Intel Corp 8-K 2012-01-19
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Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95054-1549
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The PC Client Group had revenue of $9.0B, down 4% from the third quarter. Year over year, PC Client Group revenue was up 17%.
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The Data Center Group had revenue of $2.7B, up 8% from the third quarter. Year over year, Data Center Group revenue was up 8%.
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The other Intel architecture group had revenue of $1.1B, down 20% from the third quarter. Year over year, the other Intel architecture group’s revenue was up 35%. Intel Mobile Communications (IMC), formerly the Infineon wireless division, contributed $508M to the fourth quarter 2011 revenue.
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Intel® Atom™ microarchitecture revenue, including microprocessors and associated chipsets, was $167M, down 38% from the third quarter and down 57% from the fourth quarter of 2010. Intel® Atom microarchitecture revenue is down as a result of lower demand for netbooks.
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+ 1.5 points:
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Lower manufacturing costs (platform** unit costs + other cost of sales)
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- 0.5 point:
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Higher platform** reserves
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- 0.5 point: |
Lower platform** volume
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- 0.5 point: |
Higher platform** reserves
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+ 0.5 point: |
Lower manufacturing costs (platform** unit costs + other cost of sales)
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The PC Client Group had revenue of $35.4B, up 17% year over year.
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The Data Center Group had revenue of $10.1B, up 17% from 2010.
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The other Intel architecture group had revenue of $5.0B, up 64% year over year. Intel Mobile Communications (IMC), formerly the Infineon wireless division, contributed $2.1B to 2011 revenue.
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Intel® Atom™ microarchitecture revenue, including microprocessors and associated chipsets, was $1.2B, down 25% from 2010, with netbook volume down significantly offset partially by other Intel® Atom microarchitecture based businesses.
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- 2.0 points: Higher platform** unit cost
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- 1.0 point: Lower platform** volume
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+ 1.0 point: Lower start up costs
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+ 0.5 point: Miscellaneous
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+ 1.5 points: Lower start up costs
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+ 1.0 point: No Cougar Point impact
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+ 0.5 point: Higher platform** revenue
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- 1.0 point: Higher platform** unit cost
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- 0.5 point: Miscellaneous
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Demand could be different from Intel's expectations due to factors including changes in business and economic conditions, including supply constraints and other disruptions affecting customers; 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. Uncertainty in global economic and financial conditions poses a risk that consumers and businesses may defer purchases in response to negative financial events, which could negatively affect product demand and other related matters.
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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 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; and Intel’s ability to respond quickly to technological developments and to incorporate new features into its products.
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Intel is in the process of transitioning to its next generation of products on 22nm process technology, and there could be execution and timing issues associated with these changes, including products defects and errata and lower than anticipated manufacturing yields.
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The gross margin percentage could vary significantly from expectations based on capacity utilization; variations in inventory valuation, including variations related to the timing of qualifying products for sale; changes in revenue levels; product mix and pricing; the timing and execution of the manufacturing ramp and associated costs; start-up costs; excess or obsolete inventory; changes in unit costs; defects or disruptions in the supply of materials or resources; product manufacturing quality/yields; and impairments of long-lived assets, including manufacturing, assembly/test and intangible assets.
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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.
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Gains or losses from equity securities and interest and other could vary from expectations depending on gains or losses on the sale, exchange, change in the fair value or impairments of debt and equity investments; interest rates; cash balances; and changes in fair value of derivative instruments.
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The majority of Intel’s 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 Intel’s investments in this market segment could result in significant impairment charges, impacting restructuring charges as well as gains/losses on equity investments and interest and other.
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Intel's results could be affected by adverse economic, social, political and physical/infrastructure conditions in countries where 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.
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Expenses, particularly certain marketing and compensation expenses, as well as restructuring and asset impairment charges, vary depending on the level of demand for Intel's products and the level of revenue and profits.
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Intel’s results could be affected by the timing of closing of acquisitions and divestitures.
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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. An unfavorable ruling could include monetary damages or an injunction prohibiting us from manufacturing or selling one or more products, precluding particular business practices, impacting Intel’s ability to design its products, or requiring other remedies such as compulsory licensing of intellectual property.
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INTEL CORPORATION
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EXPLANATION OF NON-GAAP MEASURES
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In addition to disclosing financial results in accordance with United States (U.S.) generally accepted accounting principles (GAAP), this document contains non-GAAP financial measures that we believe are helpful in understanding and comparing our past financial performance and our future results. The non-GAAP financial measures disclosed by the company exclude certain business combination accounting adjustments and certain expenses related to acquisitions. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes the non-GAAP financial measures are appropriate for period to period comparisons in our budget, planning and evaluation processes, and to show the reader how our performance compares to other periods. Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:
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Deferred revenue write-down and associated costs: Business combination accounting principles require us to write down to fair values the software license updates; software product and hardware systems support contracts; product support contracts and hardware systems support contracts assumed in our acquisitions. The revenue for these support contracts is deferred and typically recognized over the contract period, so our GAAP revenues for the contract period after the acquisition does not reflect the full amount of revenues that would have been reported if the acquired deferred revenue was not written down to fair value. The non-GAAP adjustments eliminate the effect of the deferred revenue write-down and include the costs associated with the revenue adjustment. We believe these adjustments to the revenue from these support contracts and to the associated costs are useful to investors as an additional means to reflect revenue trends of our business.
