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July 15, 2009

Company Report
Analysis of Sales/Earnings

Intel Corporation INTC: $16.83


Accumulate Price Target: $20.00 Semiconductors

INTC: Gross Margin Rebounds, Inventory Low, And


Guidance Conservative
THINK ACTION: Vijay Rakesh
Intel announced strong revenue/EPS results last night of $8.0B/$0.18 versus 312-201-3133, vrakesh@thinkequity.com
the Street estimates of $7.1B/$0.08. Gross margins were up 520 bp Q/Q as fab Christopher Eberle
utilization rates picked up and higher-margin server revenues increased better 312-201-3112, ceberle@thinkequity.com
than expected. Q3 guidance was better than the Street estimates, with revenue
expected to increase 6% Q/Q, with higher gross margin expectations of 53% to Changes Current Previous
the midpoint as fabs continue to fill up. June proved resilient, as the company Rating Acc --
was unable to build inventory as expected, as Q2 strength was better than Price Target $20.00 $18.00
originally expected. We are raising our estimates and our price target to $20. FY09E EPS $0.85E $0.65E
FY10E EPS $1.20E $0.93E
KEY POINTS: FY09E REV (M) $32,569.0E $30,945.0E
Intel announced strong revenue/EPS results last night of $8.0B/$0.18 versus FY10E REV (M) $35,000.0E $33,300.0E
the Street estimates of $7.1B/$0.08. Gross margins were up 520bp Q/Q to
50.8% versus the consensus of 45.6%, as fab utilization rates picked up with 52-Week High: $24.75
improving PC and Server volumes. 2Q09 inventories declined Q/Q even as the 52-Week Low: $12.05
top line grew 12% Q/Q. INTC demonstrated good OpEx control, with R&D and Shares O/S-Diluted (M): 5,634.0
SG&A flat to down Q/Q despite strong pickup on the topline, the best Q/Q Market Cap (M): $94,820.2
pickup since 1988. Netbooks are rebounding strongly, with Atom shipments up Average Daily Volume: 66,208,624
65% Q/Q. Short Interest: 0.1%
Debt/Total Cap: 2.9%
Net Cash Per Share: $2.00
Q3 guidance was better than the Street estimates, with revenue expected to
P/E (12-month forward): 17.6x
increase 6% Q/Q to $8.1-8.9B versus the Street consensus of $7.8B, with
Est. Long-Term EPS Growth: 15.0%
higher gross margin expectations of 51-55% with improved fab utilizations P/E/G: 117%
versus the consensus expectations of 49.6%. The Wind River acquisition is Fiscal Year-End: Dec
adding less than $40M to the guidance for 3Q09.
REV (M) $ 2008A 2009E 2010E
Mar 9673.0A 7145.0A 8100.0E
Overall, Intel delivered upside to the top line, gross margin for the current and
Jun 9470.0A 8024.0A 8100.0E
out quarter, well ahead of the Street expectations, reduced inventory, and
strong cash flow with net cash per share increasing to $2 per share from $1.70 Sep 10217.0A 8500.0E 9000.0E
per share last quarter, despite paying off the $1.5B EU Commission fine, which Dec 8226.0A 8900.0E 9800.0E
INTC expects to contest. FY 37586.0A 32569.0E 35000.0E
CY NA NA NA

3Q09 Tends To Be Back-End Loaded. We believe that a lot of the notebook FY P/S 2.5x 2.9x 2.7x
order strength is coming from continued stable notebook demand and new CY P/S 2.5x 2.9x 2.7x
CULV models ramping, and a positive mix shift away from netbooks to EPS $ 2008A 2009E 2010E
notebooks. Mar 0.25A 0.11A 0.24E
Jun 0.28A 0.18A 0.26E
On the State Of The Market: Intel said that the Enterprise market is weak and Sep 0.35A 0.24E 0.32E
it is not expecting a 2H rebound to be factored into guidance. Intel also said Dec 0.04A 0.31E 0.38E
that the China PC market is strong, the U.S. is strong, while Europe lagged and FY 0.92A 0.85E 1.20E
overall supply chain inventory is at normal levels. CY NA NA NA
FY P/E 18.3x 19.8x 14.0x
We are raising our 3Q09 (September) revenue/EPS estimates from $8B/$0.19 CY P/E 18.3x 19.8x 14.0x
to $8.5B/$0.24. Our 2009E EPS increases to $0.85. We are raising our 2010E
from $33.3B/$0.93 to $35B/$1.20. We are modeling gross margins of 57% for
2010E. We are raising our price target from $18 to $20, 17x 2010E EPS of
$1.20, with $2 in net cash/share and a 3.5% dividend yield.

