading 65nm process technology is ramping dual–core processors into high volume with an expected crossover in performance segments by mid–year. We expect 2006 will be another year of growth for Intel as we ramp platforms for notebooks, the digital home, the digital office and emerging markets.”

  Q4 2005 vs. Q3 2005 vs. Q4 2004
Revenue $10.2 billion +2% +6%
Operating Income $3.3 billion +7% +14%
Net Income $2.5 billion +23% +16%
EPS 40 cents +25% +21%
Note: Results for the third quarter of 2005 included a tax item and legal settlement that together lowered EPS by 6 cents.

For 2005, Intel achieved record revenue of $38.8 billion, record operating income of $12.1 billion, net income of $8.7 billion and EPS of $1.40. Intel paid record cash dividends of nearly $2 billion and used a record $10.6 billion to repurchase 418.4 million shares of common stock.

  2005 2004 Change
Revenue $38.8 billion $34.2 billion + 13.5%
Operating Income $12.1 billion $10.1 billion + 19%
Net Income $8.7 billion $7.5 billion + 15%
EPS $1.40 $1.16 + 21%

Financial Review
Fourth–quarter gross margin was 61.8 percent, slightly below the company’s updated expectation of 63 percent, plus or minus a point, primarily due to lower than expected revenue, a slight shift in the overall product mix to non–microprocessor products, and some inventory valuation adjustments to reflect lower unit costs. The effective tax rate of 29.1 percent was below the expected rate of 31 percent primarily due to tax benefits for export sales and estimated R&D tax credits.

Sales Patterns
Revenue in the company’s Asia Pacific region was essentially flat sequentially while revenue in the Americas region was sequentially lower. These results primarily reflect lower than expected demand for our desktop products among certain OEM customers.

  Q4 2005 vs. Q3 2005 vs. Q4 2004
Asia–Pacific $5.1 billion Flat +16%
Americas $1.8 billion –3.5% –10%
Europe $2.3 billion +14% Flat
Japan $945 million +2% +11%

Key Product Trends (Sequential)

  • Total microprocessor units were higher, setting a new record. The average selling price (ASP) was slightly lower.
  • Chipset units set a record.
  • Motherboard units were higher.
  • Flash units set a record. The ASP was higher.
  • Application processor units for products such as cellular phones and PDAs were lower.

Recent Highlights

  • Intel’s board of directors approved a 25 percent increase in the quarterly cash dividend to 10 cents per share beginning with a dividend expected to be declared in the first quarter of 2006 and authorized the repurchase of up to $25 billion in shares of common stock under the company’s ongoing stock repurchase program.
  • Intel launched a new generation of consumer PC platforms under the Intel® Viiv™ name that will help make it easier to download, manage and view digital entertainment and information on PCs, TVs and handheld devices. Plans to bring premium digital media to Intel Viiv technology–based PCs and devices were announced by companies including AOL, ClickStar, DirecTV, ESPN, Google, MTV, NBC and Turner Broadcasting.
  • Intel launched its next–generation Intel® Centrino® Duo mobile technology platform that includes a power–efficient dual–core processor called the Intel Core Duo processor that is also being used by Apple Computer in its first Intel–based desktop and notebook systems.
  • Intel and Micron Technology formed IM Flash Technologies, a company that will produce NAND flash memory for storing digital data in devices such as iPod* music players.
  • The company announced plans for Fab 28 in Israel, a 45nm, 300mm wafer factory scheduled for operations in 2008.

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. 16. Intel is adding additional items to its full–year Business Outlook and is discontinuing the practice of making scheduled mid–quarter Business Updates.

2006 Outlook

  • Revenue: Expected to be 6 percent to 9 percent higher than $38.8 billion in 2005.
  • Gross margin: 57 percent, plus or minus a few points (58 percent, plus or minus a few points, excluding share–based compensation effects of approximately 1 percent).
  • R&D: Approximately $6.5 billion (approximately $6 billion excluding share–based compensation effects of approximately $500 million).
  • MG&A: Approximately $6.6 billion (approximately $6 billion excluding share–based compensation effects of approximately $600 million).
  • Capital spending: $6.9 billion, plus or minus $200 million.
  • Tax rate: Approximately 32 percent.
  • Depreciation: $4.7 billion, plus or minus $100 million.
  • Amortization of acquisition–related intangibles and costs: Approximately $40 million.

