SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report: January 19, 1995
INTEL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-6217 94-1672743
(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
2200 Mission College Blvd., Santa Clara, CA 95052
(Address of principal executive offices)
408/765-8080
(Registrant's telephone number)
PAGE 2
ITEM 5. OTHER EVENTS.
- ------- -------------
5.1 Attached hereto as Exhibit 99.1 and incorporated by reference
herein is a press release of Intel Corporation relating to the
settlement of all outstanding legal disputes between Intel
Corporation and Advanced Micro Devices, Inc.
5.2 Attached hereto as Exhibit 99.2 and incorporated by reference
herein is a press release of Intel Corporation relating to
earnings for the year ended December 31, 1994.
ITEM 7. Financial Statements, Pro Forma Financial Information
- ------- and Exhibits.
-----------------------------------------------------
Exhibit 99.1 Press Release of Intel Corporation dated January 11, 1995
Exhibit 99.2 Press Release of Intel Corporation dated January 17, 1995
PAGE 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTEL CORPORATION
BY: /s/ F. Thomas Dunlap, Jr.
-------------------------
F. Thomas Dunlap, Jr.
Vice President,
General Counsel and Secretary
January 19, 1995
-----------------
Exhibit 99.1
CONTACTS: Chuck Mulloy
AMD
(408) 749-5481
Howard High
Intel
(408) 765-1488
AMD, INTEL SETTLE ALL LEGAL DISPUTES
SANTA CLARA, Calif., January 11, 1995 -- Advanced Micro Devices,
Inc. and Intel Corporation said they have reached agreement to
settle all outstanding legal disputes between the two companies.
Following are the major points of the agreement:
* AMD will have a perpetual license to the microcode
in the Intel386(tm) and Intel486(tm)
microprocessors.
* AMD agrees that it has no right to copy any other
Intel microcode including the Pentium(tm)
Processor, P6 microcode and 486 ICE (in circuit
emulation) microcode.
* The companies will negotiate a new patent
cross-license agreement to become effective
1/1/96.
* Intel will receive $58 million as settlement for
past damages in the 486 ICE case. As ordered in
the 1992 arbitration between the two companies,
Intel will pay AMD approximately $18 million
(which includes interest) awarded by the
arbitrator for breach of contract and will not
contest the rights granted AMD in the
arbitration award.
* Intel and AMD will drop all cases including
appeals currently in the courts.
* AMD will drop its antitrust case against Intel.
* AMD will have the right to use foundries for
Am486(tm) products containing Intel microcode for
up to 20% of its 486 production.
* AMD and its customers will get a license on
Intel's "Crawford `338" patent, covering memory
management.
* The two companies will agree not to initiate legal
action against one another for any activity
occurring prior to January 6, 1995.
The two companies said they have been in negotiations for 4
months. The talks were suggested by Judge Magistrate Patricia
Trumbull of the U.S. District Court in San Jose, who presided in
the 386 and 486 cases.
In a joint statement, Richard Previte, president and chief
operating officer of AMD, and Craig Barrett, executive vice
president and chief operating officer of Intel, said "We are
pleased to reach an agreement that will enable the two companies
to concentrate on competing in the marketplace, not the courts.
This is clearly in the best interests of our customers, our
stockholders and the PC marketplace." Messrs. Previte and
Barrett were the lead negotiators of the agreement.
AMD is the fifth-largest U.S. manufacturer of integrated
circuits. Focusing on the personal and networked computing and
communications markets, AMD produces micrprocessors and related
peripherals, memories, programmable logic devices and circuits
for telecommunications and networking applications.
Intel, the world's largest chip maker, is also a leading
manufacturer of personal computer, networking and communications
products.
Exhibit 99.2
CONTACTS: Howard High
Press Relations
(408) 765-1488
Scott Nirenberski
Investor Relations
(408) 765-8418
INTEL 1994 REVENUE, EARNINGS PER SHARE SET RECORDS
Q4 Results impacted by a $475 million charge
SANTA CLARA, Calif., January 17, 1995 -- Driven by a robust personal computer
market, Intel Corporation's 1994 revenue and earnings per share set new records,
the company announced today.
Revenue totaled $11.52 billion, up 31% from $8.78 billion for 1993. As a
result of a one-time pretax charge of $475 million, net income decreased
slightly to $2.29 billion, from $2.30 billion for the previous year. After the
charge, which amounted to $0.70 per share, earnings per share increased to $5.24
from $5.20 per share for 1993.
