<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934
For the quarterly period ended June 26, 1999
OR
--- Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number 0-6217
INTEL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-1672743
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2200 Mission College Boulevard, Santa Clara, California 95052-8119
- ------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(408) 765-8080
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address, and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Shares outstanding of the Registrant's common stock:
Class Outstanding at June 26, 1999
Common Stock, $.001 par value 3,308 million
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------- ------------------------
June 26, June 27, June 26, June 27,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $ 6,746 $ 5,927 $ 13,849 $ 11,928
Costs and expenses:
Cost of sales 2,771 3,027 5,683 5,776
Research and development 731 623 1,394 1,218
Marketing, general and administrative 924 671 1,815 1,382
Purchased in-process research and development -- -- -- 165
------- ------- ------- -------
Operating costs and expenses 4,426 4,321 8,892 8,541
------- ------- ------- -------
Operating income 2,320 1,606 4,957 3,387
Interest expense (11) (8) (20) (15)
Interest income and other, net 301 152 657 359
------- ------- ------- -------
Income before taxes 2,610 1,750 5,594 3,731
Provision for taxes 861 578 1,846 1,286
------- ------- ------- -------
Net income $ 1,749 $ 1,172 $ 3,748 $ 2,445
======= ======= ======= =======
Basic earnings per common share $ 0.53 $ 0.35 $ 1.13 $ 0.73
======= ======= ======= =======
Diluted earnings per common share $ 0.51 $ 0.33 $ 1.08 $ 0.69
======= ======= ======= =======
Cash dividends declared per
common share $ -- $ -- $ 0.05 $ 0.015
======= ======= ======= =======
Weighted average common shares outstanding 3,310 3,382 3,317 3,332
Dilutive effect of:
Employee stock options 136 155 145 166
1998 Step-Up Warrants -- -- -- 45
------- ------- ------- -------
Weighted average common shares outstanding,
assuming dilution 3,446 3,537 3,462 3,543
======= ======= ======= =======
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
INTEL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
June 26, Dec. 26,
1999 1998
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,599 $ 2,038
Short-term investments 6,652 5,272
Trading assets 358 316
Accounts receivable, net 3,265 3,527
Inventories:
Raw materials 222 206
Work in process 947 795
Finished goods 594 581
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1,763 1,582
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Deferred tax assets 659 618
Other current assets 177 122
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Total current assets 16,473 13,475
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Property, plant and equipment 21,998 21,068
Less accumulated depreciation 10,586 9,459
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Property, plant and equipment, net 11,412 11,609
Long-term investments 3,453 5,365
Other assets 1,463 1,022
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TOTAL ASSETS $32,801 $31,471
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 135 $ 159
Accounts payable 1,354 1,244
Accrued compensation and benefits 963 1,285
Deferred income on shipments to distributors 499 606
Accrued advertising 505 458
Other accrued liabilities 1,018 1,094
Income taxes payable 643 958
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Total current liabilities 5,117 5,804
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Long-term debt 666 702
Deferred tax liabilities 1,546 1,387
Put warrants -- 201
Stockholders' equity:
Preferred stock -- --
Common stock and capital in excess
of par value 4,819 4,822
Retained earnings 19,523 17,952
Accumulated other comprehensive income 1,130 603
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Total stockholders' equity 25,472 23,377
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $32,801 $31,471
======= =======
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
INTEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in millions)
<TABLE>
<CAPTION>
Six Months Ended
----------------
June 26, June 27,
1999 1998
---- ----
<S> <C> <C>
Cash flows provided by (used for) operating activities:
Net income $ 3,748 $ 2,445
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,583 1,304
Net loss on retirements of property, plant and equipment 87 89
Deferred taxes (139) 105
Purchased in-process research and development -- 165
Changes in assets and liabilities:
Accounts receivable 343 337
Inventories (170) 46
Accounts payable 107 (332)
Accrued compensation and benefits (333) (385)
Income taxes payable (316) (993)
Tax benefit from employee stock plans 279 181
Other assets and liabilities (1,014) (489)
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Total adjustments 427 28
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Net cash provided by operating activities 4,175 2,473
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Cash flows provided by (used for) investing activities:
Additions to property, plant and equipment (1,441) (2,206)
Purchase of Shiva Corporation, net of cash acquired (132) --
Purchase of Chips and Technologies, Inc., net of cash acquired, and Digital
Equipment Corporation semiconductor operations -- (946)
Purchases of available-for-sale investments (3,305) (4,528)
Sales of available-for-sale investments 386 46
Maturities and other changes in available-for-sale
investments 4,554 4,717
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Net cash provided by (used for) investing activities 62 (2,917)
------- -------
Cash flows provided by (used for) financing activities:
Decrease in short-term debt, net (24) (80)
Additions to long-term debt 27 34
Proceeds from sales of shares through employee stock plans and other 286 259
Proceeds from exercise of 1998 Step-Up Warrants -- 1,620
Proceeds from sales of put warrants -- 27
Repurchase and retirement of common stock (2,798) (3,531)
Payment of dividends to stockholders (167) (100)
------- -------
Net cash used for financing activities (2,676) (1,771)
------- -------
Net increase (decrease) in cash and cash equivalents $ 1,561 $(2,215)
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 20 $ 18
Income taxes $ 2,009 $ 1,989
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
Certain 1998 amounts have been reclassified to conform to the 1999 presentation.
4
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
INTEL CORPORATION, NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -
UNAUDITED
1. The accompanying interim consolidated condensed financial statements of
Intel Corporation ("Intel," the "Company" or the "Registrant") have been
prepared in conformity with generally accepted accounting principles,
consistent in all material respects with those applied in the Annual Report
on Form 10-K for the year ended December 26, 1998. The interim financial
information is unaudited, but reflects all normal adjustments which are, in
the opinion of management, necessary to provide a fair statement of results
for the interim periods presented. The interim financial statements should
be read in connection with the financial statements in the Company's Annual
Report on Form 10-K for the year ended December 26, 1998. All share, per
share and warrant amounts have been restated to reflect the effect of the
two-for-one stock split paid on April 11, 1999.
2. As of the second quarter of 1998, the Company adopted a new dividend
declaration schedule which results in the Board of Directors considering
two dividend declarations in the first and third quarters of the year and
no declarations in each of the second and fourth quarters of the year. The
new declaration schedule does not change the Company's historical quarterly
dividend payment schedule. In keeping with this new schedule, the Board of
Directors made two dividend declarations in the first quarter of 1999, and
none in the second quarter. During 1998, the Board of Directors made one
dividend declaration in the first quarter and none in the second quarter.
On July 21, 1999, subsequent to the end of the second quarter, the Board of
Directors declared a dividend of $0.03 per share payable on September 1,
1999 to stockholders of record on August 7, 1999.
3. Interest income and other, net includes (in millions):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 26, June 27, June 26, June 27,
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Interest income $ 148 $ 143 $ 304 $ 303
Foreign currency gains - 3 2 3
Other income, net 153 6 351 53
----- ----- ----- -----
Total $ 301 $ 152 $ 657 $ 359
===== ===== ===== =====
</TABLE>
Other income for all periods presented consists primarily of gains on sales
of equity investments.
4. The components of comprehensive income, net of tax, are as follows (in
millions):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 26, June 27, June 26, June 27,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 1,749 $ 1,172 $ 3,748 $ 2,445
Change in net unrealized gain on
available-for-sale investments 260 61 527 158
------- ------- ------- -------
Total $ 2,009 $ 1,233 $ 4,275 $ 2,603
======= ======= ======= =======
</TABLE>
Accumulated other comprehensive income presented in the accompanying
consolidated condensed balance sheets consists of the accumulated net
unrealized gain on available-for-sale investments.
5. During the first half of 1999, the Company repurchased 46 million shares of
Common Stock under the Company's authorized repurchase program at a cost of
$2.8 billion. As of June 26, 1999 approximately 125.4 million shares
remained available for repurchase under the program.
5
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
INTEL CORPORATION, NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -
UNAUDITED (CONTINUED)
6. In a series of private placements during the 1991-1998 period, the Company
sold put warrants that entitle the holder of each warrant to sell to the
Company, by physical delivery, one share of Common Stock at a specified
price. The remaining 5 million put warrants that were outstanding at
December 26, 1998 expired unexercised in the first quarter of 1999.
7. In the first quarter of 1999, Intel had two reportable segments under the
criteria of Statement of Financial Accounting Standards ("SFAS") No. 131,
"Disclosures about Segments of an Enterprise and Related Information": the
Intel Architecture Business Group and the Computing Enhancement Group.
During the second quarter of 1999, Intel changed the structure of its
internal organization, moving the chipset operation and the graphics chips
operation to the Intel Architecture Business Group from the Computing
Enhancement Group. This change was made to better align the product
planning and marketing strategies of the Company's component operations. As
a result, the second quarter information has been presented with the Intel
Architecture Business Group as the only remaining reportable segment.
Information for prior periods has been restated.
The Intel Architecture Business Group now includes microprocessors,
motherboards and other related board-level products, chipsets, and graphics
chips.
The "all other" category includes revenues and earnings (losses) from
non-reportable operating segments: the remaining embedded processor and
flash memory operations of the Computing Enhancement Group, the Network
Communications Group and the New Business Group. In addition, "all other"
includes certain corporate-level operating expenses (primarily the amount
by which profit-dependent bonus expenses differ from a targeted level
recorded by the segments) and the impact of reserves for deferred income on
shipments to distributors not allocated to operating segments. The income
recognized by the divisions on shipments to distributors is deferred and
reserved at the corporate level until the products are sold by the
distributors. The change in the reserve for deferred income on shipments to
the distributors reflects the difference between shipments to the
distributors and sales made by the distributors.
Information on reportable segments is as follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 26, June 27, June 26, June 27,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEL ARCHITECTURE BUSINESS GROUP:
Revenues $ 5,559 $ 5,240 $11,988 $10,655
Operating profit $ 2,305 $ 1,649 $ 5,249 $ 3,509
ALL OTHER:
Revenues $ 1,187 $ 687 $ 1,861 $ 1,273
Operating profit $ 15 $ (43) $ (292) $ (122)
TOTAL:
Revenues $ 6,746 $ 5,927 $13,849 $11,928
Operating profit $ 2,320 $ 1,606 $ 4,957 $ 3,387
</TABLE>
8. In February 1999, the Company acquired the outstanding shares of Shiva
Corporation, whose products include remote access and virtual private
networking solutions for the small to medium enterprise market segment and
the remote access needs of campuses and branch offices. The acquisition was
accounted for using the purchase method of accounting with a price of
approximately $185 million ($132 million in net cash). The operating
results subsequent to the acquisition have been included in the "all other"
category for segment reporting purposes as part of the Network
Communications Group.
