clients networking and communications intel.com 1999 annual report the building blocks of the internet economy intc.com server platforms solutions and services 29.4 30 2.25 90 2.11 26.3 1.93 25.1 1.73 20.8 20 1.45 1.50 60 16.2 1.01 11.5 10 0.75 30 8.8 0.65 0.65 High 5.8 4.8 3.9 0.31 Close 0.24 0.20 Low INTEL CORPORATION 1999 0 0 0 90 91 92 93 94 95 96 97 98 99 90 91 92 93 94 95 96 97 98 99 90 91 92 93 94 95 96 97 98 99 Net revenues Diluted earnings per share Stock price trading ranges (Dollars in billions) (Dollars, adjusted for stock splits) by fiscal year (Dollars, adjusted for stock splits) 3,111 1999 facts and figures 3,000 45 2,509 Intel’s stock 38.4 2,347 35.5 35.6 price has risen 33.3 2,000 28.4 30 1,808 27.3 at a 48% 26.2 21.2 21.6 20.4 1,296 1,111 970 compound 1,000 15 780 618 517 annual growth 0 rate in the 0 90 91 92 93 94 95 96 97 98 99 90 91 92 93 94 95 96 97 98 99 Research and development Return on average (Dollars in millions, excluding purchased last 10 years. stockholders’ equity in-process research and development) (Percent) 9.76 4,501 9 Japan 4,500 7% 4,032 7.05 3,550 3,403 3,024 5.93 6 Asia- 3,000 Pacific North 5.14 23% America 2,441 43% 1,9 33 3.69 2.80 3 1,500 1,228 2.24 Machinery 948 & equipment 1.63 1.35 Europe 680 1.12 27% Land, buildings & improvements 0 0 90 91 92 93 94 95 96 97 98 99 90 91 92 93 94 95 96 97 98 99 Book value per share Geographic breakdown of 1999 revenues Capital additions to property, at year-end (Percent) plant and equipment† (Dollars, adjusted for stock splits) (Dollars in millions) Past performance does not guarantee future results. Share and per share amounts shown have been adjusted for stock splits through 1999. †Additions in 1998 include capital assets acquired from Digital Equipment Corporation. To our stockholders 1 In 1999, the Internet revolution by following our “copy exactly” INTEL CORPORATION 1999 continued to reshape how the strategy: our new 0.18-micron world does business. According- manufacturing fabs are virtual ly, we worked to transform Intel: replicas of the development fab from being at the center of the PC where the process was perfected. industry to being at the center of Segmentation: Our strategy the Internet economy. We developed new strategic business in microprocessors has worked extremely well, allowing us directions that position us to supply key building blocks at many to provide chips for all major computing price/performance points within the Internet infrastructure, from networks to chips. points. In 1999, we adjusted our costs and our investment Even as we were expanding the company’s focus, our core strategy to be consistent with our segmentation plans, and as microprocessor business provided us with a solid growth rate. a result we experienced strong unit shipment growth across We ended the year with record sales of microprocessor market segments. $29.4 billion, an increase of 12%. This Acquisitions: We purchased 12 was our 13th straight year of revenue companies for about $6 billion, aug- growth. Net income was up 21% to $7.3 We’re building menting our capabilities in a number of billion including acquisition-related costs; key product areas. Companies acquir- without acquisition-related costs, it would on our core ed included Shiva, Softcom, Dialogic, have been up 29% to $8.1 billion. strengths to Level One Communications, NetBoost, Our performance was strong around pursue new IPivot and DSP Communications. the world, with 57% of our sales coming Strategic investments: The Intel from outside the U.S. The Asian markets strategic Capital program had a boom year, with have started to recover, and European directions. equity investments in areas of strategic sales were solid. As the developing importance to Intel. We ended the year economies expand, we expect even with an investment portfolio valued at stronger growth worldwide. about $8 billion. At the end of 1999, we 1999 was an extraordinarily busy year, with significant out- held stakes in more than 350 companies around the world, put from all of our product groups. To our frustration, our dedicated to the evolving Internet economy—from physical execution was less than perfect, leading to delays in the intro- infrastructure to content. These investments substantially duction of several products. Despite these issues, we ended augmented our participation in the online revolution. the year with a very strong roster of achievements: Future powerhouse: We produced successful sample Processor launch: We accomplished the largest micropro- versions of the Itanium™ processor, based on the revolutionary cessor product introduction in our history, with 