Please see analyst certification (Reg. AC) and other important disclosures on pages 5-7 of this report.
July 15, 2009
Company Report
Analysis of Sales/Earnings

Company Update:
For 3Q09, INTC has guided to further gross margin expansion as fab utilization continues to increase. INTC should actually
gain about 500bp in gross margin in Q3 due to higher fab utilization rates; however, some of that will likely be offset by 1)
lower ASPs due to a weaker enterprise market (higher ASPs) and a stronger consumer market (lower ASPs), 2) an increase
in costs (much of the product being sold in Q3 was built in Q2 and will be charged with lower fab utilization expense), and 3)
continued spend for INTC's 32nm transition. We expect the net result to be approximately a 200-300bp increase in gross
margins in Q3.

That said, given a strong increase in fab utilizations in 3Q09, most of the 32-nm production ramp costs coming to
an end bodes well for 4Q09 costs and 4Q09 gross margins, in our view.

Bull Case:
1) Gross margins have bottomed and will continue to improve in the future as fab utilization rates continue to increase as
inventories are lean and end-market demand returns to a more-seasonal pattern.
2) Although enterprise spending continues to be weak throughout 2009, resilience in the consumer notebook space will
likely continue to push up utilization rates, helping gross margins back to the low end of the corporate expectations of
55-60%.

Bear Case:
1) Q3 guidance of up 6% Q/Q; bears see less-than-seasonal growth into typical strong Q3 holiday ramp, which could be a
conservative guidance from Intel.
2) 2H and Q4 visibility remains limited: The company said it is seeing a strong seasonal 2H, though most skeptics argue
2H09 remains the wild card.

VALUATION:
We base our $20 price target on applying an approximate 17x P/E multiple to our 2010 EPS estimate of $1.20. We believe
investors are already assuming the worst for 2009, and given that the 2010 outlook is still cloudy, we believe we are
assuming reasonable caution and conservatism in our estimates. INTC shares, in the last five years, have traded between
10x and 32x forward P/E. We are taking a longer-term outlook and applying a mid-point multiple on closer to a mid-cycle
EPS now. We believe a paradigm change in the PC landscape, with the entry of netbooks, and any continued economic
malaise through 2009, could affect future growth. INTC has almost $2 in net cash per share and providing a 3.5% dividend
yield.

RISKS TO PRICE TARGET:


The following risks are inherent in a diversified semiconductor company: general business and economic conditions;
demand for products; changes in customer order patterns; the pricing of products; the continued development, qualification,
and availability of innovative products in a rapidly changing technological environment; the ability to reduce costs;
manufacturing risks; inventory risk; the ability to recruit and retain skilled engineers and other personnel; currency risks.

COMPANY DESCRIPTION:
Intel Corporation is one of the world's largest chip makers, and supplies over 80% of the processors for computers. Intel
makes chips, boards, systems, and software building blocks that are sold to computing, enterprise, and networking
end-markets. Intel has historically manufactured almost all of its own chips, which involves large fixed asset investments.
Intel has acquired over 50 companies to boost its development efforts, including its push into the communications market.