6
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
INTEL CORPORATION, NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -
UNAUDITED (CONTINUED)
9. In March 1999, the Company announced that it had entered into a definitive
agreement to acquire Level One Communications, Inc. ("Level One"), in a
stock-for-stock merger agreement valued at approximately $2.2 billion.
Level One provides silicon connectivity solutions for high-speed telecom
and networking applications. Under the terms of the agreement, each share
of Level One stock would be exchanged for 0.86 shares of Intel stock. Intel
expects to issue at least 33.7 million shares of its common stock for
currently outstanding shares, but may issue as many as 39.9 million shares
if all vested Level One options and warrants are exercised and Level One's
convertible debt is converted prior to the merger. The completion of this
transaction is subject to a vote of Level One stockholders scheduled for
August 9, 1999, and other conditions customary in a transaction of this
type. This transaction is expected to be accounted for using the purchase
method of accounting.
In June of 1999, the Company announced that it had entered into a
definitive agreement to acquire Dialogic Corporation ("Dialogic") for $44
per share in a cash tender offer, and on July 12, the Company completed
this transaction. The transaction will be accounted for using the purchase
method of accounting, with an approximate purchase price of $830 million,
including the value of options converted to Intel options, and a net cash
purchase price of approximately $670 million. The acquisition is aimed at
expanding the Company's standard high-volume server business in the
networking and telecommunications market segment. Dialogic designs,
manufactures and markets computer hardware and software enabling technology
for computer telephony systems.
Subsequent to the end of the second quarter, the Company acquired privately
held Softcom Microsystems, Inc. ("Softcom") in a cash transaction. The
total purchase price was approximately $150 million. Softcom develops and
markets semiconductor products for original equipment manufacturers in the
networking and communications market segments. Softcom's high-performance
components are designed for networking gear (access devices, routers, and
switches) used to direct voice and data across the Internet as well as
traditional enterprise networks. This transaction will be accounted for
using the purchase method of accounting.
10. In November 1997, Intergraph Corporation ("Intergraph") filed suit in
Federal District Court in Alabama generally alleging that Intel attempted
to coerce Intergraph into relinquishing certain patent rights. The suit
alleges that Intel infringes five Intergraph microprocessor-related patents
and includes alleged violations of antitrust laws and various state law
claims. The suit seeks injunctive relief and unspecified damages, and
further alleges that Intel's infringement is willful and that any damages
awarded should be trebled. The Company received a letter stating that
Intergraph believes that the patent damages will be "several billion
dollars by the time of trial." In addition, Intergraph claims that the
antitrust, unfair competition and tort and contract damages will be
"hundreds of millions of dollars by the time of trial." The Company
disputes Intergraph's claims and intends to defend the lawsuit vigorously.
Intel has also counterclaimed that the Intergraph patents are invalid, and
alleges infringement of seven Intel patents, breach of contract and
misappropriation of trade secrets. In April 1998, the Court ordered Intel
to continue to deal with Intergraph on the same terms as it treats
allegedly similarly situated customers with respect to confidential
information and product supply. Intel's appeal of this order was heard in
December 1998. In June 1998, Intel filed a motion for summary judgment on
Intergraph's patent claims on the grounds that Intel is licensed to use
those patents. In June 1999, the Court granted Intergraph's motion for
summary judgement that the patents asserted by Intergraph are not licensed
to Intel. Intel filed a motion for reconsideration and an alternative
request to certify the decision for appeal.
The Company is currently party to various legal proceedings, including that
noted above. While management, including internal counsel, currently
believes that the ultimate outcome of these proceedings, individually and
in the aggregate, will not have a material adverse effect on the Company's
financial position or overall trends in results of operations, litigation
is subject to inherent uncertainties. Were an unfavorable ruling to occur,
there exists the possibility of a material adverse impact on the net income
of the period in which the ruling occurs.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OPERATING SEGMENT REPORTING
During the second quarter of 1999, Intel changed the structure of its internal
organization, moving the chipset operation and the graphics chips operation to
the Intel Architecture Business Group from the Computing Enhancement Group. This
change was made to better align the product planning and marketing strategies of
the Company's component operations. As a result, the second quarter information
has been presented with the Intel Architecture Business Group as the only
remaining reportable segment. Information for prior periods has been restated.
The Intel Architecture Business Group now includes microprocessors, motherboards
and other related board-level products, chipsets, and graphics chips.
RESULTS OF OPERATIONS - SECOND QUARTER OF 1999 COMPARED TO SECOND QUARTER OF
1998
Intel's net revenues for Q2 1999 increased by 14% compared to Q2 1998. Net
revenues for the Intel Architecture Business Group operating segment increased
6% in Q2 1999 compared to Q2 1998. The increase was primarily due to higher unit
volumes of microprocessors partially offset by lower prices. Within the "all
other" category for operating segment reporting, revenues from sales of
networking products, embedded products, and flash memory grew between these
periods. In addition, the change in deferred income on shipments to
distributors, which is not allocated to operating segments, had a positive
impact on revenues in the "all other" category for Q2 1999 compared to Q2 1998.
The change in the reserve for deferred income on shipments to the distributors
reflects the difference between shipments to the distributors and sales made by
the distributors.
Sales of microprocessors and related board-level products based on the P6
microarchitecture, which are included in the Intel Architecture Business
Group's operations, comprised a majority of Intel's consolidated net revenues
and a substantial majority of gross margin in Q2 1999 and Q2 1998. Sales of
Pentium-Registered Trademark- family microprocessors were not significant in
Q2 1999, but represented a significant although declining portion of Intel's
net revenues and gross margins in Q2 1998.
Cost of sales decreased by 8% in Q2 1999 compared to Q2 1998 primarily due to
lower unit costs for microprocessors in Q2 1999 partially offset by higher unit
sales volumes. In addition, cost of sales in Q2 1998 included unusually high
inventory write-downs. The lower unit costs in Q2 1999 were achieved primarily
through redesigned microprocessor products with lower-cost packaging, including
packaging using fewer purchased components, as well as factory efficiencies and
lower purchase prices on the purchased components. The gross margin percentage
increased to 59% in Q2 1999, up from 49% in Q2 1998. The improvement in gross
margin was primarily a result of lower unit costs in the Intel Architecture
Business Group operating segment in Q2 1999, as well as the absence of the
unusually high inventory write-downs recognized in Q2 1998, partially offset by
the impact of lower prices in Q2 1999. See "Outlook" for a discussion of gross
margin expectations.
Research and development spending increased $108 million, or 17%, in Q2 1999
compared to Q2 1998, primarily due to increased spending on product
development programs. Marketing, general and administrative expenses
increased $253 million, or 38%, in Q2 1999 compared to Q2 1998, primarily due
to the Intel Inside-Registered Trademark- cooperative advertising program,
merchandising spending relating to new product launches and profit-dependent
bonus expenses. Operating expenses were 24.5% of net revenues in Q2 1999 and
21.8% of net revenues in Q2 1998.
Interest and other income increased to $301 million in Q2 1999 compared to $152
million in Q2 1998, primarily due to higher gains on sales of equity
investments.
The Company's effective income tax rate was 33% in Q2 1999 and Q2 1998.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - FIRST HALF OF 1999 COMPARED TO FIRST HALF OF 1998
Intel's net revenues for the first half of 1999 increased by 16% compared to
the first half of 1998. Net revenues for the Intel Architecture Business
Group operating segment increased 13% in the first half of 1999 compared to
the first half of 1998. The increase was primarily due to higher unit volumes
of microprocessors and a shift in mix toward processors based on the P6
microarchitecture, including the Intel-Registered Trademark- Celeron-TM- and
Pentium-Registered Trademark- III processors. Within the "all other" category
for operating segment reporting, revenues from sales of networking products
and flash memory grew between these periods. In addition, the change in
deferred income on shipments to distributors, which is not allocated to
operating segments, had a positive impact on revenues in the "all other"
category for the first half of 1999 compared to the first half of 1998.
Sales of microprocessors and related board-level products based on the P6
microarchitecture, which are included in the Intel Architecture Business Group's
operations, comprised a majority of Intel's consolidated net revenues and a
substantial majority of gross margin in the first half of 1999. For the first
half of 1998 these sales comprised a majority of Intel's consolidated net
revenues and gross margin. Sales of Pentium family microprocessors were not
significant in the first half of 1999, but represented a significant although
declining portion of Intel's net revenues and gross margins in the first half of
1998.
Cost of sales were essentially flat between the first half of 1999 and the first
half of 1998. In the Intel Architecture Business Group operating segment, lower
unit costs for microprocessors in the first half of 1999, and the absence of the
unusually high inventory write-downs recognized in the first half of 1998, were
offset by higher unit sales volumes in the first half of 1999. Gross margin
increased to 59% in the first half of 1999 from 52% in the first half of 1998
primarily due to the lower unit costs in the Intel Architecture Business Group
operating segment and the absence of the higher inventory write-downs recognized
in the first half of 1998. See "Outlook" for a discussion of gross margin
expectations.
Total spending on research and development was essentially flat between the
first half of 1999 and the first half of 1998. Increases in spending on product
development programs in the first half of 1999 were offset by the absence of the
charge of $165 million for in-process research and development related to the
acquisition of Chips and Technologies, Inc. taken in the first half of 1998.
Marketing, general and administrative expenses increased $433 million, or 31%,
in the first half of 1999 compared to the first half of 1998, primarily due to
the Intel Inside cooperative advertising program, merchandising spending
relating to new product launches and profit-dependent bonus expenses. Operating
expenses were 23.2% of net revenues in first half of 1999 and 21.8% of net
revenues in first half of 1998, excluding the effect of the in-process research
and development charge.
Interest and other income for the first half of 1999 increased by $298 million
over the prior year primarily due to higher gains on sales of equity investments
in the first half of 1999 compared to the first half of 1998.