Q1 2006 Outlook

  • Revenue: Expected to be between $9.1 billion and $9.7 billion.
  • Gross margin: 59 percent, plus or minus a couple of points (60 percent, plus or minus a couple of points, excluding share–based compensation effects of approximately 1 percent).
  • Expenses (R&D plus MG&A): Approximately $3.3 billion (approximately $3 billion excluding share–based compensation effects of approximately $300 million).
  • Gains from equity investments and interest and other: Approximately $140 million.
  • Tax rate: Approximately 32 percent.
  • Depreciation: $1.1 billion, plus or minus $100 million.
  • Amortization of acquisition–related intangibles and costs: Approximately $20 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 involve a number of risks and uncertainties. Many factors could cause Intel’s actual results to differ materially from current expectations, including the following:

  • 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, and by product demand that is highly variable. Revenue and the gross margin percentage are affected by the demand for and market acceptance of Intel’s products; the availability of sufficient inventory of Intel products and related components from other suppliers to meet demand; pricing pressures; actions taken by Intel’s competitors; and Intel’s ability to respond quickly to technological developments and to incorporate new features into its products. Factors that could cause demand to be different from Intel’s expectations include 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 from expectations based on changes in revenue levels; product mix and pricing; variations in inventory valuation, including variations related to the timing of qualifying products for sale; excess or obsolete inventory; manufacturing yields; changes in unit costs; capacity utilization; 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.
  • 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 tax laws, as well as by the level and timing of acquisition and investment activity.
  • Expenses, particularly certain marketing and compensation expenses, vary depending on the level of demand for Intel’s products and the level of revenue and profits.
  • 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.
  • Intel’s results could be impacted by unexpected economic, social and political conditions in the countries in which Intel, its customers or its suppliers operate, including security risks, possible infrastructure disruptions and fluctuations in foreign 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.
  • 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.

A more detailed discussion of these and other factors that could affect results is contained in Intel’s SEC filings, including the report on Form 10–Q for the quarter ended Oct. 1, 2005.

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 3 until publication of the company’s first–quarter 2006 earnings release on April 19, Intel will observe a “Quiet Period” during which the Business Outlook disclosed in the company’s press releases and 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.

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 April 19.

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

* Other names and brands may be claimed as the property of others.


 

INTEL CORPORATION
CONSOLIDATED SUMMARY INCOME STATEMENT DATA
(In millions, except per share amounts)

                 

Three Months Ended

Twelve Months Ended

Dec. 31,

Dec. 25,

Dec. 31,

Dec. 25,

2005

 

2004

 

2005

 

2004

NET REVENUE

$ 10,201 

$ 9,598 

$ 38,826 

$ 34,209 

Cost of sales

3,901 

4,221 

15,777 

14,463 

GROSS MARGIN

6,300 

5,377 

23,049 

19,746 

Research and

development

1,362 

1,214 

5,145 

4,778 

Marketing, general

and administrative

1,606 

1,225 

5,688 

4,659 

Amortization of

acquisition-related

intangibles and costs

23 

38 

126 

179 

OPERATING

EXPENSES

2,991 

2,477 

10,959 

9,616 

OPERATING

INCOME

3,309 

2,900 

12,090 

10,130 

Losses on equity

securities, net

(25)

(3)

(45)

(2) 

Interest and other, net

178 

130 

565 

289 

INCOME BEFORE

TAXES

3,462 

3,027 

12,610 

10,417 

Income taxes

1,009 

904 

3,946 

2,901 

NET INCOME

$ 2,453 

$ 2,123 

$ 8,664 

$ 7,516 

BASIC EARNINGS

PER SHARE

$   0.41 

$   0.34 

$   1.42 

$   1.17 

DILUTED EARNINGS

PER SHARE

$   0.40 

$   0.33 

$   1.40 

$   1.16 

COMMON SHARES

OUTSTANDING

6,008 

6,294 

6,106 

6,400 

COMMON SHARES

ASSUMING

DILUTION

6,081 

6,352 

6,178 

6,494 

 

INTEL CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEET DATA
(In millions)

 

 

 

 

 

 

 

 

Dec. 31,
2005

Oct. 1,
2005

Dec. 25,
2004

CURRENT ASSETS

Cash and short-term

 

investments

$ 11,314 

 

$ 11,951 

 

$ 14,061 

Trading assets

1,458 

 

1,982 

 

3,111 

Accounts receivable

3,914 

 

3,748 

 

2,999 

Inventories:

 

 

Raw materials

409 

 

381 

 

388 

 

 

Work in process

1,662 

 

1,434 

 

1,418 

 

 

Finished goods

1,055 

 

1,000 

 

815 

 

 

 

3,126 

 

2,815 

 

2,621 

Deferred tax assets

 

and other

1,382 

 

1,228 

 

1,266 

 

Total current assets

21,194 

 

21,724 

 

24,058 

 

Property, plant and

 

equipment, net

17,111 

 

16,825 

 

15,768 

Marketable strategic

 

equity securities

537 

 

520 

 

656 

Other long-term

 

investments

4,135 

 

3,047 

 

2,563 

Goodwill

3,873 

 

3,814 

 

3,719 

Other assets

1,464 

 

1,430 

 

1,379 

 

TOTAL ASSETS

$ 48,314 

 