Fourth quarter revenue of $3.23 billion, up 35% from $2.39 billion a year
ago, marked the first quarter in which Intel's revenue exceeded $3 billion. Net
income totaled $372 million, down 37% from $594 million for the fourth quarter
of 1993. Post-charge earnings per share were $0.86, versus $1.35 a year
earlier.
The fourth quarter results announced today compare with third quarter
revenue of $2.86 billion, and net income of $659 million or $1.52 per share.
Third quarter pretax income benefited from $45 million of non-recurring items or
approximately $0.07 earnings per share.
Fourth quarter 1994 revenue and cost of sales were impacted by a one-time
charge taken to cover replacement and other costs associated with a divide
problem in the floating point unit of the company's Pentium(tm) processor. As a
result, fourth quarter gross margin was reduced by $475 million. This charge
resulted in a $0.70 per share impact to fourth quarter and 1994 earnings per
share.
Based on Intel's analysis, the problem can result in reduced precision in
floating point divide operations once in every nine billion random number pairs.
n December, the company offered to replace the processor for any PC owner whose
system is based on this version of the Pentium processor.
The charge covers replacement costs, replacement material and writedown of
the company's inventory of the earlier versions of Pentium processors. The
company said it believed the charge announced today will be sufficient to cover
all associated costs.
In 1994, Intel repurchased a total of 10.9 million shares of common stock
at a cost of $658 million under its stock repurchase program.
President and Chief Executive Officer Andrew S. Grove, said, "Demand was
very strong for both Pentium and Intel486(tm) processors during the holiday
season. Unit shipments of the Pentium processor approximately doubled versus
the previous quarter and we expect continued strong growth in the first quarter
of 1995.
"We have done a very rapid manufacturing cutover to the updated version of
the Pentium processor, and currently all Pentium processor shipments are of the
updated version. We were able to make this very rapid transition because
Intel's manufacturing operation performed so well. The usual holiday shutdowns
were canceled and the group pulled out all the stops to ramp production of the
updated version.
"The replacement program is complex. We serve hundreds of manufacturers of
Pentium processor-based systems worldwide. They use a variety of heat sinks,
sockets and motherboards, and we offer five speed selections of Pentium
processors in various packages. Almost overnight, we created an infrastructure
to serve thousands of callers daily, and to get the right replacement processor
in their machines as quickly as possible. Our people are working hard to make
this happen.
"The Pentium processor divide problem has been a learning experience for
Intel. In the end, I think it will strengthen the company by improving our
policies and infrastructure for serving consumers with a wide range of computing
needs," Dr. Grove said.
BUSINESS UPDATE
- ---------------
Processor Products
- ------------------
Key Q4 1994 developments in the company's processor products business
include the following:
* Unit volume of microprocessor shipments set a new quarterly record.
* In spite of very strong Intel486 bookings in the fourth quarter, the dollar
volume of fourth quarter Pentium processor bookings was larger than bookings
of the Intel486 chip for the first time.
* The company said approximately 23% of its fourth quarter processor unit
shipments for the desktop computer market segment were represented by the
Pentium processor.
* The 100-MHz Pentium processor moved into volume production during the
quarter.
* Intel achieved its goal of doubling microprocessor performance at major PC
price points in 1994. For example, during the December 1993 holiday season
the consumer was able to purchase a PC based on the Intel486 DX2-50MHz
processor with 4 megabytes of RAM, a 200 megabyte hard disk drive and monitor
for about $2,000. In the December 1994 holiday season that same $2,000 would
enable the consumer to purchase a PC based on the 60-MHz Pentium processor
with 8 megabytes of RAM, a 400+ megabyte hard disk drive and monitor.
* Quarterly unit volume of PC board shipments set a new Intel record. The
company expects quarterly unit volume of PC board shipments to continue to
increase in 1995.
* At the 1994 Comdex Computer show, NEC Corporation, Texas Instruments
Incorporated, and Toshiba Corp. demonstrated new PC notebook products based
on the 75-MHz Pentium processor. To date, 28 companies have announced plans
to produce mobile PCs based on the Pentium processor.