The Company's effective income tax rate was 33% in the first half of 1999 and
the first half of 1998, excluding the impact of the nondeductible charge related
to the acquisition of Chips and Technologies, Inc. in the first half of 1998.
FINANCIAL CONDITION
The Company's financial condition remains very strong. At June 26, 1999,
total cash, trading assets, and short- and long-term investments totaled
$14.1 billion, up from $13 billion at December 26, 1998.
The major source of cash during the first half of 1999 was cash provided by
operating activities of $4.2 billion. Major uses of cash during the period
included $2.8 billion to repurchase 46 million shares of common stock, capital
spending of $1.4 billion for property, plant and equipment, primarily for
microprocessor manufacturing capacity, and $132 million in net cash paid for the
acquisition of Shiva Corporation. See "Outlook" for a discussion of capital
expenditure expectations in 1999.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
FINANCIAL CONDITION (CONTINUED)
The Company's five largest customers accounted for approximately 45% of net
revenues for the first half of 1999. At June 26, 1999, the five largest
customers accounted for approximately 41% of net accounts receivable.
In March 1999, the Company announced that it had entered into a definitive
agreement to acquire Level One Communications, Inc. ("Level One"), in a
stock-for-stock merger agreement valued at approximately $2.2 billion. Under the
terms of the agreement, each share of Level One stock would be exchanged for
0.86 shares of Intel stock. Intel expects to issue at least 33.7 million shares
of its common stock for currently outstanding shares, but may issue as many as
39.9 million shares if all vested Level One options and warrants are exercised
and Level One's convertible debt is converted prior to the merger. The
completion of this transaction is subject to a vote of Level One stockholders
scheduled for August 9, 1999, and other conditions customary in a transaction of
this type.
In June of 1999, the Company announced that it had entered into a definitive
agreement to acquire Dialogic Corporation ("Dialogic"), for $44 per share in a
cash tender offer and on July 12, the Company completed this transaction. The
net cash purchase price was approximately $670 million.
Subsequent to the end of the second quarter, the Company acquired privately held
Softcom Microsystems, Inc. ("Softcom") in a cash transaction. The total purchase
price was approximately $150 million.
The Company believes that it has the financial resources needed to meet business
requirements for the next twelve months, including potential future acquisitions
or strategic investments, capital expenditures for the expansion or upgrading of
worldwide manufacturing capacity, working capital requirements and the dividend
program.
OUTLOOK
This outlook section contains a number of forward-looking statements, all of
which are based on current expectations. Actual results may differ materially.
These statements do not reflect the potential impact of any mergers or
acquisitions that had not closed as of the end of the second quarter of 1999,
except where the impact of acquisitions is specifically identified.
The Company expects revenue for the third quarter of 1999 to be up slightly from
second quarter revenue of $6.7 billion and the Company expects a strong second
half for 1999. Revenue is partly a function of the mix of microprocessor types
and speeds, motherboards and purchased components, and other semiconductor
products sold, all of which are difficult to forecast. Because of the large
price difference between types of microprocessors, this mix affects the average
price Intel will realize and has a large impact on Intel's net revenues. Revenue
is also subject to the impact of economic conditions in various geographic
regions.
Intel's goal is to be the building block supplier to the Internet economy. Intel
plans to grow its networking business and to cultivate new services businesses
around the Internet. Intel also plans to continue to work with the computing
industry to expand Internet capabilities and product offerings and develop
compelling software applications that can take advantage of higher performance
microprocessors, thus driving demand toward Intel's newer products in each
computing market segment.
Intel's microprocessor strategy is to introduce ever-higher performance
microprocessors tailored for the different segments of the worldwide computing
market, using a tiered branding approach. In line with this strategy, in the
second quarter of 1999 the Company introduced the Pentium III processor at 550
MHz, for the performance desktop and entry-level servers and workstations, and
the Celeron processor at 466 MHz for entry-level PC buyers interested
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
OUTLOOK (CONTINUED)
in a value PC, as well as a new mobile Pentium-Registered Trademark- II
processor at 400 MHz. The Company may continue to take various steps,
including reducing microprocessor prices at such times as it deems
appropriate, in order to increase acceptance of its latest technology and to
remain competitive within each relevant market segment.
The Company expects the gross margin percentage in the third quarter to be up
slightly from 59% in the second quarter. Intel's gross margin expectation for
the full year 1999 is now 60%, plus or minus a few points, up from prior
guidance of 57%, plus or minus a few points. This change in guidance reflects
the positive impact of the Company's ongoing focus on cost improvements and
manufacturing efficiencies. Intel's gross margin percentage in any period varies
depending on the mix of types and speeds of processors sold as well as the mix
of microprocessors and related motherboards and purchased components. The
Company has been developing new packaging formats that use fewer purchased
components than the original Single Edge Contact cartridge that was introduced
with the Pentium II processor. These new packaging formats have reduced costs on
certain microprocessor products and they are expected to continue to have a
positive impact on costs as the transition continues. Intel also expects to see
the benefits of continued productivity improvements on its existing
manufacturing processes during 1999. Various other factors (including unit
volumes, yield issues associated with production at factories, ramp of new
technologies, the reusability of factory equipment, excess or obsolete
inventory, variations in inventory valuation and mix of shipments of other
semiconductors) will also continue to affect the amount of cost of sales and the
variability of gross margin percentages.
The Company has expanded semiconductor manufacturing and assembly and test
capacity over the last few years, and continues to plan capacity based on the
assumed continued success of its strategy and the acceptance of its products in
specific market segments. The Company currently expects that capital spending
will decrease to approximately $3 billion in 1999, primarily as a result of
reduced investment for new facilities and improved utilization of equipment.
This spending plan is dependent upon expectations regarding production
efficiencies and delivery times of various machinery and equipment. Depreciation
and amortization is expected to be approximately $3.3 billion for 1999.
Depreciation and amortization for the third quarter of 1999 is expected to be
approximately $810 million.
Spending on research and development and marketing, general and administrative
expenses in the third quarter is expected to be approximately four to six
percent higher than second quarter expenses of $1.7 billion. Expense projections
for the third quarter incorporate expected higher spending associated with
research and development projects.
The Company expects interest and other income to be approximately $275 million
in the third quarter depending on cash balances, interest rates, the Company's
ability to realize expected gains on investments and assuming no unanticipated
items.
The Company currently expects the tax rate to be 33% for 1999. This estimate is
based on current tax law and the current estimate of earnings, and is subject to
change.
The Company expects the Level One acquisition to close in the third quarter,
following the Level One stockholders' meeting on August 9. Intel is currently
gathering the data necessary for determining the value of identifiable
intangible assets, including in-process research and development. Based on a
preliminary analysis, in the third quarter the Company expects to incur a charge
of between $110 million and $330 million for in-process research and
development. In addition, the amount of goodwill and other intangible assets to
be amortized is expected to be between $1.8 billion and $2.0 billion, with an
estimated average useful life of five years.
Subsequent to the end of the second quarter, the acquisitions of Dialogic and
Softcom closed. The Company is early in the process of valuing the identifiable
intangible assets for these transactions and cannot yet provide estimates for
the values of in-process research and development, goodwill and other intangible
assets.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
OUTLOOK (CONTINUED)
Like many other companies, Intel is subject to risks from the year 2000 computer
programming issue. If internal systems do not correctly recognize and process
date information beyond the year 1999, there could be an adverse impact on the
Company's operations. Two other related issues could also lead to incorrect
calculations or failures: i) some systems' programming assigns special meaning
to certain dates, such as 9/9/99; and ii) the fact that the year 2000 is a leap
year.
Intel established a comprehensive program with dedicated program management and
executive-level sponsorship to deal with year 2000 issues. The Company addressed
its most essential internal systems first and categorized as "critical" or
"priority" those systems whose failure would cause an extended shutdown of all
or part of a factory, could cause personal injury or would have a sustained and
significant detrimental financial impact. The Company's semiconductor
manufacturing and assembly and test ("manufacturing") equipment and systems are
highly automated, incorporating PCs, embedded processors and related software to
control scheduling, inventory tracking, statistical analysis and automated
manufacturing. A significant portion of the Company's year 2000 efforts on
internal systems has been intended to prevent disruption to manufacturing
operations. Intel has also been working with customers and suppliers to test
systems that interface with the Company's internal systems. These activities
have encompassed all major categories of systems in use by the Company,
including network and communications infrastructure, manufacturing, facilities
management, sales, finance and human resources.
At the end of the second quarter of 1999, all of the Company's critical and
priority manufacturing and non-manufacturing systems were determined to be
already year 2000 capable, or necessary remediation (replacements, changes,
upgrades or workarounds) had been determined and unit testing and deployment had
been completed. The Company continues to work on internal systems that were not
categorized as critical or priority, and expects to have work on these systems
substantially completed by the end of the third quarter.
The Company began a comprehensive program of integrated testing of internal
systems in the third quarter of 1998. Integrated systems testing was
substantially complete at the end of the second quarter of 1999; however,
testing will continue through 1999 to ensure continued year 2000 capability as
other changes are made to internal systems and as Intel integrates any
acquisitions.
Intel has also been actively working with suppliers of products and services to
determine the extent to which the suppliers' operations and the products and
services they provide are year 2000 capable, and to monitor their progress
toward year 2000 capability. The Company has made inquiries of its major
suppliers and has received responses to its initial inquiries from 100% of
critical suppliers. Follow-up activities seek to determine whether the supplier
is taking all appropriate steps to fix year 2000 problems and to be prepared to
continue functioning effectively as a supplier in accordance with Intel's
standards and requirements. Contingency plans are being developed to address
issues related to suppliers that are not considered to be making sufficient
progress in becoming year 2000 capable.
The Company is also developing contingency plans to address possible changes in
customer order patterns due to year 2000 issues. As with Intel's suppliers, the
readiness of customers, and their suppliers, to deal with year 2000 issues may
affect their operations and their ability to order and pay for products. Intel
has surveyed its major direct customers about their year 2000 readiness in
critical areas of their operations. The results identified certain key areas to
be addressed by the customers, primarily related to supplier readiness,
including external infrastructure providers, and contingency planning. Intel has
also been communicating information about its own readiness to customers and has
conducted seminars for customers to help communicate the methodologies and
processes used in Intel's year 2000 programs. Communications with customers for
the remainder of 1999 will be primarily aimed at focusing customer attention on
contingency planning.
