Daily Letter | 1

4 April 2011

Annual EPS Annual Revenue Target

Changes 2011E $1.92 from $2.05 2011E $48.75B from $50.50B $19.00 from $22.00
2012E $2.00 from $2.20 2012E $51.30B from $53.78B

Intel Corporation
Bobby Burleson 1.415.229.7163
HOLD bburleson@canaccordgenuity.com
INTC : NASDAQ : US$19.49
Target: US$19.00 ↓ Chelsea Heffernan
Heffernan 1.415.229.7162
cheffernan@canaccordgenuity.com

COMPANY STATISTICS:
52-week Range: US$17.60 - 24.37
Technology -- Hardware -- Semiconductor Devices and Related
Market Cap (M): US$106,961.12 Technologies
EARNINGS SUMMARY: WEAK PC SUPPLY CHAIN; LOWER
FYE Dec 2010A 2011E 2012E
P/Sales:
P/E:
2.5
9.9
2.2
10.2
2.1
9.7
ESTIMATES AND PRICE TARGET
Revenue: Q1 10,299 11,600 12,250 Investment recommendation
Q2 10,765 11,750 12,300 Intel is likely to guide short of consensus, in our view, as Q2 PC
Q3 11,102 12,400 13,000
production appears to be tracking below previous expectations. While
Q4 11,457 13,000 13,750
Total 43,623 48,750 51,300 weakness is attributable to supply disruptions, we believe demand
EPS: Q1 0.43 0.46 0.45 concerns for notebooks and the potential for server share shift in the
Q2 0.51 0.45 0.45
back half of the year could pressure the stock. We are lowering our
Q3 0.52 0.48 0.52
Q4 0.51 0.53 0.58 estimates on a more flattish Q2 view, and we lower our price target from
Total 1.97 1.92 2.00 $22 to $19.
SHARE PRICE PERFORMANCE:
Investment highlights
• Outlook for Q2 to be impacted by supply disruptions. Our checks
show notebook production dropping off after April, as shortages of
materials from Japan inhibit build rates. We believe expectations of
a 10-15% Q/Q build in Q2 are now being revised to a flat to 5%
increase. For 2011, PC unit growth is likely to be closer to 5% Y/Y
versus Intel's call for 12-15% growth.

• Concerns extend beyond Japan disruption, and could

COMPANY DESCRIPTION:
Intel Corporation is the world's largest semiconductor
chip maker, in terms of revenue. The company develops
advanced integrated digital technology platforms and
components, primarily integrated circuits (ICs), targeted
at the computing and communications industries.
All amounts in US$ unless otherwise noted.
pressure Intel's shares. On the demand front, notebooks may see
weak sell-through given success of iPad 2 and
aggressive campaigns by other tablet OEMs. Another concern is
server share. AMD may begin to regain some market share in
servers with the launch of Hercules. While we don't expect AMD
to recover substantial server market share, the company's
present 6% share appears unsustainably low.

Canaccord Genuity is the global capital markets group of Canaccord Financial Inc. (CF : TSX | CF. : AIM)
The recommendations and opinions expressed in this Investment Research accurately reflect the Investment Analyst’s personal,
independent
independ ent and objective views about any and all the Designated Investments and Relevant Issuers discussed herein. For important
information, please see the Important Disclosures section in the appendix of this document or visit Canaccord Genuity’s Online Disclosure
Database.
 Daily Letter | 2
4 April 2011

We are lowering our estimates and price target

• Revenue: Q1/11E lowered from $11.7 billion to $11.6 billion; C2011E lowered from
$50.5 billion to $48.75 billion; C2012E lowered from $53.775 billion to $51.3 billion.

• EPS: Q1/11E lowered from $0.47 to $0.46; C2011E lowered from $2.05 to $1.92;
C2012E lowered from $2.20 to $2.00.

• We are lowering our price target to $19 from $22. INTC’s price target of $19 is 10x
our C2011 EPS estimate of $2.00, compared to a 13x multiple for our coverage
universe.

Figure 1: Estimate changes

New EPS Old EPS New Revs Old Revs
(M) (M)

Q1/11 $0.46 $0.47 $11,600 $11,700

C2011 $1.92 $2.05 $48,750 $50,500
C2012 $2.00 $2.20 $51,300 $53,775
Source: Canaccord Genuity and company reports

VALUATION
INTC is trading at 10x our C2012 estimate for EPS, versus a median multiple of 13x for our
coverage universe. On a market cap to revenues basis, INTC is trading at 2.1x our C2012
estimate, compared to a median market cap to revenue multiple of 1.6x for our coverage
universe.