* Intel's Scalable Systems Division set a new world supercomputing record. The
Paragon(tm) XP/S MP supercomputer at Oak Ridge National Laboratory, employing
6,768 Intel I860(R) XP processors, performed in excess of 281 billion
instructions per second on certain applications. This represents a
performance increase of over 50% from the prior speed record.
Communications & Network Products
- ---------------------------------
In the fourth quarter Intel announced new products and enhanced capability
for its ProShare(tm) personal conferencing family. The ProShare Video System
200 now includes the capability to conduct video conferences over local area
networks (LAN) in addition to ISDN (integrated services digital network)
networks. Intel also introduced an extension of its LANDesk(tm) Manager family
that allows network administrators to manage the deployment of video
conferencing over existing corporate networks. In its December 94 issue, PC
Computing selected LANDesk manager software as the 1994 most valuable product in
networking management.
Intel acquired certain assets of Shany Computers, Ltd. this quarter.
Shany's flagship AlertVIEW(R) product detects, diagnoses, and corrects LAN-based
PC software application errors across a wide spectrum of networking
environments. The acquired assets will further Intel's end-to-end network
management strategy by complementing the company's PC LAN management LANDesk
product family.
Semiconductor Products
- ----------------------
Sales of Intel's flash memory products reached a new record in the fourth
quarter as Intel continued to be the number one supplier of flash memory chips
in the world. Applications for flash memory in wireless communications and
networking products have been the principal drivers of growth in Intel's flash
memory business in recent quarters. Intel also announced two 16-megabit
embedded flash RAM devices featuring high-performance interfaces that allow both
code storage and direct data execution.
During the fourth quarter, Intel introduced new microcontrollers based on
the MCS(R) 251 architecture. These new 8-bit microcontrollers are expected to
give customers a 5-15 times performance improvement over current 8-bit devices
while preserving full compatibility with existing system design and support
software.
Geographic Review
- -----------------
Intel's revenue breakdown by major geographic regions is summarized below:
Q4 93 Q3 94 Q4 94
Percent of revenue
by geographic area
Americas 45 53 48
Europe 33 23 32
Asia Pacific 14 15 12
Japan 8 9 8
Bookings for the fourth quarter were slightly greater than billings due to
a robust PC market. Fourth quarter 1994 bookings set a record.
A healthy rebound in European sales in the fourth quarter and growth in the
Americas market drove the revenue increase. Sales in the Asia-Pacific and Japan
markets were down from the prior quarter.
Manufacturing Review
- --------------------
The company has successfully transitioned to the new stepping needed to
produce the updated version of the Pentium processor without the floating point
divide problem.
Fab 5 in Oregon converted its existing six-inch wafer, 0.8-micron capacity
to six-inch wafer, 0.6- micron technology. The converted Fab 5 was qualified
for production and began shipping volume quantities of advanced Intel486 and
Pentium processors in the fourth quarter. Conversion of existing six-inch
wafer, 0.8-micron capacity to advanced 0.6-micron capacity continues at Fab 9 in
New Mexico.
The company completed a project to upgrade Fab D1, in Aloha, Oregon to a
full production facility. Fab D1, which features the next generation
0.35-micron process technology, will begin to ramp shortly. Additional
state-of-the-art 0.35-micron capacity is being readied at Fab 11 in New Mexico.
During the fourth quarter Intel announced and began major expansions in its
production and process technology research and development (R&D) facilities.
The company began the expansion of its Fab D2 production facility in Santa Clara
that will roughly double the size of the existing facility. The company also
broke ground on a new R&D facility in Oregon known as Fab D1b. Fab D1b will
initially serve as a home for Oregon's Portland Technology Development
operation, which creates the manufacturing recipes for future Intel chips.
The plant will develop technologies in the sub-0.25-micron range and later be
converted into a manufacturing facility.
Marketing Review
- ----------------
Intel continued its Pentium processor merchandising campaign during the
fourth quarter with extensive television advertisements and cooperative
advertising in retail stores.
Intel's "Passport To The World" exhibit at the Comdex computer show and
Consumer Electronics show in Las Vegas featured a six minute presentation of
some of the latest PC applications, including ProShare video conferencing, and
CNN-At-Work*, running on Pentium processor-based systems in real-world
situations.
FINANCIAL REVIEW
- ----------------
Income Statement
- ----------------
Q4 1994 net revenue was up 13% from Q3 1994, driven by higher revenue from
Pentium processors, and board-level products. Fourth quarter revenue was
reduced slightly by the revenue portion of the charge for Pentium processors
with the floating point divide problem.