Intel believes that its most reasonably likely worst-case year 2000 scenarios
would relate to problems with the systems of third parties rather than with the
Company's internal systems or its products. Because the Company has less
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
OUTLOOK (CONTINUED)
control over assessing and remediating the year 2000 problems of third parties,
the Company believes the risks are greatest with infrastructure (e.g.,
electricity supply and water and sewer service), telecommunications,
transportation supply channels and critical suppliers of materials and services.
The Company's microprocessor production is conducted in a network of domestic
and foreign facilities. Each location relies on local private and governmental
suppliers for electricity, water, sewer and other needed supplies. Failure of an
electricity grid or an uneven supply of power, for example, would be a
worst-case scenario that would completely shut down the affected facilities.
Electrical failure could also shut down airports and other transportation
facilities.
Although most sites have some back-up electrical power, the Company does not
generally maintain its own facilities that would generate sufficient electrical
or water supply for full operations. To the extent possible, the Company is
working with infrastructure suppliers for its manufacturing sites, major
subcontractor sites and relevant transportation hubs to seek to better ensure
continuity of services. Contingency planning regarding major infrastructure
failure generally includes considering increases in inventory levels of specific
products above normal reserve stocks and evaluating the need to locate inventory
geographically. In addition, multiple plants engage in similar tasks in the
Intel system, and although overall capacity would be reduced, it is not expected
that the entire production system would halt due to the unavailability of one or
two facilities.
A worst-case scenario involving a critical supplier of materials would be the
partial or complete shutdown of the supplier and its resulting inability to
provide critical supplies to the Company on a timely basis. The Company does not
maintain the capability to replace most third-party supplies with internal
production. Where efforts to work with critical suppliers to ensure year 2000
capability have not been successful, contingency planning generally emphasizes
the identification of substitute and second-source suppliers, and in certain
situations may include a planned increase in the level of inventory carried. In
an industry characterized by rapid technological change, higher levels of raw
materials and finished goods inventories would involve increased risk of
inventory obsolescence and the potential for write-downs in the value of
inventory.
The Company is not in a position to identify or to avoid all possible scenarios;
however, the Company is currently assessing scenarios and taking steps to
mitigate the impacts of various scenarios if they were to occur. Preliminary
contingency plans for critical business operations were in place by the end of
the second quarter of 1999. In the third quarter it is expected that these plans
will be expanded and refined as the Company learns more about the preparations
and vulnerabilities of third parties regarding year 2000 issues. Testing,
validation and training will take place in the third quarter and into the fourth
quarter. Due to the large number of variables involved, the Company cannot
provide an estimate of the damage it might suffer if any of these scenarios, or
a combination of scenarios, were to occur.
The Company also has a program to assess the capability of its products to
handle the year 2000 date. To assist customers in evaluating their year 2000
issues, the Company has developed a web-enabled database that indicates the
capability of Intel's current products, and certain products no longer being
produced, to handle the year 2000 date. An Intel product, when used in
accordance with its associated documentation, is "Year 2000 Capable" when, upon
installation, it accurately stores, displays, processes, provides and/or
receives data from, into and between 1999 and 2000, and the twentieth and
twenty-first centuries, including leap-year calculations, provided that all
other technology used in combination with the Intel product properly exchanges
date data with it. The database is located on the Company's year 2000 support
Web site and is periodically updated as new products are added to the Company's
inventory.
All Intel processors are "Year 2000 Capable." All Intel micro-controllers
(embedded processors) are also "Year 2000 Capable," with the exception of two
custom microcontroller products sold to a limited number of customers. However,
the assessment of whether a complete system will operate correctly depends on
firmware (BIOS) capability and software design and integration, and for many end
users this will include firmware and software provided by companies other than
Intel.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
OUTLOOK (CONTINUED)
As described more fully at the support Web site, Intel offers a "Year 2000
Capable" Limited Warranty on certain of its current products. Except as
specifically provided for in the Limited Warranty, the Company does not believe
it is legally or otherwise responsible for costs incurred by customers related
to ensuring their year 2000 capability. Nevertheless, the Company is incurring
various costs to provide customer support and customer satisfaction services
regarding year 2000 issues, and it is anticipated that these expenditures will
continue through 1999 and thereafter.
Various of the Company's disclosures and announcements concerning its products
and year 2000 programs are intended to constitute "Year 2000 Readiness
Disclosures" as defined in the Year 2000 Information and Readiness Disclosure
Act. This Act provides added protection from liability for certain public and
private statements concerning an entity's year 2000 readiness and the year 2000
readiness of its products and services. It also potentially provides added
protection from liability for certain types of year 2000 disclosures made after
January 1, 1996 and before the date of enactment of the Act.
The Company's year 2000 efforts have been undertaken largely with its existing
personnel. In some instances, consultants have been engaged to provide specific
assessment, remediation or other services. Activities with suppliers and
customers have also involved their staffs and consultants. The Company engaged a
third-party firm to assist with planning and taking the inventory of internal
systems, and engaged another firm to perform an assessment of the overall scope
and schedule of Intel's year 2000 efforts.
The Company currently expects that the total cost of these programs, including
both incremental spending and redeployed resources, will be approximately $105
million. This is lower than the previous estimate of $175 million due to new
lower estimates for the cost of contingency planning efforts as some
uncertainties and perceived risks have been resolved favorably. In addition,
actual costs of internal systems remediation continued to be less than
originally expected, as workarounds were found and the Company was able to
obtain upgrades from suppliers. Approximately $75 million has been spent to
date, of which approximately $33 million was incurred in the first half of 1999.
A majority of the costs incurred to date have been included in cost of sales and
in the calculation of gross margin. The costs remaining to be spent are expected
to be incurred for contingency planning, remediation of internal systems not
categorized as critical or priority, continued testing, customer service,
supplier monitoring and program office management. Spending is expected to
continue, at a declining rate, into the year 2000. Year 2000 costs for
manufacturing and non-manufacturing internal systems are expected to be less
than 10% of the total information technology budget for 1999.
No significant internal systems projects are being deferred due to the year 2000
program efforts. In some instances, the installation schedule of new software
and hardware in the normal course of business is being accelerated to also
afford a solution to year 2000 capability issues. The Company expects that costs
related to accelerated systems replacements will be approximately $15 million in
addition to the total costs noted above. In addition, the estimated costs do not
include any potential costs related to customer or other claims, or potential
amounts related to executing contingency plans, such as costs incurred as a
result of an infrastructure or supplier failure. All expected costs are based on
the current assessment of the programs and are subject to change as the programs
progress.
Based on currently available information, management does not believe that the
year 2000 matters discussed above related to internal systems or products sold
to customers will have a material adverse impact on the Company's financial
condition or overall trends in results of operations; however, it is uncertain
to what extent the Company may be affected by such matters. In addition, there
can be no assurance that the failure to ensure year 2000 capability by a
supplier, customer or another party would not have a material adverse effect on
the Company's financial condition or overall trends in results of operations.
The Company is currently party to various legal proceedings. Although litigation
is subject to inherent uncertainties, management, including internal counsel,
does not believe that the ultimate outcome of these legal proceedings will have
a material adverse effect on the Company's financial position or overall trends
in results of operations. However, were an unfavorable ruling to occur in any
specific period, there exists the possibility of a material adverse
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
OUTLOOK (CONTINUED)
impact on the results of operations of that period. Management believes, given
the Company's current liquidity and cash and investments balances, that even an
adverse judgment would not have a material impact on cash and investments or
liquidity.
The Company's future results of operations and the other forward-looking
statements contained in this outlook--in particular the statements regarding
revenues, pricing, gross margin, costs and continued productivity improvements,
capital spending, depreciation and amortization, research and development
expenses, marketing and general and administrative expenses, net interest and
other, the tax rate, the year 2000 issue and pending legal proceedings--involve
a number of risks and uncertainties. In addition to the factors discussed above,
among the other factors that could cause actual results to differ materially are
the following: changes in end user demand due to usage of the Internet; changes
in customer order patterns, including changes in customer and channel inventory
levels and changes due to year 2000 issues; competitive factors such as rival
chip architectures and manufacturing technologies, competing software-compatible
microprocessors and acceptance of new products in specific market segments;
timing of introduction and production ramp of platform components; pricing
pressures; continued success in technological advances, including development
and implementation of new processes and strategic products for specific market
segments; development and timing of the introduction of compelling software
applications; execution of the manufacturing ramp, including the transitions to
the Pentium III processor and to the 0.18-micron process technology; effects of
excess or shortage of manufacturing capacity; the ability to grow new businesses
and 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); impact on the
Company's business due to internal systems or systems of suppliers,
infrastructure providers and other third parties adversely affected by year 2000
problems; claims due to year 2000 issues allegedly related to the Company's
products or year 2000 remediation efforts; and litigation involving anti-trust,
intellectual property, consumer and other issues.
Intel believes that it has the product offerings, facilities, personnel, and
competitive and financial resources for continued business success, but future
net revenues, costs, margins and profits are all influenced by a number of
factors, including those discussed above, all of which are inherently difficult
to forecast.
15
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For financial market risks related to changes in interest rates and foreign
currency exchange rates, reference is made to Part II, Item 7A, Quantitative and
Qualitative Disclosures About Market Risk, in the Registrant's Annual Report on
Form 10-K for the year ended December 26, 1998 and to the subheading "Financial
Market Risks" under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on page 32 of the Registrant's
1998 Annual Report to Stockholders.
The Company is exposed to equity price risk on the marketable portion of equity
securities included in its portfolio of investments entered into for the
promotion of business and strategic objectives. The Company typically does not
attempt to reduce or eliminate its market exposure on these equity securities.
These investments are generally in companies in the high-technology industry,
and a substantial majority of the market value of the portfolio is in three
sectors: Internet, semiconductor and networking. As of June 26, 1999, five
equity positions constituted approximately 59% of the market value of the
portfolio, of which approximately $620 million, or 24% of the market value of
the portfolio, consisted of an investment in Micron Technology, Inc.
