Intel Blows Away Q1 Results

paul intel bunny suitYeah, baby!

Revenue, earnings, gross margin, and operating margin all nicely ahead of consensus.

Stock up in after-market.

Here’s the release >

SANTA CLARA, Calif.–(BUSINESS WIRE)–Intel Corporation today reported first-quarter revenue of $10.3 billion. The company reported operating income of $3.4 billion, net income of $2.4 billion and EPS of 43 cents.

“The investments we’re making in leading edge technology are delivering the most compelling product line-up in our history,” said Paul Otellini, Intel president and CEO. “These leadership products combined with growing worldwide demand and continued outstanding execution resulted in Intel’s best first quarter ever. Looking forward, we’re optimistic about our business as Intel products are designed into a variety of new and exciting segments.”

GAAP Financial Comparison                                             Q1 2010                                           vs. Q4 2009                                           vs. Q1 2009   Revenue                                         $10.3 billion                                           down 3%                                           up 44%   Operating Income                                         $3.4 billion                                           up 38%                                           up 433%   Net Income                                         $2.4 billion                                           up 7%                                           up 288%   Earnings Per Share                                         43 cents                                           up 3 cents                                           up 32 cents   Non-GAAP Financial Comparison                                             Q1 2010                                       vs. Q4 2009 Revenue                                           $10.3 billion                                       down 3% Operating Income                                           $3.4 billion                                       down 8% Net Income                                           $2.4 billion                                       down 21% Earnings Per Share                                           43 cents                                       down 12 cents The settlement agreement with AMD of $1.25 billion and the related tax impacts of that charge are excluded from Q4 2009 results in this Non-GAAP comparison.Q1 2010 Highlights (all comparisons sequential)

  • PC Client Group revenue was flat, with record mobile microprocessor revenue.
  • Data centre Group revenue down 8 per cent.
  • Other Intel Architecture group revenue down 9 per cent.
  • Intel® Atom™ microprocessor and chipset revenue of $355 million was down 19 per cent.
  • The average selling price (ASP) for microprocessors was slightly up.
  • Excluding shipments of Intel Atom microprocessors, the ASP was approximately flat.
  • R&D plus MG&A spending of $3.1 billion was higher than the company’s prior expectation.
  • The effective tax rate was 29 per cent, in-line with the company’s prior expectation.

Business Outlook

The Outlook for the second quarter does not include the gain expected from the sale of our investment in Numonyx, nor does it include the effect of any other acquisitions, divestitures or similar transactions that may be completed after April 12th.

Q2 2010

  • Revenue: $10.2 billion, plus or minus $400 million.
  • Gross margin percentage: 64 per cent, plus or minus a couple percentage points.
  • R&D plus MG&A spending: Approximately $3.1 billion.
  • Impact of equity investments and interest and other: approximately zero.
  • Depreciation: Approximately $1.1 billion.

Full-Year 2010

  • Gross margin percentage: 64 per cent, plus or minus a couple percentage points. The company’s prior expectation was 61 per cent plus or minus 3 percentage points.
  • Spending (R&D plus MG&A): $12.4 billion, plus or minus $100 million. The company’s prior expectation was $11.8 billion, plus or minus $100 million.
  • R&D spending: Approximately $6.4 billion.
  • Tax rate: Approximately 31 per cent for the second, third and fourth quarters.
  • Depreciation: Approximately $4.4 billion, plus or minus $100 million.
  • Capital spending: Expected to be $4.8 billion, plus or minus $100 million.

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 May 28 until publication of the company’s second-quarter earnings release, Intel will observe a “Quiet Period” during which the Business Outlook disclosed in the company’s news releases and filings with the SEC should be considered as historical, speaking as of prior to the Quiet Period only and not subject to an update by the company.

Risk Factors

The above statements and any others in this document that refer to plans and expectations for the second 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 following to be the important factors that could cause actual results to differ materially from the corporation’s expectations.

