Intel Q1 revenue $8.9Billion
Apr 20, 2006
-- Operating income $1.7 billion ($2.1 billion excluding share-based compensation)
-- EPS 23 cents (27 cents excluding share-based compensation)
-- $585 million in cash dividends
-- $2.9 billion used to repurchase 138.5 million shares
Intel Corporation announced first-quarter revenue of $8.9 billion, operating income of $1.7 billion, net income of $1.3 billion and earnings per share (EPS) of 23 cents. Excluding the effects of share-based compensation, the company posted operating income of $2.1 billion, net income of $1.6 billion and EPS of 27 cents.
"We believe PC growth rates have moderated over the course of the past few quarters, leading to slower chip-level inventory reductions at our customers and affecting our revenue in the first half of the year," said Intel President and CEO Paul Otellini. "We made excellent operational progress during the quarter, shipping millions of 65nm dual-core processors, and saw strong market acceptance of the Centrino(TM) Duo mobile platform as well as the Viiv(TM) platform for the digital home. We plan to launch new processors based on the IntelÂ®Â®Â® Core(TM) microarchitecture in the third quarter, giving Intel performance leadership across the server, desktop and mobile segments and setting the stage for a strong second half."
First-quarter gross margin was 55.1 percent, versus a January expectation of 59 percent, plus or minus a couple of points. Gross margin was impacted by lower microprocessor revenue and higher inventory write-downs. Expenses (R&D plus MG&A) were $3.2 billion, versus a January expectation of $3.3 billion due to lower revenue- and profit-related spending. The effective tax rate was 27.5 percent, versus a January expectation of approximately 32 percent. The decrease was primarily driven by a higher percentage of profits in low-tax jurisdictions and an increase in non-U.S. R&D tax credits that together increased earnings by approximately 1.4 cents per share. Key
Product Trends (Sequential)
-- Total microprocessor units were lower. The average selling price (ASP) was slightly lower.
-- Chipset, motherboard and flash memory units were lower.
-- Application processor units for products such as cellular phones and PDAs were lower.
Sequential revenue in the Asia-Pacific, Americas and Europe regions was below the company's expectations while the Japan region achieved its first billion-dollar quarter driven primarily by ongoing strength in the notebook market segment.
-- Intel ramped its 65nm process technology into high volume, shipping millions of dual-core, 65nm processors into the mobile, desktop and server market segments. The company also began delivering a new server platform, code-named Bensley, that will enable customers to ship servers based on new dual-core processors code-named Dempsey and Woodcrest.
-- The company discussed details of the Intel Core microarchitecture, a processor technology that will be used to bring industry-leading, energy-efficient performance to server, desktop and mobile platforms in the third quarter.
-- Intel demonstrated a new mobile platform technology code-named Robson that works with NAND flash memories to help reduce mobile PC boot-up time, increase application performance and prolong battery life. Intel also began shipping NAND flash memories for revenue and delivered customer samples of the industry's first NOR flash memories made using 65nm process technology.
-- Intel produced the industry's first fully functional SRAM memories using 45nm process technology, demonstrating that the company is on track to be the first chipmaker to produce microprocessors on 45nm technology in 2007.
-- The company launched its Discover the PC initiative which is helping to make uncompromised PC technology affordable to first-time computer users in emerging markets. Intel also announced plans to train an additional 10 million teachers in developing nations over the next five years, and made new investments designed to expand the company's business opportunities in emerging markets around the world.
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 April 18.
Q2 2006 Outlook
-- Revenue: Expected to be between $8.0 billion and $8.6 billion, below normal seasonal patterns. The company believes PC growth rates have moderated in recent quarters, resulting in above-normal customer inventory levels that are limiting demand in the short term.
-- Gross margin: 49 percent, plus or minus a couple of points (50 percent, plus or minus a couple of points, excluding share-based compensation effects of approximately 1 percent). The expected reduction in the gross margin percentage from first-quarter levels is primarily due to a higher proportion of lower-margin product in the overall mix along with higher microprocessor unit costs and lower microprocessor ASPs.
-- Expenses (R&D plus MG&A): Between $3 billion and $3.1 billion (between $2.7 billion and $2.8 billion excluding share-based compensation effects of approximately $300 million).
-- Gains from equity investments and interest and other: Approximately $175 million.
-- Tax rate: Approximately 30.5 percent.
-- Depreciation: Between $1.1 billion and $1.2 billion.
-- Amortization of acquisition-related intangibles and costs: Approximately $10 million.
-- In accordance with internal cash management policies, the company expects to significantly reduce the rate of share repurchases in upcoming quarters relative to the first-quarter rate.
Revised 2006 Outlook
The previous Business Outlook for 2006 can be found in the company's fourth-quarter 2005 earnings release, available at www.intc.com.
-- 2006 Revenue: Expected to be approximately 3 percent lower than prior-year revenue of $38.8 billion, subject to a wide range of potential variability.
-- Gross margin: 53 percent, plus or minus a few points (54 percent, plus or minus a few points, excluding share-based compensation effects of approximately 1 percent).
-- R&D: Approximately $6.1 billion (approximately $5.6 billion excluding share-based compensation effects of approximately $500 million).
-- MG&A: Approximately $6 billion (approximately $5.4 billion excluding share-based compensation effects of approximately $600 million).
-- Capital spending: $6.6 billion plus or minus $200 million.
-- Tax rate: Approximately 30.5 percent for the third and fourth quarters.
-- Depreciation: $4.7 billion plus or minus $100 million, unchanged.
-- Amortization of acquisition-related intangibles and costs: Approximately $45 million.