The Company analyzed the historical movements over the past several years of
high-technology stock indices that the Company considered appropriate. Based on
this analysis, the Company estimated that it was reasonably possible that the
prices of the stocks in the Company's portfolio could experience a 30% adverse
change in the near term. Assuming a 30% adverse change, the Company's
available-for-sale securities would decrease in value by approximately $800
million, based on the value of the Company's portfolio as of June 26, 1999. The
portfolio's concentrations in specific companies or sectors may vary over time
and may be different from the compositions of the indices analyzed, and these
factors may affect the portfolio's price volatility. This estimate is not
necessarily indicative of future performance and actual results may differ
materially.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Intergraph Corporation v. Intel
U.S. DISTRICT COURT, NORTHERN DISTRICT OF ALABAMA, NORTHEASTERN DIVISION
(CV-97-N-3023-NE)
In November 1997, Intergraph Corporation ("Intergraph") filed suit in Federal
District Court in Alabama generally alleging that Intel attempted to coerce
Intergraph into relinquishing certain patent rights. The suit alleges that Intel
infringes five Intergraph microprocessor-related patents and includes alleged
violations of antitrust laws and various state law claims. The suit seeks
injunctive relief and unspecified damages, and further alleges that Intel's
infringement is willful and that any damages awarded should be trebled. The
Company received a letter stating that Intergraph believes that the patent
damages will be "several billion dollars by the time of trial." In addition,
Intergraph claims that the antitrust, unfair competition and tort and contract
damages will be "hundreds of millions of dollars by the time of trial." The
Company disputes Intergraph's claims and intends to defend the lawsuit
vigorously. Intel has also counterclaimed that the Intergraph patents are
invalid, and alleges infringement of seven Intel patents, breach of contract and
misappropriation of trade secrets. In April 1998, the Court ordered Intel to
continue to deal with Intergraph on the same terms as it treats allegedly
similarly situated customers with respect to confidential information and
product supply. Intel's appeal of this order was heard in December 1998. In June
1998, Intel filed a motion for summary judgment on Intergraph's patent claims on
the grounds that Intel is licensed to use those patents. In June 1999, the Court
granted Intergraph's motion for summary judgement that the patents asserted by
Intergraph are not licensed to Intel. Intel filed a motion for reconsideration
and an alternative request to certify the decision for appeal. Although
litigation is subject to inherent uncertainties and the ultimate outcome of this
lawsuit cannot be determined at this time, management, including internal
counsel, does not believe that the ultimate outcome will have a material adverse
effect on Intel's financial position or overall trends in results of operations.
17
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At Intel Corporation's Annual Meeting of Stockholders held on May 19, 1999, the
following proposals were adopted by the margins indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES
VOTED FOR WITHHELD
--------- --------
<S> <C> <C>
1. To elect a Board of Directors to hold office until the next
Annual Meeting of Stockholders or until their respective
successors have been elected or appointed.
C. Barrett 2,848,318,318 11,749,408
J. Browne 2,847,598,170 12,469,556
W. Chen 2,848,393,826 11,673,900
A. Grove 2,848,607,348 11,460,378
J. Guzy 2,848,194,060 11,873,666
G. Moore 2,847,728,858 12,338,868
D. Pottruck 2,848,206,150 11,861,576
J. Shaw 2,848,126,626 11,941,100
L. Vadasz 2,847,458,426 12,609,300
D. Yoffie 2,847,932,320 12,135,406
C. Young 2,847,088,940 12,978,786
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
VOTED
VOTED FOR AGAINST WITHHELD NO VOTE
--------- ------- -------- -------
<S> <C> <C> <C> <C>
2. To ratify the appointment of the accounting
firm of Ernst & Young LLP as independent
auditors for the Company for the current year. 2,849,438,598 3,180,130 7,448,994 4
</TABLE>
ITEM 5. OTHER INFORMATION
On September 16, 1998 the Board of Directors approved an amendment to the
Company's Bylaws to temporarily increase the number of authorized members of the
Board of Directors from 11 to 12. The number of authorized members reverted to
11 following the 1999 Annual Meeting of Stockholders held on May 19, 1999. The
amended and restated Bylaws are attached hereto as Exhibit 3.1.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
3.1 Intel Corporation Bylaws as amended.
12.1 Statement setting forth the computation of ratios of earnings to fixed charges.
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K
1) On April 14, 1999, Intel filed a report on Form 8-K relating to
financial information for Intel Corporation for the quarter ended
March 27, 1999 and forward-looking statements relating to 1999
and the second quarter of 1999, as presented in a press release
of April 13, 1999.
18
<PAGE>
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 thereunto duly authorized.
INTEL CORPORATION
(REGISTRANT)
Date: August 2, 1999 By: /s/ Andy D. Bryant
--------------------------
Andy D. Bryant
Senior Vice President,
Chief Financial Officer and
Principal Accounting Officer
19
<PAGE>
Exhibit 3.1
INTEL CORPORATION
BYLAWS
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle.
SECTION 2. OTHER OFFICES. The corporation shall also have and
maintain an office or principal place of business at 2200 Mission College
Boulevard, Santa Clara, County of Santa Clara, State of California, and may
also have offices at such other places, both within and without the State of
Delaware, as the Board of Directors may from time to time determine or the
business of the corporation may require.
ARTICLE II
STOCKHOLDERS' MEETINGS
SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State
of Delaware, as may be designated from time to time by the Board of
Directors, or, if not so designated, then at the office of the corporation
required to be maintained pursuant to Section 2 of Article I hereof.
SECTION 2. ANNUAL MEETINGS. The annual meetings of the stockholders
of the corporation, commencing with the year 1990, for the purpose of
election of directors and for such other business as may lawfully come before
it, shall be held on such date and at such time as may be designated from
time to time by the Board of Directors, but in no event more than fifteen
(15) months after the date of the preceding annual meeting.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders of
the corporation may be called, for any purpose or purposes, by the Chairman
of the Board or the President or the Board of Directors at any time.
SECTION 4. NOTICE OF MEETINGS.
(a) Except as otherwise provided by law or the Certificate of
Incorporation, written notice of each meeting of stockholders, specifying the
place, date and hour and purpose or purposes of the meeting, shall be given
not less than ten nor more than sixty days before the date of the meeting to
each stockholder entitled to vote thereat, directed to his address as it
appears upon the books of the corporation.
1.
<PAGE>
(b) If at any meeting action is proposed to be taken which, if taken,
would entitle stockholders fulfilling the requirements of section 262(d) of
the Delaware General Corporation Law to an appraisal of the fair value of
their shares, the notice of such meeting shall contain a statement of that
purpose and to that effect and shall be accompanied by a copy of that
statutory section.
(c) When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken unless the
adjournment is for more than thirty days, or unless after the adjournment a
new record date is fixed for the adjourned meeting, in which event a notice
of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
(d) Notice of the time, place and purpose of any meeting of
stockholders may be waived in writing, either before or after such meeting,
and to the extent permitted by law, will be waived by any stockholder by his
attendance thereat, in person or by proxy. Any stockholder so waiving notice
of such meeting shall be bound by the proceedings of any such meeting in all
respects as if due notice thereof had been given.
(e) Unless and until voted, every proxy shall be revocable at the
pleasure of the person who executed it or of his legal representatives or
assigns, except in those cases where an irrevocable proxy permitted by
statute has been given.
SECTION 5. QUORUM AND VOTING.
(a) At all meetings of stockholders, except where otherwise provided
by law, the Certificate of Incorporation, or these Bylaws, the presence, in
person or by proxy duly authorized, of the holders of a majority of the
outstanding shares of stock entitled to vote shall constitute a quorum for
the transaction of business. Shares, the voting of which at said meeting have
been enjoined, or which for any reason cannot be lawfully voted at such
meeting, shall not be counted to determine a quorum at said meeting. In the
absence of a quorum, any meeting of stockholders may be adjourned, from time
to time, by vote of the holders of a majority of the shares represented
thereat, but no other business shall be transacted at such meeting. At such
adjourned meeting at which a quorum is present or represented, any business
may be transacted which might have been transacted at the original meeting.
The stockholders present at a duly called or convened meeting, at which a
quorum is present, may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
(b) Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, all action taken by the holders of a majority
of the voting power represented at any meeting at which a quorum is present
shall be valid and binding upon the corporation.
2.
<PAGE>
SECTION 6. VOTING RIGHTS.
(a) Except as otherwise provided by law, only persons in whose names
shares entitled to vote stand on the stock records of the corporation on the
record date for determining the stockholders entitled to vote at said meeting
shall be entitled to vote at such meeting. Shares standing in the names of
two or more persons shall be voted or represented in accordance with the
determination of the majority of such persons, or, if only one of such
persons is present in person or represented by proxy, such person shall have
the right to vote such shares and such shares shall be deemed to be
represented for the purpose of determining a quorum.
(b) Every person entitled to vote or execute consents shall have the
right to do so either in person or by an agent or agents authorized by a
written proxy executed by such person or his duly authorized agent, which
proxy shall be filed with the Secretary of the corporation at or before the
meeting at which it is to be used. Said proxy so appointed need not be a
stockholder. No proxy shall be voted on after three years from its date
unless the proxy provides for a longer period.
SECTION 7. LIST OF STOCKHOLDERS. The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at said meeting, arranged in alphabetical order, showing the
address of and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within
the city where the meeting is to be held and which place shall be specified
in the notice of the meeting, or, if not specified, at the place where said
meeting is to be held, and the list shall be produced and kept at the time
and place of meeting during the whole time thereof, and may be inspected by
any stockholder who is present.
SECTION 8. ACTION WITHOUT MEETING. Unless otherwise provided in the
Certificate of Incorporation, any action required by statute to be taken at
any annual or special meeting of stockholders of the corporation, or any
action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action
so taken, are signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. To be effective, a written consent must be delivered to the
corporation by delivery to its registered office in Delaware, its principal
place of business, or an officer or agent of the corporation having custody
of the book in which proceedings of meetings of stockholders are recorded.
Delivery made to a corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. Every written consent
shall bear the date of signature of each stockholder who signs the consent
and no written consent shall be effective to take the corporate action
referred to therein
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unless, within sixty days of the earliest dated consent delivered in the
manner required by this Section to the corporation, written consents signed
by a sufficient number of holders to take action are delivered to the
corporation in accordance with this Section. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
SECTION 9. NOMINATIONS AND STOCKHOLDER BUSINESS.
(a) Nominations of persons for election to the Board of Directors of
the Corporation and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (a) pursuant to
the Corporation's notice of meeting, (b) by or at the direction of the Board
of Directors, or (c) by any stockholder of the Corporation who is a
stockholder of record at the time of giving of notice provided for in this
Section 9, who is entitled to vote at the meeting and who complied with the
notice procedures set forth in this Section 9.