$ 47,360 

 

$ 48,143 

 

CURRENT

 

LIABILITIES

Short-term debt

$      313 

 

$      252 

 

$      201 

Accounts payable and

 

accrued liabilities

6,453 

 

6,654 

 

6,050 

Deferred income

 

on shipments to

 

distributors

632 

 

692 

 

592 

Income taxes payable

2,008 

 

1,901 

 

1,163 

 

Total current liabilities

9,406 

 

9,499 

 

8,006 

 

LONG-TERM DEBT

2,106 

 

432 

 

703 

DEFERRED TAX

 

LIABILITIES

620 

 

753 

 

855 

 

STOCKHOLDERS'

 

EQUITY

36,182 

 

36,676 

 

38,579 

 

TOTAL LIABILITIES

 

 

AND

 

 

STOCKHOLDERS'

 

 

EQUITY

$ 48,314 

 

$ 47,360 

 

$ 48,143 

 

INTEL CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
(In millions)

 

 

 

 

 

 

 

 

 

Q4 2005

Q3 2005

Q4 2004

GEOGRAPHIC

 

 

 

 

REVENUE:

 

 

 

 

Asia-Pacific

$5,132 

$5,124 

$4,421 

 

 

 

50%

52%

46%

 

Americas

$1,836 

$1,903 

$2,047 

 

 

 

18%

19%

21%

 

Europe

$2,288 

$2,007 

$2,277 

 

 

 

23%

20%

24%

 

Japan

$945 

$926 

$853 

 

 

 

9%

9%

9%

 

 

 

 

 

 

CASH INVESTMENTS:

 

 

 

Cash and short-

 

 

 

 

term investments

$11,314 

$11,951 

$14,061 

Trading assets -

 

 

 

 

 fixed income (1)

          1,095 

          1,632 

          2,772 

Total cash investments

$12,409 

$13,583 

$16,833 

 

 

 

 

 

 

INTEL CAPITAL

 

 

 

 

PORTFOLIO:

 

 

 

Marketable strategic

 

 

 

 

equity securities

$537 

$520 

$656 

Other strategic investments

             595 

             553 

             513 

Total Intel Capital portfolio

$1,132 

$1,073 

$1,169 

 

 

 

 

 

 

TRADING ASSETS:

 

 

 

Trading assets -

 

 

 

 

equity securities

 

 

 

 

offsetting deferred

 

 

 

 

compensation (2)

$363 

$350 

$339 

Total trading assets -

 

 

 

 

sum of 1+2

$1,458 

$1,982 

$3,111 

 

 

 

 

 

 

SELECTED CASH

 

 

 

 

FLOW

 

 

 

 

INFORMATION:

 

 

 

Depreciation

$1,050 

$1,055 

$1,144 

Amortization of acquisition-

 

 

 

 

related intangibles

 

 

 

 

& costs

$23 

$29 

$38 

Capital spending

($1,359)

($1,282)

($1,031)

Stock repurchase

 

 

 

 

program

($3,137)

($2,500)

($2,000)

Proceeds from sales

 

 

 

 

of shares to

 

 

 

 

employees, tax

 

 

 

 

benefit & other

$211 

$444 

$168 

Dividends paid

($482)

($486)

($252)

Net cash used

 

 

 

 

for acquisitions

($88)

($22)

$0 

 

 

 

 

 

 

EARNINGS PER SHARE

 

 

 

 

INFORMATION:

 

 

 

Average common shares

 

 

 

 

outstanding

          6,008 

          6,062 

          6,294 

Dilutive effect of

 

 

 

 

stock options

               64  

               82 

               58  

Dilutive effect of

 

 

 

 

convertible debt

               9  

               N/A 

               N/A  

Common shares

 

 

 

 

assuming dilution

          6,081 

          6,144 

          6,352 

 

 

 

 

 

 

STOCK BUYBACK:

 

 

 

 

Shares repurchased

            118.0 

            93.6 

          89.0 

 

Cumulative shares

 

 

 

 

 

repurchased

       2,604.9 

       2,486.9 

       2,186.5 

 

Dollars authorized

 

 

 

 

 

for buyback (in billions)

      $25.0 

N/A 

N/A 

 

Remaining dollars

 

 

 

 

 

authorized for buyback

 

 

 

 

 

(in billions)

          $21.9 

N/A 

N/A 

 

 

 

 

 

 

OTHER INFORMATION:

 

 

 

Employees (in thousands)

            99.9 

            96.0 

            85.0 

 

INTEL CORPORATION
SUPPLEMENTAL OPERATING RESULTS AND OTHER INFORMATION
($ in millions)

 

 

 

 

 

 

 

 

OPERATING SEGMENT

 

 

 

 

 

INFORMATION:

Q4 2005

Q3 2005

Q2 2005

Q1 2005

Q4 2004

 