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Exhibit 1: Intel Corporation Statement of Income

Intel Corp. (INTC) FY2008 FY2009E FY2010E


Earnings Model ($M), except per-share
1Q08 data
2Q08 3Q08 4Q08 FY 1Q09 2Q09 3Q09E 4Q09E FY 1Q10E 2Q10E 3Q10E 4Q10E FY
FY Dec Year Mar Jun Sep Dec 2008 Mar Jun Sep Dec 2009E Mar Jun Sep Dec 2010E

Street Revenue Consensus (Thomson First Call) $7,284 $7,704 $8,233 $30,255 $7,766 $7,737 $8,398 $8,947 $32,803
THINK Difference 10.2% 10.3% 8.1% 7.6% 4.3% 4.7% 7.2% 9.5% 6.7%

Total Revenue 9,673 9,470 10,217 8,226 37,586 7,145 8,024 8,500 8,900 32,569 8,100 8,100 9,000 9,800 35,000

Cost of Goods Sold 4,466 4,221 4,198 3,857 16,742 3,884 3,945 3,995 3,900 15,724 3,600 3,500 3,760 4,000 14,860
R&D 1,467 1,468 1,471 1,316 5,722 1,317 1,303 1,350 1,360 5,330 1,300 1,300 1,350 1,400 5,350
SG&A 1,349 1,430 1,416 1,263 5,458 1,200 1,250 1,300 1,350 5,100 1,300 1,300 1,360 1,400 5,360
Amortization/Restructuring 329 96 34 251 710 74 91 40 40 245 40 40 40 40 160
Operating Income 2,062 2,255 3,098 1,539 8,954 670 1,435 1,815 2,250 6,170 1,860 1,960 2,490 2,960 9,270

Other Income (Expense) 109 58 (265) (1,170) (1,268) (18) (52) (80) 50 (100) 50 50 50 50 200
Pre-Tax Income 2,171 2,313 2,833 369 7,686 652 1,383 1,735 2,300 6,070 1,910 2,010 2,540 3,010 9,470
Taxes 728 712 819 135 2,394 5 348 399 529 1,281 516 543 686 813 2,557
Net Income 1,443 1,601 2,014 234 5,292 647 1,035 1,336 1,771 4,789 1,394 1,467 1,854 2,197 6,913

Avg. Shares (000) 5,879 5,800 5,692 5,623 5,749 5,634 5,595 5,650 5,700 5,645 5,700 5,750 5,800 5,850 5,775

Earnings Per Share $0.25 $0.28 $0.35 $0.04 $0.92 $0.11 $0.18 $0.24 $0.31 $0.85 $0.24 $0.26 $0.32 $0.38 $1.20

Street EPS Consensus (Thomson First Call) $0.08 $0.15 $0.20 $0.54 $0.17 $0.17 $0.24 $0.29 $0.87
THINK Difference 131.2% 57.6% 55.4% 57.1% 43.9% 50.1% 33.2% 29.5% 37.6%

Margin Analysis 55.66 56.11 51.78 51.06 53.82 55.67 53.29 51.55 52.05 54 54 55.23
Gross Profit Margin 53.8% 55.4% 58.9% 53.1% 55.5% 45.6% 50.8% 53.0% 56.2% 51.7% 55.6% 56.8% 58.2% 59.2% 57.5%
R&D 15.2% 15.5% 14.4% 16.0% 15.2% 18.4% 16.2% 15.9% 15.3% 16.4% 16.0% 16.0% 15.0% 14.3% 15.3%
SG&A 13.9% 15.1% 13.9% 15.4% 14.5% 16.8% 15.6% 15.3% 15.2% 15.7% 16.0% 16.0% 15.1% 14.3% 15.3%
Operating Margin 21.3% 23.8% 30.3% 18.7% 23.8% 9.4% 17.9% 21.4% 25.3% 18.9% 23.0% 24.2% 27.7% 30.2% 26.5%
Pre-Tax Margin 22.4% 24.4% 27.7% 4.5% 20.4% 9.1% 17.2% 20.4% 25.8% 18.6% 23.6% 24.8% 28.2% 30.7% 27.1%
Tax Rate 33.5% 30.8% 28.9% 36.6% 31.1% 0.8% 24.0% 23.0% 23.0% 21.1% 27.0% 27.0% 27.0% 27.0% 27.0%
Net Margin 14.9% 16.9% 19.7% 2.8% 14.1% 9.1% 12.9% 15.7% 19.9% 14.7% 17.2% 18.1% 20.6% 22.4% 19.8%

