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Intel Corporation : CFO Commentary on Fourth-Quarter and Full Year 2012 Results

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01/17/2013 | 10:11pm CEST
Intel Corporation

2200 Mission College Blvd.

Santa Clara, CA 95054-1549

CFO Commentary on Fourth-Quarter and Full Year 2012 Results

Summary

The fourth quarter came in consistent with our expectations. For 2012, although our financial results
were below our expectations entering the year, we launched leadership products in every major business segment and we extended our manufacturing leadership.
2012 revenue of $53.3B was down 1% from a year ago and below the expectations we had at the start of the year. Worldwide GDP growth was significantly less than we had thought entering the year and the PC market segment was impacted by the growth of tablets. Our PC Client Group revenue was down 3% from a year ago. The Data Center Group revenue grew 6% year over year as a richer mix of products and significant growth in the internet cloud segment of our business was partially offset by weakness in the enterprise server market segment. Gross margin for the year was 62.1%, at the top end of our historical gross margin range for the 3rd year in a row. Spending as a percent of revenue was up to 34.1 percent in 2012 as a result of increasing R&D investments across Ultrabooks, the data center,
smartphones, tablets, and manufacturing. Operating profit was $14.6B and net income was $11.0B, with earnings per share of $2.13.
Fourth quarter revenue of $13.5B was down 3% year over year. Relative to historical seasonal growth in the fourth quarter, revenue was impacted by softness in PC demand and continued reduction of inventories across the supply chain as OEMs reduce inventory on older generation products. Gross margin dropped from the third quarter to 58% The drop from the third quarter was driven primarily by the aggressive tactical actions we took to reduce inventory levels and to redirect space and equipment to our 14nm process technology resulting in excess capacity charges. Our inventories decreased almost
$600M from the third quarter as a result of these actions. Separately, we started production on our next generation micro-architecture product, code-named Haswell, which we expect to qualify for sale in the first quarter. This production prior to qualification for sale resulted in an increase in inventory write- offs. Operating income was $3.2B and net income was $2.5B, with earnings per share of $0.48.
On a GAAP basis, the full year 2012 results when compared to the full year 2011 results were the following:
• Revenue of $53.3B was down 1%, from $54.0B
• Gross margin of 62.1% was flat from 62.5%
• Operating income of $14.6B was down 16% from $17.5B
• Net income of $11.0B was down 15% from $12.9B
• Earnings per share of $2.13 was down 11% from $2.39
On a GAAP basis, the fourth quarter 2012 results when compared to the fourth quarter from a year ago were the following:
• Revenue of $13.5B was down 3%, from $13.9B
• Gross margin of 58.0% was down 6.5 points from 64.5%
• Operating income of $3.2B was down 31% from $4.6B
• Net income of $2.5B was down 27% from $3.4B
• Earnings per share of $0.48 was down 25% from $0.64
As a result of the acquisitions of McAfee, Inc. and the Infineon wireless division in the first quarter of
2011, we continue to provide Non-GAAP financial information in addition to GAAP to provide additional visibility into operational results of the company. The Non-GAAP information below excludes the impact of amortization of acquisition-related intangibles, and the related income tax effect.

Full year 2012 vs. Full year 2011 Non-GAAP* Financial Comparison

• Gross margin of 63.2% was flat from 63.4%
• Operating income of $15.5B was down 15% from $18.2B
• Net income of $11.6B was down 14% from $13.5B
• Earnings per share of $2.24 was down 10% from $2.50

Q4'12 vs. Q4'11 Non-GAAP* Financial Comparison

• Gross margin of 59.0% was down 6.4 points from 65.4%
• Operating income of $3.4B was down 30% from $4.8B
• Net income of $2.6B was down 26% from $3.5B
• Earnings per share of $0.51 was down 24% from $0.67
Except as otherwise noted, the remainder of this document presents results and comparables on a GAAP
basis.

Fourth Quarter 2012

Revenue

Revenue of $13.5B was flat sequentially and down 3% from a year ago. PC and Data Center volumes
were down 3% when compared to the third quarter. Platform** average selling prices were up 4% when compared to the third quarter.
Intel Architecture Group fourth quarter revenue of $12.4B was down 1% sequentially and down 4% year over year:

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Financials ($)
Sales 2017 60 016 M
EBIT 2017 17 144 M
Net income 2017 12 378 M
Debt 2017 5 779 M
Yield 2017 2,98%
P/E ratio 2017 13,98
P/E ratio 2018 12,86
EV / Sales 2017 2,90x
EV / Sales 2018 2,78x
Capitalization 168 566 M
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Brian M. Krzanich Chief Executive Officer & Director
Andy D. Bryant Chairman
W. Eric Mentzer Director-Strategy, Planning & Operations
Robert Holmes Swan Chief Financial Officer & Executive Vice President
Paula Tolliver Chief Information Officer & Vice President
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