Second-quarter net income was $896 million, down 2 percent sequentially and up 101 percent year-over-year. Earnings per share were $0.14, flat sequentially and up 100 percent from $0.07 in the second quarter of 2002.
"Overall, the quarter came in slightly better than we expected led by good demand in our computing-related business, which posted solid year-over-year results," said Craig R. Barrett, Intel chief executive officer. "We continued to see strength in emerging markets, and our Asia-Pacific region set an all-time revenue record.
"Our investments in R&D and manufacturing continued to generate strong products," Barrett said. "We saw excellent market acceptance for new, more powerful versions of the Pentium® 4 processor for desktops and for Intel® Centrino™ mobile technology for notebooks. In addition, we recently launched our latest Itanium® 2 processor for high-end enterprise computing with broad industry support. On a day when Intel celebrates its 35th anniversary, our continued focus on product and technology leadership remains the right strategy for long-term success."
Last year's second-quarter results included a $106-million charge to cost of sales related to winding down the online services business, along with a $112-million write-off of acquired intangibles.
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not include the potential impact of any mergers, acquisitions, divestitures or other business combinations that may be completed after July 14, 2003, with the exception of an anticipated closing affecting the third-quarter tax rate as discussed below.
Continuing uncertainty in global economic conditions makes it particularly difficult to predict product demand and other related matters.
- Revenue in the third quarter is expected to be between $6.9 billion and $7.5 billion.
- Gross margin percentage in the third quarter is expected to be approximately 54 percent, plus or minus a couple of points, higher than 50.9 percent in the second quarter primarily due to higher expected revenue, lower start-up costs and lower unit costs. Intel's gross margin percentage varies primarily with revenue levels, product mix and pricing, changes in unit costs and inventory valuation, capacity utilization, and the timing of factory ramps and associated costs.
- Gross margin percentage for 2003 is expected to be approximately 54 percent, plus or minus a few points, higher than the previous expectation of 51 percent, plus or minus a few points. The increase is primarily due to higher expected revenue along with lower start-up costs as resources are transferred to next-generation process development.
- R&D spending for 2003 is expected to be approximately $4.2 billion, higher than the previous expectation of $4.0 billion, primarily due to the transfer of resources from 90-nm start-up activities to 65-nm process development.
- Expenses (R&D plus MG&A) in the third quarter are expected to be approximately $2.2 billion. Expenses, particularly certain marketing- and compensation-related expenses, vary depending on the level of revenue and profits.
- The capital spending expectation for 2003 is unchanged at $3.5 billion to $3.9 billion.
- Gains or losses from equity investments and interest and other in the third quarter is expected to be a net loss of $25 million due to the expectation of a net loss on equity investments of approximately $60 million, primarily as a result of impairment charges on private equity investments.
- The tax rate is expected to be approximately 24 percent for the third quarter and 30.5 percent for the fourth quarter. The lower rate for the third quarter as compared to the second and fourth quarters is due to an expected tax benefit related to a divestiture that is anticipated to close shortly. This divestiture is not expected to have a material impact on income before taxes. The tax rate may be affected by many factors including changes in law, the closing of acquisitions or divestitures, the jurisdictions in which products are manufactured and sold and profits are determined to be earned and taxed, and the ability to realize deferred tax assets.
- Depreciation is expected to be approximately $1.2 billion for the third quarter and $4.7 billion for the year, slightly lower than the previous expectation of $4.8 billion for the year.
- Amortization of acquisition-related intangibles and costs is expected to be approximately $70 million in the third quarter and approximately $300 million for the year.