01—Abstract
Summary
Summary of the 10-Q filed May 2, 2016. Cited figures are marked; the original filing is the authoritative source.
Intel Corporation reported net revenue of $13.7 billiona for the first quarter of 2016, a 7% increase year-over-year, driven by strong performance in its Data Center Group (DCG) and the inclusion of the newly acquired Altera Corporation (now Programmable Solutions Group - PSG).
Diluted earnings per share were $0.42b, a slight increase from $0.41 in the prior year period. The company saw growth in its core computing segments, with Client Computing Group (CCG) revenue up 2% and DCG revenue up 9%.
However, the overall gross margin percentage decreased slightly to 59.3% from 60.5%, impacted by acquisition-related costs and higher unit costs. Intel generated $4.1 billionc in operating cash flow, but net cash used in investing activities significantly increased due to the $14.5 billion acquisition of Altera.
02—Key points
Key Highlights
- Net revenue increased 7% year-over-year to $13.7 billion, exceeding the previous year's $12.8 billion.
- Diluted earnings per share grew to $0.42 from $0.41 in the prior year's quarter.
- The acquisition of Altera Corporation for $14.5 billion was completed in December 2015, and its results are now included, forming the Programmable Solutions Group (PSG).
- Data Center Group (DCG) revenue showed strong growth, increasing 9% to $4.0 billion.
- Client Computing Group (CCG) revenue saw a modest 2% increase to $7.5 billion.
- Operating income decreased slightly by 2% to $2.6 billion, impacted by acquisition-related costs.
- The company generated $4.1 billion in cash from operating activities.
- Significant investment outflows occurred due to the Altera acquisition, resulting in a substantial decrease in cash and cash equivalents.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2016, Intel Corp kept $0.15.
- Revenue$13.70B100.0%
- Cost of revenue−$5.57B40.7%
- Gross profit$8.13B59.3%
- Operating costs−$5.56B40.6%
- Operating income$2.57B18.7%
- Interest, other & tax−$522.0M3.8%
- Net income$2.05B14.9%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2016filed May 2, 2016Financial Statements
Q2 FY2016 against Q2 FY2015
| Line item | Q2 FY2016Q2 FY2015 | Change |
|---|---|---|
| Revenue | $13.70B$13.20B | +3.8% |
| Cost of Revenue | $5.57B$4.95B | +12.6% |
| Gross Profit | $8.13B$8.25B | −1.4% |
| R&D Expenses | $3.25B$3.09B | +5.2% |
| SG&A Expenses | $2.23B$1.95B | +14.2% |
| Operating Expenses | $5.56B$5.35B | +3.9% |
| Operating Income | $2.57B$2.90B | −11.3% |
| Interest Expense | $208.00M$53.00M | +292.5% |
| Net Income | $2.05B$2.71B | −24.4% |
| EPS (Basic) | $0.43$0.57 | −24.6% |
| EPS (Diluted) | $0.42$0.55 | −23.6% |
| Shares Outstanding (Basic) | 4.72B4.76B | −0.8% |
| Shares Outstanding (Diluted) | 4.88B4.91B | −0.7% |
05—Questions
Frequently Asked Questions
What was the impact of the Altera acquisition on Intel's financial performance in this quarter?
The acquisition of Altera Corporation, completed in December 2015, significantly impacted the financial results. It contributed $359 million in net revenue and formed the new Programmable Solutions Group (PSG). However, it also led to acquisition-related costs and adjustments, which impacted gross margin and operating income negatively.
How did Intel's key business segments perform?
The Data Center Group (DCG) showed strong growth with a 9% increase in revenue, indicating continued demand in the cloud and enterprise sectors. The Client Computing Group (CCG) experienced a modest 2% revenue growth. The Internet of Things Group (IOTG) also performed well with a 22% revenue increase. The new Programmable Solutions Group (PSG) contributed revenue, while the Non-Volatile Memory Solutions Group (NSG) saw a 6% revenue decline.
What is the company's cash position and debt situation after the Altera acquisition?
Following the Altera acquisition, Intel's cash and cash equivalents, short-term investments, and trading assets decreased significantly to $15.1 billion from $25.3 billion at the end of the previous year. Total debt increased to $25.4 billion, partly due to financing the acquisition through long-term debt and a credit facility. Despite the reduction in cash, the company stated it has sufficient financial resources to meet its business requirements.
Are there any significant legal or restructuring matters to note?
Intel is involved in ongoing legal proceedings related to competition matters, particularly with the European Commission and consumer class actions, which continue to be defended. Furthermore, Intel announced a 2016 Restructuring Program subsequent to the quarter, which involves facility closures and a workforce reduction of up to 12,000 positions, expected to incur charges of approximately $1.2 billion in the second quarter of 2016.
06—Continue