INDUSTRY

SANTA CLARA, CA -- Intel Corporation today announced third quarter revenue of $6.5 billion, down 25 percent from the third quarter of 2000 and up 3 percent sequentially. For the third quarter, net income excluding acquisition-related costs* was $655 million, down 77 percent from the third quarter of 2000 and 23 percent sequentially. Third quarter earnings excluding acquisition-related costs were $0.10 per share, a decrease of 76 percent from $0.41 in the third quarter of 2000 and 17 percent sequentially. Including acquisition-related costs in accordance with generally accepted accounting principles, third quarter net income was $106 million, down 96 percent from the third quarter of 2000 and 46 percent sequentially. Earnings per share were $0.02, down 94 percent from $0.36 in the third quarter of 2000 and 33 percent sequentially. Intel reduced its third-quarter tax provision by $100 million due to an increase in the calculated tax benefit related to export sales for 2000, including the impact of a revision in the tax law. Acquisition-related costs in the third quarter consisted of $609 million of amortization of goodwill and other acquisition-related intangibles and costs. "Intel delivered solid third quarter results in a turbulent environment, with revenue and microprocessor units up from the second quarter," said Craig R. Barrett, president and chief executive officer. "The actions taken to accelerate our desktop product roadmap have generated strong demand for the Intel® Pentium® 4 processor and the Intel® 845 chipset platform. In addition, the ramp of our 0.13-micron process technology remains ahead of schedule with three fabs currently on line and another expected by the end of the year." "While economic conditions worldwide remain weak, we continue to strengthen our competitive position and expect to see moderate unit growth in microprocessors and flash memory in the fourth quarter," he continued. "We remain confident that our strategy for supplying the key computing and communications building blocks for the worldwide Internet build-out positions us for higher levels of growth when the economy recovers." During the quarter, the company paid its quarterly cash dividend of $0.02 per share. The dividend was paid on Sept. 1, 2001 to stockholders of record on Aug. 7, 2001. Intel has paid a regular quarterly cash dividend for nine years. During the quarter, the company repurchased a total of 34.9 million shares of common stock, at a cost of $1.0 billion, under an ongoing program. Since the program began in 1990, the company has repurchased approximately 1.5 billion shares at a total cost of approximately $25 billion. In September, Intel's board of directors increased the number of shares available under the program by 300 million shares. With this increase, a total of 328 million additional shares can be repurchased under the program. Beginning with this earnings report, Intel is providing operating segment information for two additional business groups, the Intel Communications Group (ICG) and the Wireless Communications and Computing Group (WCCG). The information can be found in the tables following this release. BUSINESS OUTLOOK 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 or other business combinations that may be completed after Sept. 29, 2001. Intel plans to provide a mid-quarter Business Update to the Outlook provided below on Dec. 6. Continuing uncertainty in global economic conditions makes it particularly difficult to predict product demand and other related matters. ** Revenue in the fourth quarter of 2001 is expected to be between $6.2 and $6.8 billion. ** Gross margin percentage in the fourth quarter of 2001 is expected to be 47 percent, plus or minus a couple of points, versus 46 percent in the third quarter. Gross margin percentage varies primarily with revenue levels, product mix, product pricing, changes in unit costs, capacity utilization, and the timing of factory ramps and associated costs. ** Expenses (R&D, excluding in-process R&D, plus MG&A) in the fourth quarter of 2001 are expected to be between $2.0 and $2.1 billion, versus $2.0 billion in the third quarter. Expenses may vary from this expectation depending in part on the level of revenue and profits. ** R&D spending, excluding in-process R&D, is expected to be approximately $3.9 billion in 2001, lower than the previous expectation of $4.0 billion, primarily due to reductions in discretionary spending within ongoing programs. ** Capital spending for 2001 is expected to be approximately $7.5 billion. ** Gains or losses from equity investments and interest and other for the fourth quarter of 2001 are expected to be a net loss of $230 million, due to a net loss on equity investments of approximately $280 million, primarily as a result of impairment charges, and will vary depending on equity market levels and volatility, the realization of expected gains or losses on investments, including gains on investments acquired by third parties, determination of impairment charges, losses on equity-method investments, interest rates, cash balances, mark-to-market of derivative instruments and assuming no unanticipated items. ** The tax rate for 2001 is expected to be approximately 25.7 percent, excluding the impact of acquisition-related costs and the one-time adjustment related to export sales for 2000. ** Depreciation is expected to be approximately $1.1 billion in the fourth quarter. ** Amortization of goodwill and other acquisition-related intangibles and costs is expected to be approximately $550 million in the fourth quarter. * Acquisition-related costs consist of one-time write-offs of purchased in-process research and development and goodwill, and the ongoing amortization of goodwill and other acquisition-related intangibles and costs. Intangibles include, for example, the value of the acquired companies' developed technology, trademarks and workforce-in-place. Earnings excluding acquisition-related costs differ from earnings presented according to generally accepted accounting principles because they exclude these costs.