SANTA CLARA, Calif., July 19, 2005 - Intel Corporation today announced second-quarter revenue of $9.2 billion, up 15 percent year-over-year and down 2 percent sequentially.

Second-quarter net income was $2 billion, up 16 percent year-over-year and down 6 percent sequentially. Earnings per share were 33 cents, up 22 percent from 27 cents in the second quarter of 2004 and down 6 percent from 35 cents in the first quarter of 2005.

"Intel delivered record second-quarter revenue, with growth of 15 percent versus a year ago led by strong demand for our notebook platforms," said Paul Otellini, president and CEO. "Our investments in new products, advanced silicon capacity and emerging markets are paying off with growth that is outpacing the industry. We look forward to the second half of 2005 as we ramp dual-core microprocessors into high volume, begin production on our 65nm process technology and deliver innovative new platforms."

Intel's results for the previous quarter included an additional week of business because 2005 is a 53-week fiscal year for the company. As discussed in the company's June 9 Mid-Quarter Business Update, Intel's results for the second-quarter included a tax adjustment primarily related to an increase in estimated research and development credits for prior years. The reversal of previously accrued taxes increased second-quarter earnings-per-share by approximately 2 cents. Intel's results for last year's second quarter included a reversal of previously accrued taxes that increased earnings-per-share by 1.3 cents.

BUSINESS OUTLOOK
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. Please see the Risk Factors Regarding Forward-Looking Statements in this release for a description of certain important risk factors that could cause actual results to differ, and refer to Intel's annual and quarterly reports on file with the Securities and Exchange Commission (SEC) for a more complete description of the risks. These statements do not include the potential impact of any mergers, acquisitions, divestitures, investments or other business combinations that may be completed after July 18, 2005.

• Revenue in the third quarter is expected to be between $9.6 billion and $10.2 billion.
• Gross margin percentage for the third quarter is expected to be approximately 60 percent, plus or minus a couple of points, as compared to 56.4 percent in the second quarter. The gross margin percentage expectation for 2005 has been narrowed from 59 percent, plus or minus a few points, to 59 percent, plus or minus a couple of points. The gross margin percentage could vary from expectations based on changes in revenue levels, product mix and pricing; variations in inventory valuation, including variations related to the timing of qualifying products for sale; excess or obsolete inventory; manufacturing yields; changes in unit costs; capacity utilization; impairments of long-lived assets, including manufacturing, assembly/test and intangible assets; and the timing and execution of the manufacturing ramp and associated costs, including start-up costs.
• Expenses (R&D plus MG&A) in the third quarter are expected to be between $2.8 billion and $2.9 billion, higher than $2.5 billion in the second quarter, primarily driven by increases in research and development. The company is transferring resources from 65nm start-up programs to 45nm development and increasing investments in new platforms. Expenses, particularly certain marketing and compensation expenses, vary depending on the level of demand for Intel's products and the level of revenue and profits.
• The R&D spending expectation for 2005 is unchanged at approximately $5.2 billion.
• The capital spending expectation for 2005 has been increased to approximately $5.9 billion, plus or minus $200 million, as compared to the previous expectation of $5.4 billion to $5.8 billion, to support higher expected demand.
• Gains from equity investments and interest and other in the third quarter are expected to be approximately $130 million.
• The tax rate for the third and fourth quarters is expected to be approximately 30.5 percent. The tax rate expectation does not reflect the impact of any potential repatriation of cash under the American Jobs Creation Act (Jobs Act). The company currently expects to finalize its analysis of whether, and to what extent, foreign earnings might be repatriated under the Jobs Act in September, which would impact the third quarter tax rate. The tax rate expectation is based on current tax law and current expected income and assumes Intel continues to receive tax benefits for export sales. The tax rate may be affected by the closing of acquisitions or divestitures; the jurisdiction in which profits are determined to be earned and taxed; changes in the estimates of credits, benefits and deductions; the resolution of issues arising from tax audits with various tax authorities; and the ability to realize deferred tax assets.
• Depreciation for the third quarter is expected to be between $1 billion and $1.1 billion, approximately flat with the second quarter. Depreciation for 2005 is now expected to be between $4.3 billion and $4.4 billion, as compared to the previous expectation of $4.4 billion, plus or minus $100 million.
• Amortization of acquisition-related intangibles and costs is expected to be approximately $30 million in the third quarter. The full-year expectation is now approximately $120 million, slightly below the previous expectation of $125 million.

SECOND-QUARTER REVIEW AND RECENT HIGHLIGHTS

Financial Review

• Intel used $2.5 billion in cash to repurchase 98.9 million shares of its common stock during the quarter under an ongoing program.
• The company paid a cash dividend of 8 cents per share on June 1 to stockholders of record on May 7.
• Gains from equity investments and interest and other in the second quarter were $105 million. The amount included $22 million in net losses from equity investments driven by $133 million in impairments, primarily due to a $105-million impairment of Intel's investment in Micron Technology to reflect the difference between the cost basis of the investment and the stock price at the end of the quarter. The impairments were partially offset by gains from dispositions.
• In June 2005, the U.S. Internal Revenue Service proposed certain adjustments related to the amounts reflected as a tax benefit for export sales in Intel's 2001 and 2002 tax returns. The company does not agree with these...