Cost of sales in Q4 1994 increased 59% from Q3 1994, driven by a one-time
charge to cover costs related to inventory writedown and replacement of Pentium
processors containing the floating point divide problem, and higher volumes of
board-level products. Primarily as a result of these items, gross margin
percentage decreased 18 percentage points and gross margin dollars decreased by
$385 million from Q3 1994.
Q4 1994 total expenses increased 11% from Q3 1994. Marketing, general and
administrative expenses increased $64 million primarily as a result of
expenditures for the Pentium processor merchandising campaign.
Interest and other income was $67 million. The company expects interest
and other income to be in the $65 million range for Q1 1995, subject to
prevailing interest rates and excluding the litigation settlement with Advanced
Micro Devices, Inc. The tax rate throughout 1994 was 36.5%. For 1995, the
company expects its tax rate to be 37.0%.
Shares and equivalents used in the calculation of earnings per share
decreased primarily as a result of the stock repurchase program. Shares and
equivalents are summarized below:
(millions of shares)
1993 1994
Q3 94 Q4 94 Year Year
Average Outstanding 413 413 418 415
Equivalents 21 20 23 22
Total 434 433 441 437
Balance Sheet
Intel's net cash position (short- and long-term investments less short- and
long-term debt) increased by $256 million in Q4 1994 to $3.63 billion.
Significant components of the changes in cash for Q4 1994 and year-to-date are
summarized below:
Increase/(Decrease)
(in millions)
Twelve Months ended
Q4 94 December 31, 1994
Net income $372 $2,288
Depreciation 282 1,028
Capital spending (760) (2,441)
Working capital
and other, net 461 (415)
Put warrant proceeds, net 11 76
Stock repurchase program (111) (658)
Sales of shares to employees,
including tax benefit 26 215
Redemption of stock
purchase rights - (2)
Dividends paid (25) (92)
Total change $256 $ (1)
Net inventories decreased $209 million in the quarter to $1.17 billion.
The decrease was primarily due to the writedown of inventories of Pentium
processors containing the floating point divide problem.
Inventories
(in millions)
October 1, 1994 December 31, 1994
Raw material $ 347 $ 345
Work in process 668 528
Finished goods 363 296
Total net inventories $1,378 $1,169
Capital spending was $760 million and depreciation was $282 million in Q4
1994. For 1994, capital spending was $2.44 billion and depreciation was $1.03
billion. The company expects 1995 capital spending to be about $2.9 billion and
1995 depreciation to be about $1.4 billion.
Accounts receivable increased by $69 million in the quarter primarily as a
result of record billings. The company's average-days-sales-outstanding was 48
at the end of Q4 1994 compared with 45 at the end of Q3 1994.
During Q4 1994, the company repurchased 1.8 million shares of common stock
at a cost of $111 million (including $65 million to repurchase 1.0 million
shares in connection with the exercise of 1.0 million put warrants) and sold an
additional 2.0 million put warrants for proceeds of $11 million. As of December
31, 1994, the company's potential put warrant obligation was $744 million to buy
back 12.5 million shares of common stock. Of the total 55.0 million shares
authorized for repurchase, approximately 24.6 million shares have been
repurchased and 17.9 million shares of common stock remained available for
repurchase under the stock repurchase program, after reserving shares to cover
outstanding put warrants.