(b) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to this Section 9, the
stockholder must have given timely notice thereof in writing to the Secretary
of the Corporation, and such business must be a proper subject for
stockholder action under the Delaware General Corporation Law. To be timely,
a stockholder's notice shall be delivered to the secretary at the principal
executive offices of the Corporation not less than 45 days nor more than 120
days prior to the date on which the Corporation first mailed its proxy
materials for the prior year's annual meeting of stockholders; provided,
however, that in the event that the date of the annual meeting is advanced by
more than 30 days or delayed (other than as a result of adjournment) by more
than 30 days from the anniversary of the previous year's annual meeting,
notice by the stockholder to be timely must be delivered not later than the
close of business on the later of the 60th day prior to such annual meeting
or the 10th day following the day on which public announcement of the date of
such meeting is first made. Such stockholder's notice shall set forth (a) as
to each person whom the stockholder proposes to nominate for election or
reelection as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); (b) as to
any other business that the stockholder proposes to bring before the meeting,
a brief description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meting and any material
interest in such business of such stockholder and the beneficial owner, if
any, on whose behalf the proposal is made; and (c) as to the stockholder
giving the notice and the beneficial owners if any on whose behalf the
nomination or proposal is made (i) the name and address of such stockholder,
as they appear on the Corporation's books, and of such beneficial owner, and
(ii) the class and number of shares of the Corporation
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which are owned beneficially and of record by such stockholder and such
beneficial owner.
(c) Notwithstanding anything in this Section 9 to the contrary, in
the event that the number of directors to be elected to the Board of
Directors of the Corporation is increased and there is no public announcement
specifying the size of the increased Board of Directors made by the
Corporation at least 70 days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Section 9
shall also be considered timely, but only with respect to nominees for any
new positions created by such increase, if it shall be delivered to the
Secretary at the principal executive offices of the Corporation not later
than the close of business on the 10th day following the day on which such
public announcement is first made by the Corporation.
(d) Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. Nominations of persons for election to the
Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Corporation's notice of meeting
(a) by or at the direction of the Board of Directors or (b) by any
stockholder of the Corporation who is a stockholder of record at the time of
giving of notice provided for in this section, who is entitled to vote at the
meeting and who complies with the notice procedures set forth in this
section. Nominations by stockholders of persons for election to the Board of
Directors may be made at such a special meeting of Stockholders if the
stockholder's notice required by this section shall be delivered to the
secretary at the principal executive offices of the Corporation not earlier
than the 120th day prior to such special meeting and not later than the close
of business on the later of the 60th day prior to such special meeting or the
10th day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
(e) Only those persons who are nominated in accordance with the
procedures set forth in this section shall be eligible for election as
directors at any meeting of stockholders. Only such business shall be
conducted at a meeting of stockholders as shall have been brought before the
meeting in accordance with the procedures set forth in this section. The
chairman of the meeting shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting was made
in accordance with the procedures set forth in this section and, if any
proposed nomination or business is not in compliance with this section, to
declare that such defective proposal shall be disregarded.
(f) For purposes of this section, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document
publicly filed by the
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Corporation with the Securities and Exchange Commission pursuant to Section 9
13, 14 or 15(d) of the Exchange Act.
(g) Notwithstanding the foregoing provisions of this Section 9, a
stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 9. Nothing in this Section 9 shall be
deemed to affect any rights of stockholders to request inclusion of proposals
in the Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM OF OFFICE. The number of directors which
shall constitute the whole of the Board of Directors shall be eleven (11).
With the exception of the first Board of Directors, which shall be elected by
the incorporator, and except as provided in Section 3 of this Article III,
the directors shall be elected by a plurality vote of the shares represented
in person or by proxy, at the stockholders annual meeting in each year and
entitled to vote on the election of directors. Elected directors shall hold
office until the next annual meeting and until their successors shall be duly
elected and qualified. Directors need not be stockholders. If, for any cause,
the Board of Directors shall not have been elected at an annual meeting, they
may be elected as soon thereafter as convenient at a special meeting of the
stockholders called for that purpose in the manner provided in these Bylaws.
SECTION 2. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by or under the direction
of the Board of Directors.
SECTION 3. VACANCIES. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be
filled by a majority of the directors then in office, although less than a
quorum, or by a sole remaining director, and each director so elected shall
hold office for the unexpired portion of the term of the director whose place
shall be vacant, and until his successor shall have been duly elected and
qualified. A vacancy in the Board of Directors shall be deemed to exist under
this Section in the case of the death, removal or resignation of any
director, or if the stockholders fail at any meeting of stockholders at which
directors are to be elected (including any meeting referred to in Section 4
below) to elect the number of directors then constituting the whole Board.
SECTION 4. RESIGNATIONS AND REMOVALS.
(a) Any director may resign at any time by delivering his
written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of
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Directors. If no such specification is made, it shall be deemed effective at
the pleasure of the Board of Directors. When one or more directors shall
resign from the Board, effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have
power to fill such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective, and each director so
chosen shall hold office for the unexpired portion of the term of the
director whose place shall be vacated and until his successor shall have been
duly elected and qualified.
(b) Except as provided in Section 141 of the Delaware General
Corporation Law, at a special meeting of stockholders called for the purpose
in the manner hereinabove provided, the Board of Directors, or any individual
director, may be removed from office, with or without cause, and a new
director or directors elected by a vote of stockholders holding a majority of
the outstanding shares entitled to vote at an election of directors.
SECTION 5. MEETINGS.
(a) The annual meeting of the Board of Directors shall be held
immediately after the annual stockholders' meeting and at the place where
such meeting is held or at the place announced by the Chairman at such
meeting. No notice of an annual meeting of the Board of Directors shall be
necessary and such meeting shall be held for the purpose of electing officers
and transacting such other business as may lawfully come before it.
(b) Except as hereinafter otherwise provided, regular meetings of the
Board of Directors shall be held in the office of the corporation required to
be maintained pursuant to Section 2 of Article I hereof. Regular meetings of
the Board of Directors may also be held at any place within or without the
State of Delaware which has been designated by resolutions of the Board of
Directors or the written consent of all directors. Notice of regular meetings
of the directors is hereby dispensed with and no notice whatever of any such
meetings need be given.
(c) Special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or by any two of the directors.
(d) Written notice of the time and place of all special meetings of
the Board of Directors shall be delivered personally to each director or sent
by telegram at least 24 hours before the start of the meeting, or sent by
first class mail at least 72 hours before the start of the meeting. Notice of
any meeting may be waived in writing at any time before or after the meeting
and will be waived by any director by attendance thereat.
SECTION 6. QUORUM AND VOTING.
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(a) A quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time in accordance with
Section 1 of Article III of these Bylaws, but not less than one; provided,
however, at any meeting whether a quorum be present or otherwise, a majority
of the directors present may adjourn from time to time until the time fixed
for the next regular meeting of the Board of Directors, without notice other
than by announcement at the meeting.
(b) At each meeting of the Board at which a quorum is present, all
questions and business shall be determined by a vote of a majority of the
directors present, unless a different vote be required by law, the
Certificate of Incorporation, or these Bylaws.
(c) Notwithstanding any of the foregoing, any action stated in any
Rights Agreement between this Corporation and the rights agent appointed
thereunder from time to time, as such Rights Agreement may be entered into or
adopted by this Corporation and amended from time to time (the "Rights
Agreement") to be taken by the Board of Directors after a Person has become
an Acquiring Person shall require the presence in office of Continuing
Directors and the concurrence of a majority of the Continuing Directors.
Capitalized terms in this paragraph shall have the meanings indicated in the
Rights Agreement.
(d) Any member of the Board of Directors, or of any committee
thereof, may participate in a meeting by means of conference telephone or
similar communication equipment by means of which all persons participating
in the meeting can hear each other, and participation in a meeting by such
means shall constitute presence in person at such meeting.
(e) The transactions of any meeting of the Board of Directors, or any
committee thereof, however called or noticed, or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice, if
a quorum be present and if, either before or after the meeting, each of the
directors not present shall sign a written waiver of notice, or a consent to
holding such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or
made a part of the minutes of the meeting.
SECTION 7. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board
or of such committee, as the case may be, consent thereto in writing, and
such writing or writings are filed with the minutes of proceedings of the
Board or committee.
SECTION 8. FEES AND COMPENSATION. Directors shall not receive
any stated salary for their services as directors but by resolution of the
Board, a fixed fee, with or without expense of attendance, may be allowed for
attendance at each meeting and at each meeting of any committee of the Board of
Directors. Nothing herein
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contained shall be construed to preclude any director from serving the
corporation in any other capacity as an officer, agent, employee, or
otherwise, and receiving compensation therefor.
SECTION 9. COMMITTEES.
(a) EXECUTIVE COMMITTEE: The Board of Directors may, by resolution
passed by a majority of the whole Board, appoint an Executive Committee of
not less than one member, each of whom shall be a director. The Executive
Committee, to the extent permitted by law, shall have and may exercise when
the Board of Directors is not in session all powers of the Board in the
management of the business and affairs of the corporation, including, without
limitation, the power and authority to declare a dividend or to authorize the
issuance of stock, except such committee shall not have the power or
authority to amend the Certificate of Incorporation, to adopt an agreement of
merger or consolidation, to recommend to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and
assets, to recommend to the stockholders of the Corporation a dissolution of
the Corporation or a revocation of a dissolution, or to amend these Bylaws.
(b) OTHER COMMITTEES: The Board of Directors may, by resolution
passed by a majority of the whole Board, from time to time, appoint such
other committees as may be permitted by law. Such other committees appointed
by the Board of Directors shall have such powers and perform such duties as
may be prescribed by the resolution or resolutions creating such committee,
but in no event shall any such committee have the powers denied to the
Executive Committee in these Bylaws.
(c) TERM: The members of all committees of the Board of Directors
shall serve a term coexistent with that of the Board of Directors which shall
have appointed such committee. The Board, subject to the provisions of
subsections (a) or (b) of this Section 9, may at any time increase or
decrease the number of members of a committee or terminate the existence of a
committee; provided, that no committee shall consist of less than one member.
