10-QPeriod: Q2 FY2013

INTEL CORP Quarterly Report for Q2 Ended Jun 29, 2013

Filed July 29, 2013For Securities:INTC

Summary

Intel Corporation reported a decrease in net revenue and net income for the second quarter and first six months of 2013 compared to the same periods in 2012. The decline in revenue was primarily driven by softness in the PC market, although the Data Center Group saw a slight increase in revenue year-over-year. Gross margin percentage also declined due to increased startup costs for next-generation manufacturing processes and lower overall revenue. The company is navigating a challenging PC market impacted by the rise of ultra-mobile devices and is investing in its Atom microarchitecture for these segments. Despite the revenue headwinds, Intel generated significant operating cash flow. The company is actively managing its capital resources, returning cash to shareholders through dividends and share repurchases, while also maintaining a substantial investment portfolio. Intel anticipates a flat revenue for the full year 2013, reflecting a slower than expected macroeconomic recovery and ongoing market shifts. The company is also making strategic adjustments, including re-directing resources to focus on Atom microarchitecture-based products and advanced SoC integration.

Financial Highlights

52 data points
Beta

Revenue

$12.81B

58.3% Gross Margin

Net Income

$2.00B

15.6% Net Margin

EPS (Diluted)

$0.39

Total Assets

$85.66B

Cash & Equivalents

$3.78B

Free Cash Flow

$2.00B

Financial Statements
Beta
Revenue$12.81B
Cost of Revenue$5.34B
Gross Profit$7.47B
R&D Expenses$2.52B
SG&A Expenses$2.17B
Operating Expenses$4.75B
Operating Income$2.72B
Interest Expense$60.00M
Net Income$2.00B
EPS (Basic)$0.40
EPS (Diluted)$0.39
Shares Outstanding (Basic)4.98B
Shares Outstanding (Diluted)5.11B

Key Highlights

  • 1Net revenue for Q2 2013 was $12.811 billion, a 5% decrease from Q2 2012.
  • 2Net income for Q2 2013 was $2.000 billion, a decrease from $2.827 billion in Q2 2012.
  • 3Gross margin percentage declined to 58.3% in Q2 2013 from 63.4% in Q2 2012, impacted by higher manufacturing startup costs.
  • 4PC Client Group revenue decreased by 7% year-over-year, reflecting softness in traditional PC demand.
  • 5Data Center Group revenue saw a slight increase of $9 million year-over-year, driven by growth in cloud and high-performance computing.
  • 6The company expects full-year 2013 revenue to be approximately flat compared to 2012.
  • 7Intel returned $1.1 billion in dividends and repurchased $550 million in common stock during Q2 2013.

Frequently Asked Questions

The primary drivers of the revenue decline in Q2 2013 were a 5% decrease in PC Client Group platform unit volume and softness in traditional PC demand. This was partially offset by slight growth in the Data Center Group.

The gross margin percentage was impacted by increased start-up costs for next-generation 14nm process technology, higher pre-qualification product costs, and lower platform revenue. These factors were partially offset by improvements in non-qualified product costs and higher platform volumes.

Intel is re-directing resources to place greater emphasis on its Intel Atom microarchitecture-based products, aiming to move them faster to leading-edge silicon technology and focusing on SoC integration of key components like graphics and communications. The company also launched its 4th generation Intel Core Processor family for notebooks, desktops, and tablets, and announced new Intel Atom processors for ultra-mobile form factors.

Intel now expects full-year 2013 revenue to be approximately flat compared to 2012. This revised outlook reflects anticipated improvements in macroeconomic conditions in the second half of the year, but at a slower pace than previously expected, and the ongoing impact of the PC market shift towards ultra-mobile devices.