INVESTMENT RISKS
As Intel derives approximately 90% of its revenues from the PC market, any material
slowdown in PC unit growth could impact the company's revenues and profitability. In
addition, declining production volumes at Intel's internal factories could negatively impact
gross margins, as could adverse pricing conditions driven by aggressive competitors in the
processor and chipset space.
 Daily Letter | 3
4 April 2011

Figure 2: INTC FY financial model

2010 2011E 2012E

Q1 Q2 Q3 Q4 FY Q1E Q2E Q3E Q4E FYE Q1E Q2E Q3E Q4E FYE
Mar-10 Jun-10 Sep-10 Dec-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Dec-12

REVENUES 10,299.0 10,765.0 11,102.0 11,457.0 43,623.0 11,600.0 11,750.0 12,400.0 13,000.0 48,750.0 12,250.0 12,300.0 13,000.0 13,750.0 51,300.0
Cost of Sales 3,770.0 3,530.0 3,781.0 4,181.8 15,262.8 4,524.0 4,494.4 4,588.0 4,680.0 18,286.4 4,716.3 4,735.5 4,810.0 5,018.8 19,280.5
GROSS PROFIT 6,529.0 7,235.0 7,321.0 7,275.2 28,360.2 7,076.0 7,255.6 7,812.0 8,320.0 30,463.6 7,533.8 7,564.5 8,190.0 8,731.3 32,019.5
R&D 1,564.0 1,666.0 1,675.0 1,671.0 6,576.0 1,825.0 1,950.0 2,175.0 2,250.0 8,200.0 2,200.0 2,200.0 2,200.0 2,200.0 8,800.0
Marketing, G & A 1,514.0 1,584.0 1,506.0 1,705.0 6,309.0 1,775.0 1,810.0 1,925.0 2,000.0 7,510.0 1,900.0 1,900.0 2,000.0 2,085.0 7,885.0
OPERATING EXPENSES 3,081.0 3,254.0 3,185.0 3,383.0 12,885.0 3,600.0 3,760.0 4,100.0 4,250.0 15,710.0 4,100.0 4,100.0 4,200.0 4,285.0 16,685.0
OPERATING INCOME 3,448.0 3,981.0 4,136.0 3,892.2 15,457.2 3,476.0 3,495.6 3,712.0 4,070.0 14,753.6 3,433.8 3,464.5 3,990.0 4,446.3 15,334.5
Interest Income/(Expense), net (2.0) 204.0 115.0 140.0 457.0 200.0 100.0 100.0 100.0 500.0 100.0 100.0 100.0 100.0 400.0

