Intel Reports Record Annual and Quarterly Revenue and EPS; Q4 Earnings Excluding Acquisition-related Costs $0.69 Per Share, Up 15%; Q4 EPS $0.61, up 3% - Company Financial Information

Edge: Work-Group Computing Report, Jan 17, 2000

Intel Corporation announced fourth quarter revenue of $8.2 billion, a new record, up 8 percent from the fourth quarter of 1998 and up 12 percent sequentially.

Revenue for 1999 was $29.4 billion, up 12 percent from 1998, and resulted in the company's thirteenth consecutive year of revenue growth. In addition, seasonally strong demand led to record unit shipments of microprocessors, chipsets, motherboards and flash memory.

For 1999, net income excluding acquisition-related costs(a) was $8.1 billion, up 29 percent from 1998 net income of $6.3 billion. 1999 earnings excluding acquisition-related costs were $2.33 per share, an increase of 30 percent from $1.79 in 1998.

Including acquisition-related costs in accordance with generally accepted accounting principles, net income in 1999 was $7.3 billion, up 21 percent from $6.1 billion in 1998. 1999 earnings per share were $2.11, up 22 percent from $1.73 in 1998.

Acquisition-related costs in 1999 consisted of $392 million in one-time charges for purchased in-process research and development and $411 million of amortization of goodwill and other acquisition-related intangibles.

For the fourth quarter, net income excluding acquisition-related costs was $2.4 billion, up 15 percent from the fourth quarter of 1998 and up 26 percent sequentially. Fourth quarter earnings excluding acquisition-related costs were $0.69 per share, an increase of 15 percent from $0.60 in the fourth quarter of 1998, and up 25 percent sequentially.

Including acquisition-related costs in accordance with generally accepted accounting principles, fourth quarter net income was $2.1 billion, up 2 percent from fourth quarter 1998 and up 45 percent sequentially. Earnings per share were $0.61, up 3 percent from $0.59 in the fourth quarter of 1998 and up 45 percent sequentially.

Acquisition-related costs in the fourth quarter consisted of $59 million in one-time charges for purchased in-process research and development and $241 million of amortization of goodwill and other acquisition-related intangibles.

"We are proud of our quarterly and annual records in both revenue and earnings," said Craig R. Barrett, president and chief executive officer. "Notably, these results were achieved as we extended our position as the key building block supplier to the worldwide Internet economy. We are also pleased that our 0.18-micron manufacturing process was our fastest ramping process ever."

"In 2000, we look forward to continued growth in our core microprocessor business, and to the mid-year production of our new Itanium processor which began sampling in the fourth quarter of last year. We are also excited about the expansion of our new Internet-related businesses," Barrett added. "This year we expect to grow revenues in our networking, communication and wireless businesses by 50 percent or more."

During the quarter Intel acquired DSP Communications, Inc., IPivot, Inc., Parity Software Development Corporation and the Telecom Component Products Division of Stanford Telecommunications, Inc. For the year, Intel acquired 12 companies and businesses for approximately $6 billion, significantly broadening and strengthening the company's networking and communications businesses.

During the quarter, the company paid its quarterly cash dividend of $0.03 per share. The dividend was paid on December 1, 1999, to stockholders of record on November 7, 1999. Intel has paid a regular quarterly cash dividend for over seven years.

During the quarter, the company repurchased a total of 12.5 million shares of common stock, at a cost of $903 million, under an ongoing program. For the year, the company repurchased a total of 71.3 million shares at a total cost of $4.6 billion. Since the program began in 1990, the company has repurchased 659.9 million shares at a total cost of $18.2 billion.

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not include the potential impact of any mergers or acquisitions that may be completed after December 25, 1999.

The company expects revenue for the first quarter of 2000 to be slightly down from fourth quarter revenue of $8.2 billion, due to seasonal factors.

Gross margin percentage in the first quarter of 2000 is expected be approximately flat with the fourth quarter. Intel's gross margin expectation for 2000 is 61 percent, plus or minus a few points, compared to 59.7 percent for all of 1999. In the short term, Intel's gross margin percentage varies primarily with revenue levels and product mix as well as changes in unit costs.

Expenses (R&D, excluding in-process R&D, plus MG&A) in the first quarter of 2000 are expected to be down 3 to 5 percent from fourth quarter expenses of $2.0 billion, primarily due to seasonally lower advertising expenses. Expenses are dependent in part on the level of revenue.

R&D spending, excluding in-process R&D, is expected to be approximately $3.8 billion for 2000, up from $3.1 billion in 1999. The higher spending is driven primarily by the full year impact of acquisitions and investments in new businesses as well as increased investment in Intel architecture related businesses.