Qtr/Qtr Change
Total Revenue (10%) (2%) 8% (19%) (13%) 12% 6% 5% (9%) 0% 11% 9%
Cost of Sales (0%) (5%) (1%) (8%) 1% 2% 1% (2%) (8%) (3%) 7% 6%
R&D (1%) 0% 0% (11%) 0% (1%) 4% 1% (4%) 0% 4% 4%
SG&A (8%) 6% (1%) (11%) (5%) 4% 4% 4% (4%) 0% 5% 3%
Operating Income NM 9% 37% (50%) NM 114% 26% 24% NM 5% 27% 19%
Pre-Tax Income (33%) 7% 22% (87%) 77% 112% 25% 33% (17%) 5% 26% 19%
Taxes (26%) (2%) 15% (84%) (96%) 6,860% 15% 33% (3%) 5% 26% 19%
Net Income (36%) 11% 26% (88%) 176% 60% 29% 33% (21%) 5% 26% 19%
Avg Shares (000) - Diluted (2%) (1%) (2%) (1%) 0% (1%) 1% 1% 0% 1% 1% 1%
Diluted EPS Before Chgs (35%) 12% 28% (88%) 176% 61% 28% 31% (21%) 4% 25% 17%
Source: Company reports & ThinkEquity LLC Research estimates

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Exhibit 2: Intel Corporation Balance Sheet

Intel Corp. (INTC)


Balance Sheet ($M) 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09
FY Dec Year Mar Jun Sep Dec Mar Jun
Assets
Current Assets
Cash & Short-Term Investments
10,876 8,391 8,287 8,681 7,792 9,021
Accounts Receivable 2,725 2,399 2,782 1,712 2,086 1,938
Inventories 3,272 3,265 3,398 3,744 3,045 2,805
Current Assets/Trading 2,816 3,570 3,917 3,162 2,807 2,603
Other Current Assets/Def Income
2,375 2,153 3,039 2,572 2,407 2,100
Total Current Assets 22,064 19,778 21,423 19,871 18,137 18,467

Long-Term Investments 10,740 11,976 4,221 3,276 2,925 3,515


PP&E 16,667 16,723 17,026 17,544 17,815 17,515
Goodwill/Intangible Assets 3,916 3,915 3,924 3,932 3,932 3,932
Other Long-Term Assets 6,125 6,092 5,615 5,632
Total Assets 53,387 52,392 52,719 50,715 48,424 49,061

Liabilities & Shareholders' Equity


Total Current Liabilities 8,668 8,032 10,068 7,818 6,293 7,079

Long-Term Debt, Less Current1,990


Maturities1,892 1,889 1,886 1,170 1,174
Other Long-Term Liabilities 2,069 2,107 1,851 1,923 1,879 1,761

Total Liabilities 12,727 12,031 13,808 11,627 9,342 10,014

Stockholder Equity 40,660 40,361 38,911 39,088 39,082 39,047

Total Liabilities and Stockholders'


53,387
Equity52,392 52,719 50,715 48,424 49,061

Ratios :
DSO 26 23 25 19 27 22
Days of Inventory 67 70 74 88 71 65
Inventory Turns 5.5 5.2 5.0 4.1 5.1 5.6
Inventory Growth Q/Q (3%) (0%) 4% 10% (19%) (8%)
Current Ratio 2.5 2.5 2.1 2.5 2.9 2.6
Return on Equity 5.1% 5.6% 8.0% 3.9% 1.7% 3.7%
Return on Sales 21.3% 23.8% 30.3% 18.7% 9.4% 17.9%
Return on Assets 3.9% 4.3% 5.9% 3.0% 1.4% 2.9%
Net Cash Per Share $3.3 $3.2 $1.9 $1.8 $1.7 $2.0
TBV/Share $6.3 $6.3 $6.1 $6.3 $6.2 $6.3
Source: Company reports