  • Demand could be different from Intel’s expectations due to factors including changes in business and economic conditions; customer acceptance of Intel’s and competitors’ products; changes in customer order patterns including order cancellations; and changes in the level of inventory at customers.
  • Intel operates in intensely competitive industries that are characterised by a high percentage of costs that are fixed or difficult to reduce in the short term and product demand that is highly variable and difficult to forecast. Additionally, Intel is in the process of transitioning to its next generation of products on 32nm process technology, and there could be execution issues associated with these changes, including product defects and errata along with lower than anticipated manufacturing yields. 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 and introductions, marketing programs and pricing pressures and Intel’s response to such actions; defects or disruptions in the supply of materials or resources; and Intel’s ability to respond quickly to technological developments and to incorporate new features into its products.
  • The gross margin percentage could vary significantly from expectations based on changes in revenue levels; product mix and pricing; start-up costs, including costs associated with the new 32nm process technology; 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; impairments of long-lived assets, including manufacturing, assembly/test and intangible assets; the timing and execution of the manufacturing ramp and associated costs; and capacity utilization.
  • Expenses, particularly certain marketing and compensation expenses, as well as restructuring and asset impairment charges, 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. The tax rate may be affected by 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, including payment of interest and penalties; and the ability to realise deferred tax assets.
  • Gains or losses from equity securities and interest and other could vary from expectations depending on gains or losses realised on the sale or exchange of securities; gains or losses from equity method investments; impairment charges related to debt securities as well as equity and other investments; interest rates; cash balances; and changes in fair value of derivative instruments.
  • The majority of our non-marketable equity investment portfolio balance is concentrated in companies in the flash memory market segment, and declines in this market segment or changes in management’s plans with respect to our investments in this market segment could result in significant impairment charges, impacting restructuring charges as well as gains/losses on equity investments and interest and other.
  • Intel’s results could be impacted by adverse economic, social, political and physical/infrastructure conditions in countries where 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 the timing of closing of acquisitions and divestitures.
  • 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. An unfavorable ruling could include monetary damages or an injunction prohibiting us from manufacturing or selling one or more products, precluding particular business practices, impacting our ability to design our products, or requiring other remedies such as compulsory licensing of intellectual property.

A 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-K for the fiscal year ended Dec. 26, 2009.

Earnings Webcast

Intel will hold a public webcast at 2:30 p.m. PDT today on its Investor Relations Web site at www.intc.com. A webcast replay and MP3 download will also be made available on the site.

Intel plans to report its earnings for the second quarter of 2010 on Tuesday, July 13, 2010. Immediately following the earnings report, the company plans to publish a commentary by Stacy J. Smith, vice president and chief financial officer at www.intc.com/results.cfm. A public webcast of Intel’s earnings conference call will follow at 2:30 p.m. PDT at www.intc.com.

Intel [NASDAQ: INTC], 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 and blogs.intel.com

Intel, the Intel logo, Intel Xeon, Intel Core, and Intel Atom are trademarks of Intel Corporation in the United States and other countries.

