Intel Announces Record Revenue of $9.96 Billion; EPS of 32 Cents Includes Legal Settlement that Lowered EPS by Approximately 2 Cents


To increase server power efficiency, the company introduced low-voltage versions of its 64-bit Intel Xeon processors, including a 3 GHz, low-voltage version that operates in a 55-watt processor power envelope and a 3.2 GHz, mid-voltage version for use in 90-watt configurations, both targeted at rack and blade server designs.

Intel prepared for the volume ramp of new dual-core platforms by launching a broad evaluation program that will provide thousands of systems to enterprise customers and software developers, including a dual-core Intel Xeon server platform code-named Bensley for upcoming processors code-named Dempsey and Woodcrest. The evaluation program will help developers optimize their multithreaded applications and allow IT end users to evaluate performance gains, test compatibility with in-house applications and accelerate deployment plans.

The Itanium(R) Solutions Alliance was formed by Intel along with Bull, Fujitsu, Fujitsu Siemens Computers, Hitachi, HP, NEC, SGI and Unisys. This additional level of collaboration within the Itanium community will further grow software capabilities and choices for Itanium-based servers.

For the Digital Office, the company demonstrated how Intel(R) Virtualization Technology and Intel(R) Active Management Technology can be used in future business PC designs to help IT managers fight computer viruses by detecting, isolating and patching infected PCs, thereby protecting the network and preserving user productivity.

At the Intel Developer Forum in August, the company unveiled a next-generation processor microarchitecture that will power the company's future platforms for the Digital Enterprise, Digital Office, Digital Home and Mobility. The new microarchitecture combines the power-efficiency associated with the company's industry-leading notebook PC processors with multicore computing capability and "(star)T" technologies that help enable 64-bit computing and improved manageability, reliability and security. The new microarchitecture will be the foundation of new Intel platforms beginning in the second half of 2006 with the introduction of dual-core processors code-named Woodcrest for server platforms, Conroe for desktop platforms, and Merom for notebook platforms, all of which will be manufactured on Intel's 65nm process technology.

Mobility

In handheld computing and communications, Research In Motion (RIM) announced plans to use the Intel's new cellular processor, codenamed Hermon, in next-generation BlackBerry* devices, which are used on high-speed EDGE wireless networks to enable users to connect to the Internet and send and receive data with broadband-like speed. In addition, Motorola announced plans for the Moto Q* smartphone which uses an Intel application processor code-named Bulverde for applications including mobile e-mail and Web surfing.

In notebook computing, Intel announced an agreement with Matsushita Battery Industrial to develop technology enabling "all-day computing." The company also said it is working with Crown Castle and DiBcom to demonstrate mobile broadcast TV functionality on mobile platforms based on Intel(R) Centrino(R) mobile technology as well as Intel XScale(R) technology.

To enable future mobile platforms and small-form factor devices that combine performance and long battery life, Intel announced it is developing an ultra-low power derivative of its 65nm process technology.

To further accelerate the deployment of WiMAX wireless broadband networks, Intel launched the Asian Broadband Campaign which will provide consulting and expertise along with silicon and technical services. Intel Capital invested in Unwired Australia, which is quickly moving to WiMAX technology and expanding wireless broadband services to more cities. Intel now expects 100 WiMAX trials to be underway worldwide by the end of the year.

Intel and Cisco Systems announced plans to enhance the quality and reliability of wireless LANs and allow enterprises to use computers and the network as a combined defense against security threats. In 2006, the companies plan to deliver a new set of features called Business Class Wireless Suite that will allow Intel Centrino mobile technology-based clients to scan for the best access point within a business wireless LAN and provide enhanced Voice over IP services and technologies for notebook PCs.

To advance the bandwidth available from Wi-Fi networks, Intel and other industry leaders formed the Enhanced Wireless Consortium. The companies will enable an ecosystem of a new generation of interoperable, high-performance wireless LAN products with the goal of accelerating the development of the IEEE 802.11n standard. Intel also launched the Digital Communities initiative and is working with a diverse group of high-tech companies to help communities use wireless technology and new applications to enhance government efficiency, promote economic growth, foster greater community satisfaction and bridge the digital divide.

