UNITED STATES 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: April 14, 1998
(Date of earliest event reported)
INTEL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 0-6217 94-1672743
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) file number) Identification No.)
2200 Mission College Boulevard, Santa Clara, California 95052-8119
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(Address of principal executive offices) (Zip Code)
(408) 765-8080
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(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 5. OTHER EVENTS
5.1 Attached hereto as Exhibit 99.1 and incorporated by reference
herein is financial information for Intel Corporation for the
quarter ended March 28, 1998 and forward-looking statements
relating to 1998, the 2nd Quarter of 1998 and the 2nd Half
of 1998, as presented in a press release of April 14, 1998.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(c) Exhibits
99.1 Financial information for Intel Corporation for the quarter
ended March 28, 1998 and forward-looking statements relating to
1998, the 2nd Quarter of 1998 and the 2nd Half of 1998
<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
(Registrant)
Date: April 14, 1998 By: /s/ Andy D. Bryant
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Andy D. Bryant
Vice President, Chief Financial
Officer and Principal Accounting
Officer
EXHIBIT 99.1
SANTA CLARA, Calif., April 14, 1998 - Weaker than anticipated demand,
particularly from OEM customers, led to lower first quarter revenue and
earnings for Intel Corporation, the company said today. Weaker demand
resulted in lower sequential revenue in the Americas, Japan and Europe. First
quarter revenue in Asia-Pacific was up from the fourth quarter of 1997.
For the quarter, over one half of microprocessor revenue was generated
from P6 micro-architecture products, led by the continued rapid market
acceptance of the Pentium(R) II processor.
First quarter revenue was $6.0 billion, down 7 percent from first
quarter 1997 revenue of $6.4 billion, and down 8 percent from fourth quarter
1997 revenue of $6.5 billion.
Net income in the first quarter was $1.3 billion, down 36 percent from
first quarter 1997 net income of $2.0 billion, and down 27 percent from
fourth quarter 1997 net income of $1.7 billion. First quarter net income
included a non-deductible one time charge to earnings of approximately $165
million, or $.09 per share, for in-process research and development associated
with the acquisition of Chips and Technologies, Inc.
Earnings per share in the first quarter declined to $0.72 from
$1.10 in the first quarter of 1997, a decrease of 35 percent. Earnings per
share in the first quarter were down 27 percent from $0.98 in the fourth
quarter of 1997. Earnings per share for the first quarter include the impact
of the one time charge mentioned above.
"This was a disappointing quarter," said Dr. Andrew S. Grove, chairman
and chief executive officer. "The PC industry seems to have gotten ahead of
itself, building more product than end-customers purchased."
"We will, however, not let this diminish our conviction that our
business, providing building blocks for a universe of connected computers,
provides the foundation of the new technological world. We invest in our
products, production facilities and programs guided by that conviction."
In the first quarter, the company repurchased a total of 22.1 million
shares of common stock at a cost of $1.8 billion under an ongoing program.
Since the program began in 1990, the company has repurchased 235.5 million
shares at a total cost of $8.6 billion. In March, Intel's Board of Directors
approved an increase in the stock buyback program of 100 million shares. With
this increase, a total of 129.7 million shares can now be repurchased under the
program, after allowing for shares to cover outstanding put warrants.
In the first quarter, approximately 78 million 1998 Step-Up Warrants were
exercised and converted to common stock. Proceeds from the exercise of the
warrants were approximately $1.6 billion.
During the quarter, the company announced its regular quarterly cash
dividend of $0.03 per share. The dividend is payable on June 1, 1998 to
stockholders of record on May 1, 1998. Intel has paid a quarterly dividend
for over five years.
BUSINESS OUTLOOK
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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 or acquisitions
that may be completed after the date of this release, except the previously
announced transaction with Digital Equipment Corporation.
** The company expects revenue for the second quarter of 1998 to be flat to
slightly down with first quarter revenue of $6.0 billion. The company expects
sequential revenue growth to resume in the second half of 1998.
** Gross margin percentage in the second quarter of 1998 is expected to be down
a few points from 54 percent in the first quarter, primarily the result of
purchased components used on the SEC cartridge for the Pentium II processor.
The company expects the quarterly gross margin percentage to reach its lowest
level for the year in the second quarter. Intel's gross margin expectation for
1998 is 52 percent, plus or minus a few points. In the short-term, Intel's
gross margin percentage varies primarily with revenue levels and product mix.
** The company still believes that over the long-term, the gross margin
percentage will be 50 percent plus or minus a few points. Intel's long-term
gross margin percentage will vary depending on product mix.