 

 

 

 

 

 

 

Digital Enterprise Group

 

 

 

 

 

 

Microprocessor revenue

      4,929

      4,936

      4,603

4,944 

5,256 

 

Chipset, motherboard

 

 

 

 

 

 

 

and other revenue

1,476

1,434

     1,398

1,417 

1,517 

 

Net revenue

 6,405

 6,370

6,001

6,361 

6,773 

 

Operating income

     2,449

     2,162

     2,012

2,383 

2,450 

 

Mobility Group

 

 

 

 

 

 

Microprocessor

         

 

 

revenue

     2,400

     2,331

     2,056

1,917 

1,710 

 

Chipset and other

 

 

 

 

 

 

 

revenue

         705

639 

         566

517 

425 

 

Net revenue

      3,105

2,970 

2,622 

2,434 

2,135 

 

Operating income

      1,547

1,431 

1,221 

1,131 

951 

 

Flash Memory Group

 

 

 

 

 

 

Net revenue

600 

572 

528 

578 

643 

 

Operating loss

       (12)

       (30)

       (80)

    (32)

       (57)

 

All Other

 

 

 

 

 

 

Net revenue

           91

           48

           80

         61

         47

 

Operating loss

       (675)

       (463)

       (504)

    (450)

       (444)

 

Total

 

 

 

 

 

 

Net revenue

10,201 

     9,960

     9,231

9,434 

9,598 

 

Operating income

3,309 

     3,100

     2,649

3,032 

2,900 

 

 

INTEL CORPORATION
SUPPLEMENTAL OPERATING RESULTS AND OTHER INFORMATION (CONTINUED)
($ in millions)

 

 

 

 

 

 

OPERATING SEGMENT

 

 

 

INFORMATION:

2005

2004

2003

 

 

 

 

 

 

Digital Enterprise Group

 

 

 

 

Microprocessor revenue

      19,412

      19,426

      17,991

 

Chipset, motherboard

 

 

 

 

 

and other revenue

       5,725

       5,352

       5,068

 

Net revenue

      25,137

      24,778

      23,059

 

Operating income

       9,006

       8,851

       8,017

 

Mobility Group

 

 

 

 

Microprocessor revenue

       8,704

       5,667

       4,120

 

Chipset and other

 

 

 

 

 

revenue

       2,427

       1,314

          966

 

Net revenue

      11,131

       6,981

       5,086

 

Operating income

       5,330

       2,833

       1,743

 

Flash Memory Group

 

 

 

 

Net revenue

       2,278

       2,285

       1,608

 

Operating loss

         (154)

         (149)

         (152)

 

All Other

 

 

 

 

Net revenue

          280

          165

          388

 

Operating loss

      (2,092)

      (1,405)

      (2,075)

 

Total

 

 

 

 

Net revenue

      38,826

      34,209

      30,141

 

Operating income

      12,090

      10,130

       7,533

During the first quarter of 2005, the company reorganized its operating segments to bring all major product groups in line with the company’s strategy to design and deliver technology platforms. The operating segments after the first quarter reorganization included the Digital Enterprise Group, the Mobility Group, the Digital Home Group, the Digital Health Group and the Channel Platforms Group. In the fourth quarter of 2005, the company added the Flash Memory Group. The Digital Enterprise Group and the Mobility Group are reportable operating segments. The Flash Memory Group, Digital Home Group, Digital Health Group and Channel Platforms Group operating segments do not meet the quantitative thresholds for reportable segments; however, the Flash Memory Group is reported separately as management believes this information is useful to readers. The Digital Home Group, Digital Health Group and Channel Platforms Group operating segments are included within the “all other” category. All prior period amounts have been adjusted retrospectively to reflect the new organizational structure and certain minor reorganizations effected through the fourth quarter of 2005.

The Digital Enterprise Group operating segment’s products include microprocessors and related chipsets and motherboards designed for the desktop (including consumer desktop) and enterprise computing market segments, communications infrastructure components such as network processors and embedded microprocessors, wired connectivity devices and products for network and server storage. The Mobility Group operating segment’s products include microprocessors and related chipsets designed for the notebook computing market segment, wireless connectivity products, application and cellular processors used in cellular handsets and handheld computing devices, and cellular baseband chipsets. The Flash Memory Group operating segment’s products include NOR flash memory products designed for cellular phones and embedded form factors. Revenue for the “all other” category primarily consists of microprocessors and related chipsets sold by the Digital Home Group.

The “all other” category includes certain corporate-level operating expenses, including a portion of profit-dependent bonus and other expenses not allocated to the operating segments. “All other” also includes the results of operations of seed businesses that support the company’s initiatives. Finally, “all other” includes acquisition-related costs. In 2003, acquisition-related costs included a goodwill impairment charge of $611 million.

 

Back to Top