Intel Fourth Quarter Revenue to be Below Expectation; Gross Margin Percentage Expectation Unchanged

Business Wire, Dec 7, 2000

Business Editors and High Tech Writers

SANTA CLARA, Calif.--(BUSINESS WIRE)--Dec. 7, 2000

Intel's fourth quarter revenue is anticipated to be below the company's previous expectation, primarily due to a slowing worldwide economy impacting PC demand, the company said today. As a result of recent large cancellations by customers worldwide, the company now expects revenue for the fourth quarter to be flat, plus or minus a couple of percentage points, with third quarter revenue of $8.7 billion. This is lower than the previous expectation that fourth quarter revenue would be up 4 to 8 percent from third quarter revenue.

The company's expectation for gross margin percentage for the fourth quarter remains 63 percent, plus or minus a point. Expenses (R&D, excluding in-process R&D, plus MG&A) in the fourth quarter are now expected to be approximately flat with third quarter expenses of $2.3 billion. This is lower than the previous expectation that fourth quarter expenses would be up 6 to 8 percent from third quarter expenses, due primarily to a slowdown in discretionary spending and lower revenue and profit dependent expenses. Interest and other is expected to be approximately $675 million for the fourth quarter, down from the company's previous expectation of $950 million, due to lower than expected realized gains on equity investments as equity market levels fell during the quarter.

BUSINESS OUTLOOK

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not reflect the potential impact of any mergers, acquisitions or other business combinations that may be completed after the date of this release.

-- The company expects revenue for the fourth quarter of 2000 to be flat, plus
or minus a couple of percentage points, with third quarter revenue of $8.7
billion.

-- The company expects gross margin percentage for the fourth quarter to be 63
percent, plus or minus a point. In the short term, Intel's gross margin
percentage varies primarily with revenue levels, product mix, changes in unit
costs and timing of factory ramps and associated costs.

-- Expenses (R&D, excluding in-process R&D, plus MG&A) in the fourth quarter of
2000 are expected to be approximately flat with third quarter expenses of $2.3
billion. Expenses are dependent in part on the level of revenue and profits.

-- R&D spending, excluding in-process R&D, is expected to be approximately $1.0
billion for the fourth quarter.

-- The company expects interest and other income for the fourth quarter of 2000
to be approximately $675 million. Interest and other is dependent in part on
interest rates, cash balances, equity market levels and volatility, the
realization of expected gains on investments, including gains on investments
acquired by third parties, and assuming no unanticipated items.

-- The tax rate for 2000 is expected to be approximately 31.8 percent,
excluding the impact of the previously announced agreement with the Internal
Revenue Service and acquisition-related costs.

-- Capital spending for 2000 is expected to be approximately $6.5 billion,
higher than previous expectation of $6.0 billion.

-- Depreciation is expected to be approximately $815 million in the fourth
quarter, lower than previous expectation of $865 million.

-- Amortization of goodwill and other acquisition-related intangibles is
expected to be approximately $460 million in the fourth quarter, higher than
previous expectation of $440 million.

The above statements contained in this Outlook are forward-looking statements that involve a number of risks and uncertainties. In addition to factors discussed above, among other factors that could cause actual results to differ materially are the following: business and economic conditions and growth in the computing industry in various geographic regions; changes in customer order patterns; changes in the mixes of microprocessor types and speeds, purchased components and other products; competitive factors, such as rival chip architectures and manufacturing technologies, competing software-compatible microprocessors and acceptance of new products in specific market segments; pricing pressures; development and timing of introduction of compelling software applications; insufficient, excess or obsolete inventory and variations in inventory valuation; continued success in technological advances, including development and implementation of new processes and strategic products for specific market segments; execution of the manufacturing ramp; shortage of manufacturing capacity; the ability to grow new networking, communications, wireless and other Internet-related businesses and successfully integrate and operate any acquired businesses; impact of events outside the United States such as the business impact of fluctuating currency rates or unrest or political instability in a locale, such as transport disruption in Europe or unrest in Israel; unanticipated costs or other adverse effects associated with processors and other products containing errata (deviations from published specifications); litigation involving antitrust, intellectual property, consumer and other issues; and other risk factors listed from time to time in the company's SEC reports, including but not limited to the report on Form 10-Q for the quarter ended Sept. 30, 2000 (Part I, Item 2, Outlook section).