PRETAX INCOME 3,446.0 4,185.0 4,251.0 4,032.2 15,914.2 3,676.0 3,595.6 3,812.0 4,170.0 15,253.6 3,533.8 3,564.5 4,090.0 4,546.3 15,734.5
Provision for Taxes 1,004.0 1,298.0 1,296.0 1,099.0 4,697.0 1,066.0 1,042.7 1,105.5 1,209.3 4,423.6 1,024.8 1,033.7 1,186.1 1,318.4 4,563.0
NET INCOME 2,442.0 2,887.0 2,955.0 2,933.2 11,217.2 2,610.0 2,552.9 2,706.5 2,960.7 10,830.1 2,509.0 2,530.8 2,903.9 3,227.8 11,171.5
GAAP EPS $0.43 $0.51 $0.52 $0.51 $1.97 $0.46 $0.45 $0.48 $0.53 $1.92 $0.45 $0.45 $0.52 $0.58 $2.00
Diluted Shares O/S (000) 5681.0 5711.0 5694.0 5698.0 5696.0 5680.9 5663.9 5646.9 5629.9 5655.4 5613.0 5596.2 5579.4 5562.7 5587.8
Margins:
Gross Margin 63.4% 67.2% 65.9% 63.5% 65.0% 61.0% 61.8% 63.0% 64.0% 62.5% 61.5% 61.5% 63.0% 63.5% 62.4%
R&D 15.2% 15.5% 15.1% 14.6% 15.1% 15.7% 16.6% 17.5% 17.3% 16.8% 18.0% 17.9% 16.9% 16.0% 17.2%
Marketing, G & A 14.7% 14.7% 13.6% 14.9% 14.5% 15.3% 15.4% 15.5% 15.4% 15.4% 15.5% 15.4% 15.4% 15.2% 15.4%
Operating Margin 33.5% 37.0% 37.3% 34.0% 35.4% 30.0% 29.8% 29.9% 31.3% 30.3% 28.0% 28.2% 30.7% 32.3% 29.9%
Interest Income 0.0% 1.9% 1.0% 1.2% 1.0% 1.7% 0.9% 0.8% 0.8% 1.0% 0.8% 0.8% 0.8% 0.7% 0.8%
Pre Tax Income 33.5% 38.9% 38.3% 35.2% 36.5% 31.7% 30.6% 30.7% 32.1% 31.3% 28.8% 29.0% 31.5% 33.1% 30.7%
Tax Rate 29.1% 31.0% 30.5% 27.3% 29.5% 29.0% 29.0% 29.0% 29.0% 29.0% 29.0% 29.0% 29.0% 29.0% 29.0%
Net Income 23.7% 26.8% 26.6% 25.6% 25.7% 22.5% 21.7% 21.8% 22.8% 22.2% 20.5% 20.6% 22.3% 23.5% 21.8%
Y/Y % Change:
Sales 44.1% 34.2% 18.2% 8.4% 24.2% 12.6% 9.2% 11.7% 13.5% 11.8% 5.6% 4.7% 4.8% 5.8% 5.2%
Gross Profit 100.2% 77.4% 35.5% 6.4% 44.8% 8.4% 0.3% 6.7% 14.4% 7.4% 6.5% 4.3% 4.8% 4.9% 5.1%
Operating Profit NM NM 60.4% 55.9% 169.6% 0.8% -12.2% -10.3% 4.6% -4.6% -1.2% -0.9% 7.5% 9.2% 3.9%
Pretax Income NM NM 67.9% 55.5% 177.9% 6.7% -14.1% -10.3% 3.4% -4.2% -3.9% -0.9% 7.3% 9.0% 3.2%
Net Income 277.4% NM 59.2% 28.5% 155.7% 6.9% -11.6% -8.4% 0.9% -3.5% -3.9% -0.9% 7.3% 9.0% 3.2%
EPS 274.3% NM 57.0% 27.5% 153.1% 6.9% -10.8% -7.6% 2.2% -2.7% -2.7% 0.3% 8.6% 10.3% 4.4%
Q/Q % Change:
Sales -2.6% 4.5% 3.1% 3.2% 1.2% 1.3% 5.5% 4.8% -5.8% 0.4% 5.7% 5.8%
Gross Profit -4.5% 10.8% 1.2% -0.6% -2.7% 2.5% 7.7% 6.5% -9.5% 0.4% 8.3% 6.6%
Operating Profit 38.1% 15.5% 3.9% -5.9% -10.7% 0.6% 6.2% 9.6% -15.6% 0.9% 15.2% 11.4%
Pretax Income 32.9% 21.4% 1.6% -5.1% -8.8% -2.2% 6.0% 9.4% -15.3% 0.9% 14.7% 11.2%
Net Income 7.0% 18.2% 2.4% -0.7% -11.0% -2.2% 6.0% 9.4% -15.3% 0.9% 14.7% 11.2%
EPS 6.4% 17.6% 2.7% -0.8% -10.8% -1.9% 6.3% 9.7% -15.0% 1.2% 15.1% 11.5%

*All data in millions except EPS

Source: Canaccord Genuity and company reports

 Daily Letter | 4
4 April 2011

APPENDIX: IMPORTANT DISCLOSURES

Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this investment
research hereby certifies that (i) the recommendations and opinions expressed in this investment research
accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the
designated investments or relevant issuers discussed herein that are within such authoring analyst’s coverage
universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly,
related to the specific recommendations or views expressed by the authoring analyst in the investment
research.

Site Visit: An analyst has visited the issuer's material operations in Santa Clara, California. No payment or
reimbursement was received from the issuer for the related travel costs.