Digital Home

As part of its strategy to deliver technology tailored to the needs of consumers, Intel announced plans to deliver platforms with a new Intel(R) Viiv(TM) technology brand name. PCs with Intel Viiv technology will include remote controls and work with a variety of Intel-verified online services and software, including movies, music, photos and games. Designed from the ground up for the digital home, Intel Viiv technology will include a suite of Intel ingredients including a dual-core processor, chipset, platform software and networking capabilities. Systems based on the first versions of the new platform will be available in the first quarter of 2006 in a variety of form factors and designs.

Intel is also developing platforms to power consumer electronics (CE) devices such as digital televisions, set-top boxes and digital media recorders. Intel announced the Oplus(TM) MN301 "system-on-a-chip" multimedia display processor for flat panel displays and HDTV monitors. The company also announced its intention to acquire demodulator and tuner technologies as well as expertise from Zarlink Semiconductor that comprise the "front end" of such CE devices, enabling them to receive, process, display and store digital broadcast signals.

Technology and Manufacturing

Intel has initiated commercial production and revenue shipments of dual-core microprocessors based on the company's industry-leading 65nm, 300mm process technology, which enables cost-effective, high-volume manufacturing of multicore microprocessors and other advanced products. Intel expects to ship hundreds of thousands of processors built on 65nm technology by the end of the year and is broadly sampling dual-core processors code-named Yonah, Presler and Dempsey to its OEM customers in preparation for a high-volume ramp in 2006.

The company began construction of Fab 32, a new 300mm wafer fabrication facility in Chandler, Ariz. The $3 billion factory is scheduled to begin production of leading-edge microprocessors in the second half of 2007 on a 45nm process technology.

The company also announced plans to invest $345 million to expand capacity at Fab 23 in Colorado Springs, Colo. and Fab 17 in Hudson, Mass. The 200mm facilities are being used to produce products such as chipsets and communications devices for a variety of Intel platforms. Intel also plans to invest $105 million to convert an inactive fabrication facility in Rio Rancho, N.M. for use as a product testing facility.

EARNINGS WEBCAST

Intel will hold a public webcast at 2:30 p.m. PDT today on its Investor Relations Web site at www.intc.com. A replay of the webcast will be available until Jan. 17.

STATUS OF BUSINESS OUTLOOK AND MID-QUARTER BUSINESS UPDATE

During the quarter, Intel's corporate representatives may reiterate the Business Outlook during private meetings with investors, investment analysts, the media and others. Intel intends to publish a Mid-Quarter Business Update on Dec. 8. From the close of business on Dec. 2 until publication of the Update, Intel will observe a "Quiet Period" during which the Business Outlook disclosed in the company's press releases and filings with the SEC on Forms 10-K and 10-Q should be considered to be historical, speaking as of prior to the Quiet Period only and not subject to update by the company. For more information about the Business Outlook, Update and related Quiet Periods, please refer to the Business Outlook section of Intel's Web site at www.intc.com.

RISK FACTORS REGARDING FORWARD-LOOKING STATEMENTS

The statements in this document that refer to plans and expectations for the fourth quarter, the year and the future are forward-looking statements that involve a number of risks and uncertainties. Many factors could affect Intel's actual results, and variances from Intel's current expectations regarding such factors could cause actual results to differ materially from those expressed in these forward-looking statements. Intel presently considers the factors accompanying certain of such statements above and set forth below to be the important factors that could cause actual results to differ materially from Intel's published expectations. A more detailed discussion of these factors, as well as other factors that could affect Intel's results, is contained in Intel's SEC filings, including the report on Form 10-Q for the quarter ended July 2, 2005.

-- Intel operates in intensely competitive industries. Revenue and the gross margin percentage are affected by the demand for and market acceptance of Intel's products, the availability of sufficient inventory to meet demand, pricing pressures and actions taken by Intel's competitors. Factors that could cause demand to be different from Intel's expectations include changes in customer order patterns, including order cancellations; changes in the level of inventory at customers; and changes in business and economic conditions.

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