The membership of a committee member shall terminate on the date of his death
or voluntary resignation, but the Board may at any time for any reason remove
any individual committee member and the Board may fill any committee vacancy
created by death, resignation, removal or increase in the number of members
of the committee. The Board of Directors may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee, and, in addition, in the
absence or disqualification of any member of a committee, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place
of any such absent or disqualified member.
(d) MEETINGS: Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed
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pursuant to this Section 9 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter; special meetings of
any such committee may be held at the principal office of the corporation
required to be maintained pursuant to Section 2 of Article I hereof; or at
any place which has been designated from time to time by resolution of such
committee or by written consent of all members thereof, and may be called by
any director who is a member of such committee, upon written notice to the
members of such committee of the time and place of such special meeting given
in the manner provided for the giving of written notice to members of the
Board of Directors of the time and place of special meetings of the Board of
Directors. Notice of any special meeting of any committee may be waived in
writing at any time after the meeting and will be waived by any director by
attendance thereat. A majority of the authorized number of members of any
such committee shall constitute a quorum for the transaction of business, and
the act of a majority of those present at any meeting at which a quorum is
present shall be the act of such committee.
SECTION 10. EMERITUS DIRECTOR. The Board of Directors may, from time
to time, elect one or more Emeritus Directors, each of whom shall serve, at
the pleasure of the Board, until the first meeting of the Board next
following the Annual Meeting of Stockholders and for a maximum period of 3
years, subject to an annual review, or until earlier resignation or removal
by the Board (except that founders of the company may remain as Emeritus
Directors, subject to the annual review, or until earlier resignation or
removal by the Board). Emeritus Directors shall serve as advisors and
consultants to the Board of Directors and may be appointed by the Board to
serve as advisors and consultants to committees of the Board. Emeritus
Directors may be invited to attend meetings of the Board or any committee of
the Board for which they have been appointed to serve as advisors and
consultants and, if present, may participate in the discussions occurring
during such meetings. Emeritus Directors shall not be permitted to vote on
matters brought before the Board or any committee thereof and shall not be
counted for the purpose of determining whether a quorum of the Board or the
committee is present. Emeritus Directors shall receive no fee for their
services as Emeritus Directors. Emeritus Directors will not be entitled to
receive reimbursement for expenses of meeting attendance, except as approved
by the Chairman of the Board. Emeritus Directors may be removed at any time
by the Board of Directors.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS DESIGNATED. The officers of the corporation shall
be a Chairman of the Board of Directors who shall be a member of the Board of
Directors, a President, one or more Vice Presidents, a Secretary, and a
Treasurer. The order of the seniority of the Vice Presidents shall be in the
order of their nomination, unless otherwise determined by the Board of
Directors. The Board of Directors or the
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Chairman of the Board or the President may also appoint one or more assistant
secretaries, assistant treasurers, and such other officers and agents with
such powers and duties as it or he shall deem necessary. The Board of
Directors may assign such additional titles to one or more of the officers as
they shall deem appropriate. Any one person may hold any number of offices of
the corporation at any one time unless specifically prohibited therefrom by
law. The salaries and other compensation of the officers of the corporation
shall be fixed by or in the manner designated by the Board of Directors.
SECTION 2. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL: All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If
the office of any officer becomes vacant for any reason, the vacancy may be
filled by the Board of Directors. Nothing in these Bylaws shall be construed
as creating any kind of contractual right to employment with the corporation.
(b) DUTIES OF THE CHAIRMAN OF THE BOARD OF DIRECTORS: The Chairman of
the Board of Directors (if there be such an officer appointed) shall preside
at all meetings of the stockholders and the Board of Directors. The Chairman
of the Board of Directors shall perform such other duties and have such other
powers as the Board of Directors shall designate from time to time.
(c) DUTIES OF PRESIDENT: The President shall preside at all meetings
of the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. The
President shall perform such other duties and have such other powers as the
Board of Directors shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS: The Vice Presidents, in the order of
their seniority, may assume and perform the duties of the President in the
absence or disability of the President or whenever the office of the
President is vacant. The Vice President shall perform such other duties and
have such other powers as the Board of Directors or the President shall
designate from time to time.
(e) DUTIES OF SECRETARY: The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and any committee thereof, and
shall record all acts and proceedings thereof in the minute book of the
corporation and shall keep the seal of the corporation in safe custody. The
Secretary shall give notice, in conformity with these Bylaws, of all meetings
of the stockholders, and of all meetings of the Board of Directors and any
Committee thereof requiring notice. The Secretary shall perform such other
duties and have such other powers as the Board of Directors shall designate
from time to time. The President may direct any Assistant Secretary to assume
and perform the duties of the Secretary in the absence or disability of the
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Secretary, and each Assistant Secretary shall perform such other duties and
have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER AND TREASURER: The Chief
Financial Officer and Treasurer shall control, audit and arrange the
financial affairs of the corporation. He or she shall receive and deposit all
monies belonging to the corporation and shall pay out the same only in such
manner as the Board of Directors may from time to time determine, and he or
she shall perform such other further duties as the Board of Directors may
require. It shall be the duty of the assistant treasurers to assist the
Treasurer in the performance of the Treasurer's duties and generally to
perform such other duties as may be delegated to them by the Board of
Directors.
ARTICLE V
EXECUTION OF CORPORATE INSTRUMENTS, AND
VOTING OF SECURITIES OWNED BY THE CORPORATION
SECTION 1. EXECUTION OF CORPORATE INSTRUMENTS.
(a) The Board of Directors may, in its discretion, determine the
method and designate the signatory officer or officers, or other person or
persons, to execute any corporate instrument or document, or to sign the
corporate name without limitation, except where otherwise provided by law,
and such execution or signature shall be binding upon the corporation.
(b) Unless otherwise specifically determined by the Board of
Directors or otherwise required by law, formal contracts of the corporation,
promissory notes, deeds of trust, mortgages and other evidences of
indebtedness of the corporation, and other corporate instruments or documents
requiring the corporate seal, and certificates of shares of stock owned by
the corporation, shall be executed, signed or endorsed by the Chairman of the
Board (if there be such an officer appointed), the President, any Vice
President or the Secretary. All other instruments and documents requiring the
corporate signature, but not requiring the corporate seal, may be executed as
aforesaid or in such other manner as may be directed by the Board of
Directors.
(c) All checks and drafts drawn on banks or other depositaries on
funds to the credit of the corporation, or in special accounts of the
corporation, shall be signed by such person or persons as the Board of
Directors shall authorize so to do.
SECTION 2. VOTING OF SECURITIES OWNED BY CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors or, in the absence of such
authorization, by the Chairman of the Board (if there be such an officer
appointed), or by the President, or by any Vice President.
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ARTICLE VI
SHARES OF STOCK
SECTION 1. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent
with the Certificate of Incorporation and applicable law. Every holder of
stock in the corporation shall be entitled to have a certificate signed by,
or in the name of the corporation by, the Chairman of the Board (if there be
such an officer appointed), or by the President or any Vice President and by
the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary,
certifying the number of shares owned by him in the corporation. Any or all
of the signatures on the certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued with
the same effect as if he were such officer, transfer agent, or registrar at
the date of issue. If the corporation shall be authorized to issue more than
one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights
shall be set forth in full or summarized on the face or back of the
certificate which the corporation shall issue to represent such class or
series of stock, provided that, except as otherwise provided in section 202
of the Delaware General Corporation Law, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock,
a statement that the corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions
of such preferences and/or rights.
SECTION 2. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost or destroyed. When authorizing
such issue of a new certificate or certificates, the Board of Directors may,
in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost or destroyed certificate or certificates, or
his legal representative, to indemnify the corporation in such manner as it
shall require and/or to give the corporation a surety bond in such form and
amount as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost or destroyed.
SECTION 3. TRANSFERS. Transfers of record of shares of stock of the
corporation shall be made only upon its books by the holders thereof, in
person or by
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attorney duly authorized, and upon the surrender of a certificate or
certificates for a like number of shares, properly endorsed.
SECTION 4. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
not be more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the date on which the meeting is
held. A determination of stockholders of record entitled notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
(b) In order that the corporation may determine the stockholders
entitled to consent (if such written consent is permitted under these Bylaws
and the Certificate of Incorporation) corporate action in writing without a
meeting, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which date shall not be more than
ten days after the date upon which the resolution fixing the record date is
adopted by the Board of Directors. If no record date has been fixed by the
Board of Directors, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is required by the Delaware General
Corporation Law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation by delivery to its registered office in Delaware, its principal
place of business, or an officer or agent of the corporation having custody
of the book in which proceedings of meetings of stockholders are recorded.
Delivery made to a corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no record date has
been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be
at the close of business on the day on which the Board of Directors adopts
the resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or
allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose
of any other lawful action, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the
14.
<PAGE>
resolution fixing the record date is adopted, and which record date shall be
not more than sixty days prior to such action. If no record date is fixed,
the record date for determining stockholders for any such purpose shall be at
the close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
SECTION 5. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
OTHER SECURITIES OF THE CORPORATION
All bonds, debentures and other corporate securities of the
corporation, other than stock certificates, may be signed by the Chairman of
the Board (if there be such an officer appointed), or the President or any
Vice President or such other person as may be authorized by the Board of
Directors and the corporate seal impressed thereon or a facsimile of such
seal imprinted thereon and attested by the signature of the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer; provided,
however, that where any such bond, debenture or other corporate security
shall be authenticated by the manual signature of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signature of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or
Assistant Treasurer of the corporation, or such other person as may be
authorized by the Board of Directors, or bear imprinted thereon the facsimile
signature of such person. In case any officer who shall have signed or
attested any bond, debenture or other corporate security, or whose facsimile
signature shall appear thereon or before the bond, debenture or other
corporate security so signed or attested shall have been delivered, such
bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased
to be such officer of the corporation.
ARTICLE VIII
CORPORATE SEAL
The corporation shall have a common seal, upon which shall be
inscribed:
"Intel Corporation
15.
<PAGE>
Incorporated March 1, 1989
Delaware"
In the event the corporation changes its name, the corporate seal
shall be changed to reflect such new name.
16.