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July 15, 2009
Company Report
Analysis of Sales/Earnings

COMPANIES MENTIONED IN THIS REPORT:


Company Exchange Symbol Price Rating Price Target
Wind River Systems NASDAQ WIND $11.49 Acc $12.00

Important Disclosures
Analyst Certification
I, Vijay Rakesh, hereby certify that all of the views expressed in this research report accurately reflect my personal views about the
subject securities and issuers. I also certify that no part of my compensation was, is, or will be directly or indirectly related to the specific
recommendations or views expressed in this research report.
I, Christopher Eberle, hereby certify that all of the views expressed in this research report accurately reflect my personal views about the
subject securities and issuers. I also certify that no part of my compensation was, is, or will be directly or indirectly related to the specific
recommendations or views expressed in this research report.

The analyst(s) responsible for preparing this report has/have received compensation based on various factors, including the firm's total
revenues, a portion of which is generated by investment banking activities.

ThinkEquity LLC makes a market in Wind River Systems and Intel Corporation securities; and/or associated persons may sell to or buy
from customers on a principal basis.

Rating and Price Target History for: Intel Corporation (INTC) as of 07-14-2009
08/04/06 09/01/06 07/17/07 10/11/07 03/05/08 06/09/08 09/24/08 10/10/08 12/11/08 04/15/09
S:$14.00 A:$23.00 A:$26.00 SoF:$22.00 D:NR:NA I:B:$29.00 B:$24.00 S:$12.00 A:$17.00 A:$18.00
30

25

20

15

10

5
Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2
2007 2008 2009

Created by BlueMatrix

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July 15, 2009
Company Report
Analysis of Sales/Earnings

Rating and Price Target History for: Wind River Systems (WIND) as of 07-14-2009
11/06/07 03/07/08 12/05/08 06/05/09
B:$16.00 B:$15.00 B:$12.00 A:$12.00
14

12

10

4
Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2
2007 2008 2009

Created by BlueMatrix

Rating Definitions
The ThinkEquity LLC rating system is based on a stock's expected total return over a 12-month investment horizon. Ratings on coverage
are defined as follows:

Buy: Appreciation potential of 20% or more over the next 12 months. Analyst has a high level of conviction that the company's business
fundamentals are intact and that the company will meet or exceed earnings projections. Valuation is considered reasonable considering
the company's potential.
Accumulate: Appreciation potential greater than 0% and less than 20% over the next 12 months. Typically good companies, with
fundamentals and earnings visibility intact, but current valuation limits upside potential.
Source of Funds: Stock is expected to decline as much as 20% over the next 12 months, due to a single or combination of factors
including excessive valuation, negative sector sentiment, and/ or reduced earnings expectations.
Sell: Stock expected to decline 20% or more over the next 12 months. Company fundamentals are deteriorating, leading to material
downward revisions in earnings projections and valuation.

Distribution of Ratings, Firmwide

ThinkEquity LLC

IB Serv./Past 12 Mos.
Rating Count Percent Count Percent
BUY [B] 104 52.30 14 13.46
HOLD [Acc] 68 34.20 5 7.35
SELL [S/SoF] 27 13.60 0 0.00

This report does not purport to be a complete statement of all material facts related to any company, industry, or security mentioned. The
information provided, while not guaranteed as to accuracy or completeness, has been obtained from sources believed to be reliable. The
opinions expressed reflect our judgment at this time and are subject to change without notice and may or may not be updated. Past
performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or
implied, is made regarding future performance. This notice shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall
there be any sale of these securities in any state in which said offer, solicitation, or sale would be unlawful prior to registration or
qualification under the securities laws of any such state. This research report was originally prepared and distributed to institutional clients

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July 15, 2009
Company Report
Analysis of Sales/Earnings

of ThinkEquity LLC.

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Copyright 2009 ThinkEquity LLC, A Panmure Gordon Company

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