Activity during the quarter related to put warrants and stock buybacks is
as follows:
<TABLE>
Increase/(Decrease)
(millions of shares)
(Less)
Available For Allocated To Net
Stock Buybacks Put Warrants Available
<S> <C> <C> <C>
10/1/94 32.2 11.5 20.7
Put warrant sales - 2.0 (2.0)
Stock buyback (0.8) - (0.8)
Put warrant exercises (1.0) (1.0) -
12/31/94 30.4 12.5 17.9
</TABLE>
Stockholders' equity increased by $215 million in Q4 1994. Changes in
equity for Q4 and the 1994 year are summarized as follows:
<TABLE>
Increase/(Decrease)
(in millions)
Twelve Months ended
Q4 1994 December 31, 1994
<S> <C> <C>
Net income $ 372 $2,288
Put warrant proceeds 11 76
Reclass of put warrant
obligation, net (122) (121)
Repurchase of stock (46) (593)
Dividends declared (25) (95)
Redemption of stock
purchase rights - (2)
Sales of shares to employees,
plus tax benefit and other 25 214
Total increase $ 215 $1,767
</TABLE>
Key Microprocessor Prices
- -------------------------
(1,000 unit prices)
Pentium Processor. Q4 94 Jan 3, 1995***
100 MHz $935 $905
90 MHz $587 $587
75 MHz (TCP) $495 $495
66 MHz **$479 $479
60 MHz **$383 $383
IntelDX4(tm)
100 MHz $459 $449
75 MHz $382 $356
IntelDX2(tm)
66 MHz $199 $158
50 MHz (SQFP) $149 $102
40 MHz (SQFP) $149 $102
Intel486 DX
33 MHz (PQFP) $149 $102
IntelSX2
50 MHz $102 $ 75
Intel486 SX
33 MHz $ 85 $ 83
25 MHz $ 78 $ 77
** These Q4 1994 prices were effective 10/31/94.
*** New prices are expected to be released in February.
Copies of this earnings release can be obtained by calling Intel's transfer
agent, Harris Trust, at 1-800-298-0146 or through the following on-line
services: CompuServe* (GO: Intel), and the Internet
(Address: http://www.intel.com).
Intel, the world's largest chip maker, is also a leading manufacturer of
personal computer, networking and communications products.
*Other brands or products are trademarks or registered trademarks of their
respective holders.
<TABLE>
INTEL CORPORATION
-----------------
CONSOLIDATED SUMMARY FINANCIAL STATEMENTS
-----------------------------------------
(Millions, except per share amounts)
------------------------------------
INCOME STATEMENT 3 Months Ended 12 Months Ended
Dec. 31, Dec. 25, Dec. 31, Dec. 25,
1994 1993 1994 1993
------- -------- ------- --------
<S> <C> <C> <C> <C>
NET REVENUE $ 3,228 $ 2,389 $11,521 $ 8,782
------- -------- ------- --------
Cost of Sales 2,023 935 5,576 3,252
Research and Development 285 262 1,111 970
Marketing, General
and Administrative 402 333 1,447 1,168
------- -------- ------- --------
Operating Costs and Expenses 2,710 1,530 8,134 5,390
------- -------- ------- --------
OPERATING INCOME 518 859 3,387 3,392
Interest and Other 67 55 216 138
------- -------- ------- --------
INCOME BEFORE TAXES 585 914 3,603 3,530
Income Taxes 213 320 1,315 1,235
------- -------- ------- --------
NET INCOME $ 372 $ 594 $ 2,288 $ 2,295
======= ======== ======= ========
EARNINGS PER SHARE $ 0.86 $ 1.35 $ 5.24 $ 5.20
======= ======== ======= ========
COMMON SHARES AND EQUIVALENTS 433 441 437 441
</TABLE>
<TABLE>
- --------------------------------------------------------------------
BALANCE SHEET At At
(millions) Dec. 31, Dec. 25,
1994 1993
- --------------------------------------------------------------------
CURRENT ASSETS
- --------------
<S> <C> <C>
Cash and Short-Term
Investments $ 2,410 $ 3,136
Accounts Receivable 1,978 1,448
Inventories 1,169 838
Deferred Tax Assets and Other 610 380
------- -------
Total Current Assets 6,167 5,802
Property, Plant and
Equipment, Net 5,367 3,996
Long-Term Investments 2,127 1,416
Other Assets 155 130
------- -------
TOTAL ASSETS $13,816 $11,344
======= =======
CURRENT LIABILITIES
- -------------------
Short-Term Debt $ 517 $ 497
Accounts Payable and Accrued
Liabilities 1,809 1,345
Deferred Income on Shipments
to Distributors 269 200
Income Taxes Payable 429 391
------- -------
Total Current Liabilities 3,024 2,433
------- -------
LONG-TERM DEBT 392 426
------- -------
DEFERRED TAX LIABILITIES 389 297
------- -------
PUT WARRANTS 744 688
------- -------
STOCKHOLDERS' EQUITY
- --------------------
Common Stock and Capital
in Excess of Par Value 2,306 2,194
Retained Earnings 6,961 5,306
------- -------
Total Stockholders' Equity 9,267 7,500
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $13,816 $11,344
======= =======
</TABLE>