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Amortization of acquisition-related intangible assets: Amortization of acquisition-related intangible assets consists of amortization of developed technology, trade names, and customer relationships acquired in connection with business combinations. We record charges relating to the amortization of these intangibles in our GAAP financial statements. Amortization charges for our acquisition-related intangible assets are inconsistent in size and are significantly impacted by the timing and valuation of our acquisitions. Consequently, our non-GAAP adjustments exclude these charges to facilitate an evaluation of our current operating performance and comparisons to our past operating performance.
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Inventory valuation adjustment: Business combination accounting principles require us to measure acquired inventory at fair value. The fair value of inventory reflects the acquired company’s cost of manufacturing plus a portion of the expected profit margin. The non-GAAP adjustment to our cost of sales excludes the expected profit margin component that is recorded under business combination accounting principles. We believe the adjustment is useful to investors as an additional means to reflect cost of sales and gross margin trends of our business.
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INTEL CORPORATION
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SUPPLEMENTAL RECONCILIATIONS OF GAAP TO NON-GAAP RESULTS
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Set forth below are reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures. The non-GAAP financial measures disclosed by the company have limitations and should not be considered a substitute for, or superior to, financial measures prepared in accordance with GAAP, and the financial results prepared in accordance with GAAP and reconciliations from these results should be carefully evaluated. Please refer to "Explanation of Non-GAAP Measures" in this document for a detailed explanation of the adjustments made to comparable GAAP measures, the ways management uses these non-GAAP measures, and the reasons why management believes these non-GAAP measures provide useful information for investors.
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(In millions, except per share amounts)
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Three Months Ended
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Dec. 31,
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Dec. 25,
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Dec. 31,
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Dec. 25,
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2011
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2010
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2011
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2010
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GAAP NET REVENUE
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$
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13,887
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$
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11,457
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$
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53,999
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$
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43,623
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Adjustment for deferred revenue write-down
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35
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-
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204
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-
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NON-GAAP NET REVENUE
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$
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13,922
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$
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11,457
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$
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54,203
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$
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43,623
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GAAP GROSS MARGIN
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$
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8,952
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$
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7,406
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$
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33,757
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$
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28,491
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Adjustment for:
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Deferred revenue write-down and associated costs
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32
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-
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190
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-
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Amortization of acquisition-related intangibles
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137
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17
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482
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65
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Inventory valuation
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-
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-
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33
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-
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NON-GAAP GROSS MARGIN
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$
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9,121
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$
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7,423
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$
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34,462
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$
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28,556
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GAAP GROSS MARGIN PERCENTAGE
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64.5%
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64.6%
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62.5%
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65.3%
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Adjustment for:
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Deferred revenue write-down and associated costs
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-
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-
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0.1%
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-
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Amortization of acquisition-related intangibles
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1.0%
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0.2%
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0.9%
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0.2%
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Inventory valuation
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-
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0.1%
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NON-GAAP GROSS MARGIN PERCENTAGE
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65.5%
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64.8%
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63.6%
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65.5%
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GAAP OPERATING INCOME
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$
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4,599
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$
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4,023
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$
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17,477
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$
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15,588
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Adjustment for:
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Deferred revenue write-down and associated costs
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32
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190
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Amortization of acquisition-related intangibles
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209
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24
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742
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83
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Inventory valuation
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-
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-
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33
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-
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NON-GAAP OPERATING INCOME
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$
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4,840
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$
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4,047
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$
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18,442
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$
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15,671
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GAAP NET INCOME
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$
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3,360
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$
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3,180
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$
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12,942
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$
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11,464
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Adjustment for:
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Deferred revenue write-down and associated costs
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32
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-
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190
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-
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Amortization of acquisition-related intangibles
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209
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24
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742
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83
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Inventory valuation
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-
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-
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33
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-
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Income tax effect
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(56
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(8
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(215
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(29
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NON-GAAP NET INCOME
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$
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3,545
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$
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3,196
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$
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13,692
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$
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11,518
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GAAP DILUTED EARNINGS PER COMMON SHARE
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$
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0.64
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$
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0.56
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$
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2.39
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$
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2.01
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Adjustment for:
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Deferred revenue write-down and associated costs
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0.01
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-
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0.03
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-
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Amortization of acquisition-related intangibles
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0.04
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-
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0.14
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0.01
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Inventory valuation
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-
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-
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0.01
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-
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Income tax effect
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(0.01
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-
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(0.04
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-
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NON-GAAP DILUTED EARNINGS PER COMMON SHARE
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$
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0.68
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$
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0.56
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$
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2.53
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$
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2.02
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INTEL CORPORATION
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SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP OUTLOOK
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Set forth below are reconciliations of the non-GAAP financial measure to the most directly comparable GAAP financial measure. The non-GAAP financial measure disclosed by the company has limitations and should not be considered a substitute for, or superior to, the financial measure prepared in accordance with GAAP, and the financial outlook prepared in accordance with GAAP and the reconciliations from this outlook should be carefully evaluated. Please refer to "Explanation of Non-GAAP Measures" in this document for a detailed explanation of the adjustment made to the comparable GAAP measures, the ways management uses the non-GAAP measures, and the reasons why management believes the non-GAAP measures provide useful information for investors.
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Q1 2012 Outlook
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2012 Outlook
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GAAP GROSS MARGIN PERCENTAGE
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63%
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+/- a couple percentage points
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64%
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+/- a few percentage points
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Adjustment for amortization of acquisition-related intangibles
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1%
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1%
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NON-GAAP GROSS MARGIN PERCENTAGE
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64%
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+/- a couple percentage points
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65%
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+/- a few percentage points
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