15 new Pentium® III new IA-64 architecture designed to meet the needs of powerful and Pentium® III Xeon™ processors introduced at once. This was Internet servers. We expect this architecture to be as important supported by chipsets and motherboards that help computer to the Internet infrastructure in the future as the current Intel makers bring systems based on the new chips to market quickly. architecture has been to PC computing for the last 15 to 20 Manufacturing: We ramped our new 0.18-micron manu- years. Our goal is to make the IA-64 architecture the main en- facturing process faster than any other process in our history. gine of the Internet in the next decade, starting with the Itanium We were able to generate high yields quickly in our factories processor, which we expect to be in production in mid-2000. 2 As others see us: We were pleased to have Internet Exchange™ architecture, a powerful, flexi- Intel included in the Dow Jones Industrial Average* ble new platform for silicon-based networking in November 1999; this reflects the importance of products. We are also expanding our offering of technology in the overall U.S. economy. We were system-level communications products that help gratified to be ranked #8 on Fortune magazine’s build the network infrastructure. Our future powerhouse: list of most admired companies, and honored to the Itanium™ processor Server platforms: Within five years, we expect be rated #4 among U.S. companies with the best corporate there to be tens of millions of servers worldwide, most based reputations, according to research by Harris Interactive Incor- on Intel architecture. Many servers harness the power of two, porated and the Reputation Institute. four, eight or more Intel processors each, making them a very INTEL CORPORATION 1999 Supplying the Internet economy. Just as the PC was the significant growth opportunity. We have invested about half growth engine for computing in the last decade, the Internet of our microprocessor R&D budget on initiatives in this area, will be the growth engine for computing in the next decade. including the IA-64 architecture and the Pentium III Xeon pro- The Internet runs on chips. From the networking silicon that cessor family, specifically designed for mid-range and high- directs electronic signals around the end servers and workstations. Part of globe, to the high-performance servers our strategy is to make it easier for that house every Web page and e-mail Our mission server makers to design their products message, to the microprocessors in the is to be the around Intel architecture, so we pro- PCs and other devices used to get on- preeminent vide chipsets, boards and system-level line, the Internet relies on silicon. This products that incorporate Intel com- reliance builds directly on our experi- building block ponents for servers at various levels ence and core strengths. supplier to of integration. Our four key business areas are: Solutions and services: The e-Bus- Clients: In our core business, we the worldwide iness revolution provides a key oppor- focus on delivering quality microproces- Internet tunity to help companies develop and sors for a wide range of computing needs. run e-Commerce systems. We do more Our Pentium III microprocessor is the economy. than $1 billion in business each month fastest ramping processor ever, excel- over the Internet, and according to lent for performance desktop PCs and entry-level servers and the July 1999 issue of PC Computing magazine, we are workstations. We also supply the Intel® Celeron™ processor, the world’s largest business-to-business e-Commerce site. enabling entry-level PC buyers to get reliable Intel technology Through Intel® Online Services, we sell our own technology for less than $1,000; a variety of processors customized for and products in a service form to other companies that may mobile computing solutions; and a line of flash memory prod- not have the expertise or resources to handle a booming ucts for handheld wireless devices. e-Commerce operation in house. Networking and communications: With the boom in net- These new strategies leverage our core business and posi- working and communications, we have made it a priority to tion us well to serve the Internet economy. These strategic develop and acquire expanded capabilities in the networking areas are described in further detail on the following pages. silicon business. We have purchased several companies with We look forward to the challenges in this new environment strong expertise in this area and have developed the Intel® and expect to grow as Internet computing continues to expand.