Intel Posts Record Third-Quarter Revenue of $10.2 Billion -- Net Income Up By 12%

Business Outlook

Intels Business Outlook does not include the potential impact of any mergers, acquisitions, divestitures or other business combinations that may be completed after Oct. 13. Current uncertainty in global economic conditions makes it particularly difficult to predict product demand and other related matters and makes it more likely that Intels actual results could differ materially from expectations.

Q4 2008:

  • Revenue: Between $10.1 billion and $10.9 billion.
  • Gross margin: 59 percent plus or minus a couple of points.
  • Spending (R&D plus MG&A): Approximately $2.9 billion.
  • Restructuring and asset impairment charges: Approximately $250 million. The expected charges are primarily driven by the decision by Intel and Micron to discontinue the supply of NAND flash memory from a 200mm facility within the IMFT manufacturing network.
  • Net gain or loss from equity investments and interest and other: Net loss of approximately $50 million.
  • Tax rate: Approximately 29 percent, lower than the previous expectation of approximately 33 percent.
  • Depreciation: Approximately $1.1 billion.

Full-Year 2008:

  • Spending (R&D plus MG&A): Approximately $11.5 billion, lower than the previous expectation of approximately $11.7 billion dollars.
  • R&D: Approximately $5.9 billion, lower than the previous expectation of approximately $6 billion.
  • Capital spending: $5 billion plus or minus $100 million, as compared to the previous expectation of $5.2 billion plus or minus $200 million.

Status of Business Outlook

During the quarter, Intels corporate representatives may reiterate the Business Outlook during private meetings with investors, investment analysts, the media and others. Due to the uncertain economic environment, Intel intends to publish a mid-quarter business update this quarter. From the close of business on Nov. 28 until publication of the mid-quarter update on Dec. 4, Intel will observe a Quiet Period during which the Business Outlook disclosed in the companys 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 an update by the company.

Risk Factors

The above statements and any others in this document that refer to plans and expectations for the fourth quarter, the year and the future are forward-looking statements that involve a number of risks and uncertainties. Many factors could affect Intels actual results, and variances from Intels 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 corporations expectations.

  • Current uncertainty in global economic conditions pose a risk to the overall economy as consumers and businesses may defer purchases in response to tighter credit and negative financial news, which could negatively affect product demand and other related matters. Consequently, demand could be different from Intel's expectations due to factors including changes in business and economic conditions, including conditions in the credit market that could affect consumer confidence; customer acceptance of Intels and competitors products; changes in customer order patterns including order cancellations; and changes in the level of inventory at customers.
  • Intels results could be affected by the timing of closing of acquisitions and divestitures.
  • 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 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 and introductions, marketing programs and pricing pressures and Intels response to such actions; Intels ability to respond quickly to technological developments and to incorporate new features into its products; and the availability of sufficient supply of components from suppliers to meet demand.
  • 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, 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; 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 that 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. 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 realize deferred tax assets.
  • The recent financial crisis affecting the banking system and financial markets and the going concern threats to investment banks and other financial institutions have resulted in a tightening in the credit markets, a low level of liquidity in many financial markets, and extreme volatility in fixed income, credit and equity markets. There could be a number of follow-on effects from the credit crisis on Intel s business, including insolvency of key suppliers resulting in product delays; inability of customers to obtain credit to finance purchases of our products and/or customer insolvencies; counterparty failures negatively impacting our treasury operations; increased expense or inability to obtain short-term financing of Intel s operations from the issuance of commercial paper; and increased impairments from the inability of investee companies to obtain financing. Gains or losses from equity securities and interest and other could also vary from expectations depending on gains or losses realized 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 current volatility in the financial markets and overall economic uncertainty increases the risk that the actual amounts realized in the future on our debt and equity investments will differ significantly from the fair values currently assigned to them.
  • 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 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 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.

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