** Expenses (R&D plus MG&A) in the second quarter of 1998 are expected to be
approximately 3 to 5 percent higher than first quarter expenses of $1.3
billion. The $1.3 billion represents first quarter expenses excluding $165
million for in process R&D associated with the acquisition of Chips and
Technologies, Inc. Expenses are dependent in part on the level of revenue.
** Additionally, the company expects to reduce headcount by approximately
3,000 people over the next 6 months predominantly through attrition, augmented
by localized reductions in workforce. Where such reductions occur, every
attempt will be made to place affected employees in other parts of the company.
** R&D spending is expected to be approximately $2.8 billion for 1998, up
from $2.3 billion in 1997 and down from previous guidance of $3.0 billion.
This estimate includes approximately $165 million for in process R&D associated
with the acquisition of Chips and Technologies, Inc.
** The company expects interest and other income for the second quarter of
1998 to be approximately $160 million assuming no significant changes in
interest rates or expected cash balances, and no unanticipated items.
** The tax rate for the remaining quarters of 1998 is expected to be 33.0
percent. Tax rate guidance for 1998 has been lowered from previous guidance
of 34.0 percent.
** Capital spending for 1998 is expected to be approximately $5.0 billion, up
from $4.5 billion in 1997, but down from previous guidance for the year of
$5.3 billion.
** Depreciation is expected to be approximately $2.9 billion for 1998, up from
$2.2 billion in 1997 and higher than previous guidance for 1998 of $2.7
billion. Depreciation in the second quarter of 1998 is expected to be
approximately $690 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, including changes in customer and channel inventory
levels; changes in the mixes of microprocessor types and speeds, motherboards,
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; excess or obsolete inventory and variations
in inventory valuation; timing of software industry product introductions;
continued success in technological advances, including development and
implementation of new processes and strategic products for specific market
segments; execution of the manufacturing ramp; excess or shortage of
manufacturing capacity; the ability to successfully integrate and operate any
acquired businesses; unanticipated costs or other adverse effects associated
with processors and other products containing errata (deviations from published
specifications); litigation involving 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-K for the year
ended December 27, 1997 (Part II, Item 7, Outlook section).
INTEL CORPORATION
CONSOLIDATED SUMMARY FINANCIAL STATEMENTS
(In millions, except per share amounts)
<TABLE>
INCOME 3 Months Ended
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March 28, March 29,
1998 1997
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<S> <C> <C>
NET REVENUE $ 6,001 $ 6,448
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Cost of sales 2,749 2,307
Research and development 595 581
Marketing, general and administrative 711 693
Purchased in-process research and development 165 -
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Operating costs and expenses 4,220 3,581
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OPERATING INCOME 1,781 2,867
Interest and other 200 208
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INCOME BEFORE TAXES 1,981 3,075
Income taxes 708 1,092
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NET INCOME $ 1,273 $ 1,983
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BASIC EARNINGS PER SHARE $ 0.78 $ 1.21
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DILUTED EARNINGS PER SHARE $ 0.72 $ 1.10
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COMMON SHARES OUTSTANDING 1,641 1,638
COMMON SHARES ASSUMING DILUTION 1,775 1,800
</TABLE>
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<TABLE>
BALANCE SHEET At At
March 28, Dec. 27,
1998 1997
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<S> <C> <C>
CURRENT ASSETS
Cash and short-term investments $10,609 $ 9,927
Accounts receivable 3,092 3,438
Inventories:
Raw materials 254 255
Work in process 1,035 928
Finished goods 532 514
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1,821 1,697
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Deferred tax assets and other 750 805
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Total current assets 16,272 15,867
Property, plant and equipment, net 11,137 10,666
Long-term investments 2,082 1,839
Other assets 738 508
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TOTAL ASSETS $30,229 $28,880
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CURRENT LIABILITIES
Short-term debt $ 365 $ 322
Accounts payable and accrued liabilities 3,454 4,017
Deferred income on shipments to distributors 516 516
Income taxes payable 1,519 1,165
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Total current liabilities 5,854 6,020
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LONG-TERM DEBT 441 448
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DEFERRED TAX LIABILITIES 1,164 1,076
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PUT WARRANTS 1,185 2,041
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STOCKHOLDERS' EQUITY
Common Stock and
capital in excess of par value 4,955 3,311
Retained earnings 16,630 15,984
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Total stockholders' equity 21,585 19,295
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $30,229 $28,880
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</TABLE>
