10-QPeriod: Q1 FY2013

INTEL CORP Quarterly Report for Q1 Ended Mar 30, 2013

Filed April 29, 2013For Securities:INTC

Summary

Intel Corporation's first quarter 2013 financial results show a decrease in net revenue and net income compared to the prior year. Net revenue for the quarter ending March 30, 2013, was $12.58 billion, down from $12.91 billion in the same period of 2012. Net income also declined to $2.045 billion, or $0.40 per diluted share, from $2.738 billion, or $0.53 per diluted share, in the first quarter of 2012. The decline in revenue was primarily attributed to a 6% decrease in platform volume within the PC Client Group (PCCG) and Data Center Group (DCG), signaling softness in traditional PC demand. The gross margin percentage also saw a significant drop from 64.0% to 56.2%, largely due to increased start-up costs associated with the company's next-generation 14nm process technology and higher excess capacity charges. Despite these challenges, Intel generated robust operating cash flow of $4.285 billion and continued to return capital to shareholders through dividends and share repurchases.

Financial Highlights

52 data points
Beta

Revenue

$12.58B

56.2% Gross Margin

Net Income

$2.04B

16.3% Net Margin

EPS (Diluted)

$0.40

Total Assets

$83.08B

Cash & Equivalents

$5.70B

Free Cash Flow

$2.11B

Financial Statements
Beta
Revenue$12.58B
Cost of Revenue$5.51B
Gross Profit$7.07B
R&D Expenses$2.53B
SG&A Expenses$1.95B
Operating Expenses$4.55B
Operating Income$2.52B
Interest Expense$73.00M
Net Income$2.04B
EPS (Basic)$0.41
EPS (Diluted)$0.40
Shares Outstanding (Basic)4.95B
Shares Outstanding (Diluted)5.08B

Key Highlights

  • 1Net revenue for Q1 2013 decreased by 3% year-over-year to $12.58 billion.
  • 2Net income for Q1 2013 declined by 25% year-over-year to $2.045 billion.
  • 3Diluted earnings per share decreased to $0.40 from $0.53 in the prior year's quarter.
  • 4Gross margin percentage dropped significantly from 64.0% to 56.2%, impacted by higher manufacturing start-up costs and excess capacity charges.
  • 5The PC Client Group experienced a 6% decline in revenue, primarily due to lower platform unit sales.
  • 6Operating cash flow remained strong at $4.285 billion for the quarter.
  • 7Intel returned $1.1 billion in dividends and repurchased $533 million of common stock during the quarter.

Frequently Asked Questions

The decrease in revenue was primarily driven by lower platform unit sales in the PC Client Group and Data Center Group, reflecting softness in traditional PC demand. The decline in net income was exacerbated by lower gross margins, which were impacted by increased start-up costs for new manufacturing technologies (14nm process) and higher excess capacity charges.

Intel is investing in its next-generation 14nm process technology, which led to higher start-up costs in Q1 2013. However, the company is also leveraging efficiency gains, such as reusing equipment from older technologies for newer ones, which allowed for a $1.0 billion reduction in forecasted capital expenditures for 2013. They are also exploring foundry services, shipping silicon to a foundry customer on their 22nm process technology and agreeing with Altera to manufacture on their 14nm process technology.

Intel forecasts a revenue increase of approximately 3% from Q1 2013, which is slightly above normal seasonal trends. This is attributed to expected inventory replenishment in the PC supply chain due to the anticipated launch of their next-generation microarchitecture platforms, code-named Haswell, in Q2 2013. Gross margin percentage is expected to improve by about two percentage points compared to Q1 2013.

Intel continues to return capital to shareholders through dividend payments and share repurchases. In Q1 2013, they paid $1.1 billion in dividends and repurchased $533 million of common stock. The company also has an ongoing authorization for significant share repurchases, with $4.8 billion remaining available as of March 30, 2013.