Price Chart:*

Distribution of Ratings: Coverage Universe IB Clients

Global Stock Ratings Rating # % %
(as of 3 March 2011) Buy 447 58.7% 36.9%
Speculative Buy 62 8.1% 66.1%
Hold 237 31.1% 17.3%
Sell 15 2.0% 6.7%
761 100.0%

Canaccord Ratings BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.
System: HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.
SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.
NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer.

“Risk-adjusted return” refers to the expected return in relation to the amount of risk associated with the
designated investment or the relevant issuer.

Risk Qualifier: SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental
criteria. Investments in the stock may result in material loss.
 Daily Letter | 5
4 April 2011

Canaccord Research Disclosures as of 4 April 2011

Company Disclosure
Intel Corporation 5, 7

1 The relevant issuer currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated
companies. During this period, Canaccord Genuity or its affiliated companies provided the following services
to the relevant issuer:
A. investment banking services.
B. non-investment banking securities-related services.
C. non-securities related services.
2 In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for
Corporate Finance/Investment Banking services from the relevant issuer.
3 In the past 12 months, Canaccord Genuity or any of its affiliated companies have been lead manager, co-lead
manager or co-manager of a public offering of securities of the relevant issuer or any publicly disclosed offer
of securities of the relevant issuer or in any related derivatives.
4 Canaccord Genuity acts as corporate broker for the relevant issuer and/or Canaccord Genuity or any of its
affiliated companies may have an agreement with the relevant issuer relating to the provision of Corporate
Finance/Investment Banking services.
5 Canaccord Genuity or any of its affiliated companies is a market maker or liquidity provider in the securities
of the relevant issuer or in any related derivatives.
6 In the past 12 months, Canaccord Genuity, its partners, affiliated companies, officers or directors, or any
authoring analyst involved in the preparation of this investment research has provided services to the
relevant issuer for remuneration, other than normal course investment advisory or trade execution services.
7 Canaccord Genuity intends to seek or expects to receive compensation for Corporate Finance/Investment
Banking services from the relevant issuer in the next six months.
8 The authoring analyst, a member of the authoring analyst’s household, or any individual directly involved in
the preparation of this investment research, has a long position in the shares or derivatives, or has any other
financial interest in the relevant issuer, the value of which increases as the value of the underlying equity
increases.
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the preparation of this investment research, has a short position in the shares or derivatives, or has any
other financial interest in the relevant issuer, the value of which increases as the value of the underlying
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member of his/her household, is an officer, or director, or serves as an advisor or board member of the
relevant issuer and/or one of its subsidiaries, and such person’s name is disclosed above.
12 As of the month end immediately preceding the date of publication of this investment research, or the prior
month end if publication is within 10 days following a month end, Canaccord Genuity or its affiliate
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other common equity securities of the relevant issuer or held any other financial interests in the relevant
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month end if publication is within 10 days following a month end, the relevant issuer owned 1% or more of
any class of the total issued share capital in Canaccord Genuity or any of its affiliated companies.
14 Other specific disclosures as described above.

Canaccord Genuity is the business name used by certain subsidiaries of Canaccord Financial Inc., including
Canaccord Genuity Inc., Canaccord Genuity Limited, and Canaccord Genuity Corp.
The authoring analysts who are responsible for the preparation of this investment research are employed by
Canaccord Genuity Corp. a Canadian broker-dealer with principal offices located in Vancouver, Calgary,
Toronto, Montreal, or Canaccord Genuity Inc., a US broker-dealer with principal offices located in Boston,
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offices located in London and Edinburgh (UK).
In the event that this is compendium investment research (covering six or more relevant issuers), Canaccord
Genuity and its affiliated companies may choose to provide specific disclosures of the subject companies by
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access this material or for more information, please send a request to Canaccord Genuity Research, Attn:
 Daily Letter | 6
4 April 2011

Disclosures, P.O. Box 10337 Pacific Centre, 2200-609 Granville Street, Vancouver, BC, Canada V7Y 1H2 or
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The authoring analysts who are responsible for the preparation of this investment research have received (or
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For Canadian Residents: This Investment Research has been approved by Canaccord Genuity Corp., which accepts sole responsibility
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States only to certain US institutional investors. US clients wishing to effect transactions in any Designated
 Daily Letter | 7
4 April 2011

Investment discussed should do so through a qualified salesperson of Canaccord Genuity Inc. Analyst(s)
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