10-QPeriod: Q1 FY2008

INTEL CORP Quarterly Report for Q1 Ended Mar 29, 2008

Filed May 2, 2008For Securities:INTC

Summary

Intel Corporation reported its first-quarter 2008 financial results, showing a year-over-year increase in net revenue to $9.7 billion, up 9% from $8.9 billion in Q1 2007. This growth was primarily driven by strong microprocessor unit sales, particularly in the enterprise segment, and a new 45nm process technology. However, the company experienced headwinds from the weak NAND flash memory pricing environment and a decline in average selling prices for mobile microprocessors. Net income for the quarter was $1.44 billion, a decrease from $1.64 billion in the prior year, leading to diluted earnings per share of $0.25 compared to $0.28 in Q1 2007. The company also saw a significant increase in restructuring and asset impairment charges, largely related to the divestiture of its NOR flash memory business. Intel continued its commitment to returning capital to shareholders, repurchasing $2.5 billion in stock and increasing its quarterly dividend.

Key Highlights

  • 1Net revenue increased by 9% year-over-year to $9.7 billion, driven by strong microprocessor performance.
  • 2Gross margin improved to 53.8% from 50.1% in the prior year, benefiting from a more favorable product mix and cost reductions.
  • 3Net income decreased to $1.44 billion from $1.64 billion in Q1 2007, resulting in diluted EPS of $0.25.
  • 4Significant restructuring and asset impairment charges of $329 million were recorded, primarily due to the NOR flash memory divestiture.
  • 5The company repurchased $2.5 billion of its common stock, demonstrating a strong commitment to capital return.
  • 6Intel saw a substantial increase in R&D spending by 5% to $1.47 billion, reflecting investment in future technologies like 32nm process technology.
  • 7The company divested its NOR flash memory assets to Numonyx B.V., impacting future revenue but expected to benefit gross margin percentage.

Frequently Asked Questions

The primary driver of Intel's revenue growth in the first quarter of 2008 was significantly higher microprocessor unit sales, particularly in the enterprise computing segment, supported by the ramp of its quad-core multi-processor server products on 45-nm process technology.

Despite revenue growth, Intel's net income decreased year-over-year due to several factors including a weak NAND flash memory pricing environment, lower average selling prices for mobile microprocessors, increased R&D spending, and substantial restructuring and asset impairment charges related to the NOR flash memory divestiture. Higher effective tax rates also contributed to the decline.

Intel demonstrated a strong commitment to returning capital through significant share repurchases, spending $2.5 billion in Q1 2008. Additionally, the company increased its quarterly cash dividend, reflecting confidence in its financial position and future prospects.

The divestiture of NOR flash memory assets to Numonyx B.V. is expected to reduce future revenue but improve the overall gross margin percentage, as NOR flash memory products historically have a lower gross margin compared to microprocessors. This move aligns with Intel's strategy to focus on higher-margin core businesses.