Intel Posts Record Third-Quarter Revenue of $10.2 Billion -- Net Income Up By 12%
Intel’s 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 Intel’s actual results
could differ materially from expectations.
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.
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, Intel’s 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 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 an update by the company.
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 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
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 Intel’s
and competitors’ products; changes in
customer order patterns including order cancellations; and changes in
the level of inventory at customers.
Intel’s 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 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 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
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.