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

INTEL CORPORATION CONSOLIDATED SUMMARY STATEMENT OF OPERATIONS DATA (In millions, except per share amounts)                           Three Months Ended     March 27,   March 28,     2010   2009 NET REVENUE   $ 10,299   $ 7,145 Cost of sales     3,770     3,907 GROSS MARGIN     6,529     3,238                   Research and development     1,564     1,317 Marketing, general and administrative     1,514     1,198 R&D AND MG&A     3,078     2,515 Restructuring and asset impairment charges     –     74 Amortization of acquisition-related intangibles and costs     3     2 OPERATING EXPENSES     3,081     2,591 OPERATING INCOME     3,448     647 Gains (losses) on equity investments, net     (31)     (113) Interest and other, net     29     95 INCOME BEFORE TAXES     3,446     629 Provision for taxes     1,004     – NET INCOME   $ 2,442   $ 629                   BASIC EARNINGS PER COMMON SHARE   $ 0.44   $ 0.11 DILUTED EARNINGS PER COMMON SHARE   $ 0.43   $ 0.11                   WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:               BASIC     5,529     5,573   DILUTED     5,681     5,634 INTEL CORPORATION CONSOLIDATED SUMMARY BALANCE SHEET DATA (In millions)                   March 27,   Dec. 26,   2010   2009 CURRENT ASSETS             Cash and cash equivalents $ 4,988   $ 3,987   Short-term investments   5,927     5,285   Trading assets   5,427     4,648   Accounts receivable, net   2,192     2,273   Inventories:               Raw materials   464     437     Work in process   1,473     1,469     Finished goods   1,049     1,029         2,986     2,935   Deferred tax assets   1,423     1,216   Other current assets   781     813 TOTAL CURRENT ASSETS   23,724     21,157                 Property, plant and equipment, net   17,028     17,225 Marketable equity securities   926     773 Other long-term investments   4,326     4,179 Goodwill   4,452     4,421 Other long-term assets   5,317     5,340   TOTAL ASSETS $ 55,773   $ 53,095                 CURRENT LIABILITIES             Short-term debt $ 330   $ 172   Accounts payable   1,912     1,883   Accrued compensation and benefits   1,377     2,448   Accrued advertising   843     773   Deferred income on shipments to distributors   653     593   Income taxes payable   916     86   Other accrued liabilities   2,881     1,636 TOTAL CURRENT LIABILITIES   8,912     7,591                 Long-term income taxes payable   174     193 Long-term debt   2,052     2,049 Other long-term liabilities   1,735     1,558 Stockholders’ equity:             Preferred stock   –     –   Common stock and capital in excess of par value   15,466     14,993   Accumulated other comprehensive income (loss)   414     393   Retained earnings   27,020     26,318 TOTAL STOCKHOLDERS’ EQUITY   42,900     41,704   TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 55,773   $ 53,095 INTEL CORPORATION SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION (In millions)                   Q1 2010   Q4 2009   Q1 2009 GEOGRAPHIC REVENUE:             Asia-Pacific $5,888   $5,964   $3,647     57%   57%   51%   Americas $1,906   $2,088   $1,510     18%   20%   21%   Europe $1,404   $1,524   $1,273     14%   14%   18%   Japan $1,101   $993   $715     11%   9%   10%               CASH INVESTMENTS:           Cash and short-term investments $10,915   $9,272   $7,792 Trading assets – marketable debt securities (1) 5,427   4,648   2,521 Total cash investments $16,342   $13,920   $10,313               TRADING ASSETS:           Trading assets – equity securities             offsetting deferred compensation (2) –   –   $286 Total trading assets – sum of 1+2 $5,427   $4,648   $2,807               SELECTED CASH FLOW INFORMATION:           Depreciation $1,080   $1,172   $1,208 Share-based compensation $248   $200   $213 Amortization of intangibles $61   $89   $62 Capital spending ($928)   ($1,081)   ($1,509) Investments in non-marketable equity instruments ($45)   ($85)   ($41) Proceeds from sales of shares to employees, tax benefit & other $230   $36   $247 Dividends paid ($870)   ($774)   ($779) Net cash received/(used) for divestitures/acquisitions ($37)   –   –               EARNINGS PER COMMON SHARE INFORMATION:           Weighted average common shares outstanding – basic 5,529   5,522   5,573 Dilutive effect of employee equity incentive plans 101   77   10 Dilutive effect of convertible debt 51   51   51 Weighted average common shares outstanding – diluted 5,681   5,650   5,634               STOCK BUYBACK:           Cumulative shares repurchased (in billions) 3.4   3.4   3.3 Remaining dollars authorised for buyback (in billions) $5.7   $5.7   $7.4               OTHER INFORMATION:           Employees (in thousands) 79.9   79.8   82.5 INTEL CORPORATION SUPPLEMENTAL OPERATING GROUP RESULTS ($ in millions)                           Three Months Ended             Q1 2010   Q4 2009   Q1 2009 Net Revenue             PC Client Group               Microprocessor revenue   $ 5,913   $ 5,881   $ 4,249   Chipset, motherboard and other revenue   1,761   1,877   1,112         7,674   7,758   5,361 Data centre Group               Microprocessor revenue   1,552   1,703   1,012   Chipset, motherboard and other revenue   319   323   252         1,871   2,026   1,264                   Other Intel Architecture groups   375   410   326 Intel Architecture group revenue   9,920   10,194   6,951                   Other operating groups   369   367   149 Corporate   10   8   45 TOTAL NET REVENUE   $ 10,299   $ 10,569   $ 7,145                                     Operating income (loss)             PC Client Group   $ 3,143   $ 3,340   $ 701 Data centre Group   835   972   266 Other Intel Architecture groups   (29)   12   (76) Intel Architecture group operating income   3,949   4,324   891                   Other operating groups   (21)   (22)   (153) Corporate   (480)   (1,805)   (91) TOTAL OPERATING INCOME   $ 3,448   $ 2,497   $ 647 INTEL CORPORATION SUPPLEMENTAL RECONCILIATIONS OF GAAP TO NON-GAAP RESULTS                       In addition to disclosing financial results calculated in accordance with United States (U.S.) generally accepted accounting principles (GAAP), this earnings release contains non-GAAP financial measures that exclude the charge incurred in the fourth quarter of 2009 as a result of the settlement agreement with Advanced Micro Devices, Inc. (AMD) in the amount of $1.25 billion. These non-GAAP measures also exclude the associated impacts of the AMD settlement on our tax provision.   The non-GAAP financial measures disclosed by the company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes the non-GAAP financial measures are appropriate for both its own assessment of, and to show the reader, how our performance compares to other periods. Set forth below are reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.                               (In millions, except per-share amounts)       Three Months Ended       March 27,   Dec. 26,   March 28,       2010   2009     2009                       GAAP OPERATING INCOME $ 3,448   $ 2,497     $ 647   Adjustment for AMD settlement:   –     1,250       – OPERATING INCOME EXCLUDING AMD SETTLEMENT $ 3,448   $ 3,747     $ 647                       GAAP NET INCOME $ 2,442   $ 2,282     $ 629   Adjustment for:                     AMD settlement   –     1,250       –     Income tax impacts   –     (438 )     – NET INCOME EXCLUDING AMD SETTLEMENT $ 2,442   $ 3,094     $ 629                       GAAP DILUTED EARNINGS PER COMMON SHARE $ 0.43   $ 0.40     $ 0.11   Adjustment for:                     AMD settlement   –     0.22       –     Income tax impacts   –     (0.07 )     – DILUTED EARNINGS PER COMMON SHARE EXCLUDING AMD SETTLEMENT $ 0.43   $ 0.55     $ 0.11

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