<PAGE>
ARTICLE IX
INDEMNIFICATION OF
OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is a
party or is threatened to be made a party to or is involved (as a party,
witness, or otherwise), in any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative (hereinafter a "Proceeding"), by reason of the fact that he, or
a person of whom he is the legal representative, is or was a director,
officer, employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of
another corporation or of a partnership, joint venture, trust, or other
enterprise, including service with respect to employee benefit plans, whether
the basis of the Proceeding is alleged action in an official capacity as a
director, officer, employee, or agent or in any other capacity while serving
as a director, officer, employee, or agent (hereafter an "Agent"), shall be
indemnified and held harmless by the corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended or interpreted (but, in the case of any such amendment
or interpretation, only to the extent that such amendment or interpretation
permits the corporation to provide broader indemnification rights than were
permitted prior thereto) against all expenses, liability, and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties, and
amounts paid or to be paid in settlement, and any interest, assessments, or
other charges imposed thereon, and any federal, state, local, or foreign
taxes imposed on any Agent as a result of the actual or deemed receipt of any
payments under this Article) reasonably incurred or suffered by such person
in connection with investigating, defending, being a witness in, or
participating in (including on appeal), or preparing for any of the foregoing
in, any Proceeding (hereinafter "Expenses"); provided, however, that except
as to actions to enforce indemnification rights pursuant to Section 3 of this
Article, the corporation shall indemnify any Agent seeking indemnification in
connection with a Proceeding (or part thereof) initiated by such person only
if the Proceeding (or part thereof) was authorized by the Board of Directors
of the corporation. The right to indemnification conferred in this Article
shall be a contract right.
SECTION 2. AUTHORITY TO ADVANCE EXPENSES. Expenses incurred by an
officer or director (acting in his capacity as such) in defending a
Proceeding shall be paid by the corporation in advance of the final
disposition of such Proceeding, provided, however, that if required by the
Delaware General Corporation Law, as amended, such Expenses shall be advanced
only upon delivery to the corporation of an undertaking by or on behalf of
such director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the corporation as
authorized in this Article or otherwise. Expenses incurred by other Agents of
the corporation (or by the directors or officers not acting in their capacity
as such, including service with respect to employee benefit plans) may be
advanced upon such terms and conditions as the Board of Directors deems
appropriate. Any obligation to reimburse the
17.
<PAGE>
corporation for Expense advances shall be unsecured and no interest shall be
charged thereon.
SECTION 3. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section
1 or 2 of this Article is not paid in full by the corporation within thirty
(30) days after a written claim has been received by the corporation, the
claimant may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim and, if successful in whole or in
part, the claimant shall be entitled to be paid also the expense (including
attorneys' fees) of prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred
in defending a Proceeding in advance of its final disposition where the
required undertaking has been tendered to the corporation) that the claimant
has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law for the corporation to indemnify the
claimant for the amount claimed. The burden of proving such a defense shall
be on the corporation. Neither the failure of the corporation (including its
Board of Directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper under the circumstances because he
has met the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the corporation (including
its Board of Directors, independent legal counsel, or its stockholders) that
the claimant had not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that claimant has not met the
applicable standard of conduct.
SECTION 4. PROVISIONS NONEXCLUSIVE. The rights conferred on any
person by this Article shall not be exclusive of any other rights that such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, agreement, vote of stockholders or
disinterested directors, or otherwise, both as to action in an official
capacity and as to action in another capacity while holding such office. To
the extent that any provision of the Certificate, agreement, or vote of the
stockholders or disinterested directors is inconsistent with these Bylaws,
the provision, agreement, or vote shall take precedence.
SECTION 5. AUTHORITY TO INSURE. The corporation may purchase and
maintain insurance to protect itself and any Agent against any Expense,
whether or not the corporation would have the power to indemnify the Agent
against such Expense under applicable law or the provisions of this Article.
SECTION 6. SURVIVAL OF RIGHTS. The rights provided by this Article
shall continue as to a person who has ceased to be an Agent and shall inure
to the benefit of the heirs, executors, and administrators of such a person.
SECTION 7. SETTLEMENT OF CLAIMS. The corporation shall not be liable
to indemnify any Agent under this Article (a) for any amounts paid in
settlement of any action or claim effected without the corporation's written
consent, which consent shall
18.
<PAGE>
not be unreasonably withheld; or (b) for any judicial award if the
corporation was not given a reasonable and timely opportunity, at its
expense, to participate in the defense of such action.
SECTION 8. EFFECT OF AMENDMENT. Any amendment, repeal, or
modification of this Article shall not adversely affect any right or
protection of any Agent existing at the time of such amendment, repeal, or
modification.
SECTION 9. SUBROGATION. In the event of payment under this Article,
the corporation shall be subrogated to the extent of such payment to all of
the rights of recovery of the Agent, who shall execute all papers required
and shall do everything that may be necessary to secure such rights,
including the execution of such documents necessary to enable the corporation
effectively to bring suit to enforce such rights.
SECTION 10. NO DUPLICATION OF PAYMENTS. The corporation shall not be
liable under this Article to make any payment in connection with any claim
made against the Agent to the extent the Agent has otherwise actually
received payment (under any insurance policy, agreement, vote, or otherwise)
of the amounts otherwise indemnifiable hereunder.
ARTICLE X
NOTICES
Whenever, under any provisions of these Bylaws, notice is required to
be given to any stockholder, the same shall be given in writing, timely and
duly deposited in the United States Mail, postage prepaid, and addressed to
his last know post office address as shown by the stock record of the
corporation or its transfer agent. Any notice required to be given to any
director may be given by the method hereinabove stated, or by telegram,
except that such notice other than one which is delivered personally, shall
be sent to such address as such director shall have filed in writing with the
Secretary of the corporation, or, in the absence of such filing, to the last
known post office address of such director. If no address of a stockholder or
director be known, such notice may be sent to the office of the corporation
required to be maintained pursuant to Section 2 of Article I hereof. An
affidavit of mailing, executed by a duly authorized and competent employee of
the corporation or its transfer agent appointed with respect to the class of
stock affected, specifying the name and address or the names and addresses of
the stockholder or stockholders, director or directors, to whom any such
notice or notices was or were given, and the time and method of giving the
same, shall be conclusive evidence of the statements therein contained. All
notices given by mail, as above provided, shall be deemed to have been given
as at the time of mailing and all notices given by telegram shall be deemed
to have been given as at the sending time recorded by the telegraph company
transmitting the same. It shall not be necessary that the same method of
giving be employed in respect of all directors, but one permissible method
may be employed in respect of any one or more, and any other
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<PAGE>
permissible method or methods may be employed in respect of any other or
others. The period or limitation of time within which any stockholder may
exercise any option or right, or enjoy any privilege or benefit, or be
required to act, or within which any director may exercise any power or
right, or enjoy any privilege, pursuant to any notice sent him in the manner
above provided, shall not be affected or extended in any manner by the
failure of such a stockholder or such director to receive such notice.
Whenever any notice is required to be given under the provisions of the
statutes or of the Certificate of Incorporation, or of these Bylaws, a waiver
thereof in writing signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto. Whenever notice is required to be given, under any provision of law
or of the Certificate of Incorporation or Bylaws of the corporation, to any
person with whom communication is unlawful, the giving of such notice to such
person shall not be required and there shall be no duty to apply to any
governmental authority or agency for a license or permit to give such notice
to such person. Any action or meeting which shall be taken or held without
notice to any such person with whom communication is unlawful shall have the
same force and effect as if such notice had been duly given. In the event
that the action taken by the corporation is such as to require the filing of
a certificate under any provision of the Delaware General Corporation Law,
the certificate shall state, if such is the fact and if notice is required,
that notice was given to all persons entitled to receive notice except such
persons with whom communication is unlawful.
ARTICLE XI
AMENDMENTS
Unless otherwise provided in the Certificate of Incorporation, these
Bylaws may be repealed, altered or amended or new Bylaws adopted by written
consent of stockholders in the manner authorized by Section 8 of Article II,
or at any meeting of the stockholders, either annual or special, by the
affirmative vote of a majority of the stock entitled to vote at such meeting.
The Board of Directors shall also have the authority to repeal, alter or
amend these Bylaws or adopt new Bylaws (including, without limitation, the
amendment of any Bylaws setting forth the number of directors who shall
constitute the whole Board of Directors) by unanimous written consent or at
any annual, regular, or special meeting by the affirmative vote of a majority
of the whole number of directors, subject to the power of the stockholders to
change or repeal such Bylaws and provided that the Board of Directors shall
not make or alter any Bylaws fixing the qualifications, classifications, term
of office or compensation of directors.
20.
<PAGE>
Exhibit 12.1
INTEL CORPORATION
STATEMENT SETTING FORTH THE COMPUTATION
OF RATIOS OF EARNINGS TO FIXED CHARGES
(in millions)
<TABLE>
<CAPTION>
Six Months Ended
June 26, June 27,
1999 1998
----------------------
<S> <C> <C>
Income before taxes $ 5,594 $ 3,731
Add fixed charges net of
capitalized interest 32 23
-------- --------
Income before taxes and fixed
charges (net of capitalized
interest) $ 5,626 $ 3,754
======== ========
Fixed charges:
Interest $ 20 $ 15
Capitalized interest 3 4
Estimated interest component
of rental expense 12 8
-------- --------
Total $ 35 $ 27
======== ========
Ratio of earnings before taxes and
fixed charges, to fixed charges 161 139
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from Intel Corporation's
CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND CONSOLIDATED CONDENSED BALANCE
SHEETS and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-END> JUN-26-1999
<CASH> 3599
<SECURITIES> 7010
<RECEIVABLES> 3265<F2>
<ALLOWANCES> 0
<INVENTORY> 1763
<CURRENT-ASSETS> 16473
<PP&E> 21998
<DEPRECIATION> 10586
<TOTAL-ASSETS> 32801
<CURRENT-LIABILITIES> 5117
<BONDS> 666
0
0
<COMMON> 4819
<OTHER-SE> 20653
<TOTAL-LIABILITY-AND-EQUITY> 32801
<SALES> 13849
<TOTAL-REVENUES> 13849
<CGS> 5683
<TOTAL-COSTS> 5683
<OTHER-EXPENSES> 1394<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20
<INCOME-PRETAX> 5594
<INCOME-TAX> 1846
<INCOME-CONTINUING> 3748
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3748
<EPS-BASIC> 1.13
<EPS-DILUTED> 1.08
<FN>
<F1>Item consists of research and development.
<F2>Item shown net of allowance, consistent with the balance sheet presentation.
</FN>
</TABLE>
