01—Abstract
Summary
Summary of the 10-K filed February 16, 2018. Cited figures are marked; the original filing is the authoritative source.
Intel Corporation's 2017 10-K filing reveals a company in the midst of a significant transformation, shifting its focus from a PC-centric to a data-centric business model.
This strategic pivot is supported by strong growth in data-centric segments like Data Center Group (DCG), Internet of Things Group (IOTG), Non-Volatile Memory Solutions Group (NSG), and Programmable Solutions Group (PSG). Despite a slight dip in net income year-over-year, driven by significant tax reform impacts and divestitures, revenue increased to a record $62.8 billiona, up 6% from 2016. The company highlights robust performance in its data-centric businesses, which collectively grew 16% year-over-year (adjusted for divestitures), signaling a positive trend in its strategic realignment.
The company's commitment to innovation is evident in its continued R&D investments, particularly in advancing manufacturing process technologies like 10nm and 7nm, and in strategic acquisitions, most notably the $14.5 billionb purchase of Mobileye, which is expected to bolster its presence in the autonomous driving market. Intel's financial position remains strong, with significant operating cash flow, though capital expenditures increased to support manufacturing ramp-ups. Investors should note the company's focus on returning capital to shareholders through dividends and stock repurchases, underscoring its commitment to shareholder value.
02—Key points
Key Highlights
- Record Net Revenue of $62.8 billion in 2017, a 6% increase from 2016, driven by strong performance in data-centric businesses.
- Data-centric businesses collectively grew 16% year-over-year (adjusted for divestitures), highlighting successful strategic transformation.
- Acquisition of Mobileye for $14.5 billion to strengthen position in autonomous driving and data-intensive markets.
- Significant R&D investment to advance manufacturing technologies, including 10nm and 7nm process nodes.
- Restructuring program initiated in 2016 completed in 2017, resulting in annual savings of approximately $1.8 billion, reallocated to growth segments.
- Operating income increased significantly to $17.9 billion, up from $12.9 billion in 2016, reflecting improved operational efficiency and revenue growth.
- Increased capital expenditures to $11.8 billion in 2017, primarily for manufacturing and assembly/test facilities.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Intel Corp kept $0.15.
- Revenue$62.76B100.0%
- Cost of revenue−$23.66B37.7%
- Gross profit$39.10B62.3%
- Operating costs−$21.05B33.5%
- Operating income$18.05B28.8%
- Interest, other & tax−$8.45B13.5%
- Net income$9.60B15.3%
Where FY2017 revenue went
$62.76B- Cost of revenue: $23.66B, 38% of revenue
- R&D: $13.04B, 21% of revenue
- Net income: $9.60B, 15% of revenue
- Interest, other & tax: $8.45B, 13% of revenue
- SG&A: $7.45B, 12% of revenue
- Other operating costs: $561.0M, 0.9% of revenue
Kept 15% as net incomeOther operating costs $561.0M · 0.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 16, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $62.76B$59.39B | +5.7% |
| Cost of Revenue | $23.66B$23.15B | +2.2% |
| Gross Profit | $39.10B$36.23B | +7.9% |
| R&D Expenses | $13.04B$12.69B | +2.8% |
| SG&A Expenses | $7.45B$8.38B | −11.0% |
| Operating Expenses | $21.05B$23.10B | −8.9% |
| Operating Income | $18.05B$13.13B | +37.4% |
| Interest Expense | $646.00M$733.00M | −11.9% |
| Net Income | $9.60B$10.32B | −6.9% |
| EPS (Basic) | $2.04$2.18 | −6.4% |
| EPS (Diluted) | $1.99$2.12 | −6.1% |
| Shares Outstanding (Basic) | 4.70B4.73B | −0.6% |
| Shares Outstanding (Diluted) | 4.83B4.88B | −0.8% |
05—Questions
Frequently Asked Questions
What is Intel's primary strategic focus for 2017?
Intel's primary strategic focus in 2017 was its transformation from a PC-centric company to a data-centric company. This involved significant investments in growth areas like memory, programmable solutions, and autonomous driving, aiming to capitalize on the increasing demand for processing, analyzing, storing, and transferring data.
How did the Mobileye acquisition impact Intel's financial performance?
The acquisition of Mobileye for $14.5 billion in August 2017 was a significant strategic move to expand Intel's presence in the automotive sector and autonomous driving. While it increased goodwill and identified intangible assets on the balance sheet, it aligns with Intel's data-centric strategy and is expected to drive future growth in high-value markets.
What was the impact of the U.S. Tax Cuts and Jobs Act on Intel's 2017 financials?
The U.S. Tax Cuts and Jobs Act, enacted in December 2017, resulted in a one-time provisional income tax expense of $5.4 billion for Intel in 2017. This was primarily due to a transition tax on previously untaxed foreign earnings and the remeasurement of deferred tax assets and liabilities. However, the company expects the new legislation to lower its effective tax rate starting in 2018.
How is Intel managing its manufacturing and R&D investments?
Intel is making significant investments in both manufacturing and R&D. In 2017, capital expenditures increased to $11.8 billion to support the ramp of new process technologies like 10nm and 7nm, as well as investments in assembly and test facilities. R&D spending also increased, focusing on new microarchitectures, process technology advancements, and emerging technologies like AI and 5G.
06—Continue