INTC Barclays

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Equity Resear

Barclays Capital does and seeks to do business with companies covered in its research reports. As a result, investors should baware that the firm may have a conflict of interest that could affect the objectivity of this report.

Investors should consider this report as only a single factor in making their investment decision.

PLEASE SEE ANALYST(S) CERTIFICATION(S) ON PAGE 11 AND IMPORTANT DISCLOSURES BEGINNINON PAGE 12

1

December 21, 2009

Intel Corp. (INTC - US$ 19.07) 1-OverweightRecommendation Change

Valuation Low, Ests Up, Move to 1-OW

Investment ConclusionFollowing a period of sig underperf. relative to boththe NASDAQ & Semi Group, we blv it may be timeto revisit INTC given solid end mkt, upward bias toest & intriguing val. at just 12x CY10 EPS of $1.60vs 5 yr avg 16x and trough 11x. We edge ests for4Q09 & CY10 up & move rating to 1-OW. We seeupside to at least $24 or just 15x CY10 est $1.60w/support at $18. Sector view remains 2-Neutral.

SummaryExpanding Mkt, Enterprise May Bal Margin,

FTC, AMD Concerns; NB mkt grwth encouraging& potential Enterprise refresh spurred by Nehalemmay support Server outlook & GM into CY10.

Higher End Est Edge Up; Look for solid 4Q09 w/ests edging to rev +8.5%, 62.5% GM & EPS $0.45vs cons rev +7.8% & 62% GM. Our seasonal 1Qrev -8.6% & EPS $0.35 may prove conserv. CY10rev and EPS move to $39.3B and $1.60 from$38.8B/ $1.58. Introduce new FY11 EPS of $1.73.

New Products, CES Likely Positive; Blv newreleases of Pinetrail for Atom this wk, Arrandale &Clarksdake at CES on Jan 7 & results/ guide onJan 14 may support sentiment.

FTC Issues; Consider recent FTC casehighlighting GPU mkt may be lengthy but blvmonetary payment unlikely.

Tim Lu1.212.526.49

[email protected]

BCI, New Y

United States of Amer

Technolo

Semiconducto

Reuters INTC

Bloomberg INTC

ADR

EPS (US$) (FY Dec)

2008 2009 2010 % Change

Actual Old New St. Est. Old New St. Est. 2009 20101Q 0.25A 0.11A 0.11A 0.11A 0.34E 0.35E 0.33E -56% 218%2Q 0.28A 0.18A 0.18A -0.07A 0.35E 0.35E 0.32E -36% 94%3Q 0.35A 0.33A 0.33A 0.33A 0.41E 0.42E 0.39E -6% 27%4Q 0.04A 0.44E 0.45E 0.37E 0.47E 0.48E 0.45E 1025% 7%

Year 0.92A 1.07E 1.08E 0.72E 1.58E 1.60E 1.46E 17% 48%

P/E 17.7 11.9

Market Data

Market Cap (Mil.) 111758

Dividend Yield 3.52

52 Week Range 21.27 - 12.05

Financial Summary

Revenue TTM (Mil.) 32784

Stock Overview

INTEL CORP. - 12 / 18/ 2009

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: LehmanLive

12

16

20

Volume

100M

Stock Rating Target Price

New: 1-Overweight New: US$ 24.00

Old: 2-Equal Weight Old: US$ 24.00

Sector View: 2-Neutral


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Summary; Valuation Low; Ests Up, Move to 1-OW

Time to Revisit; Following a period of significant underperformance relative to both the NASDAQ and the Semi Group, we believe it may

be time to revisit the shares of MPU giant Intel given seemingly solid end market conditions, an upward bias to estimates and an intriguing

valuation at just 12x our CY10 EPS estimate of $1.60 versus a 5-year average of 16x and trough of 11x. We edge our 4Q09 and CY10

estimate upwards and move our rating to 1-OW from 2-EW. We see upside to a target price of at least $24 or just 15x CY10 of $1.60 with

support at $18. Our sector view remains 2-Neutral.

While we recognize end market sell thru may remain a key area of focus for investors, we believe recent weakness in Intels shares on

concerns of peaking gross margins and FTC investigations in the graphics arena may be overdone just as core business trends appear to

be improving with potential for a corporate recovery cycle in 2010 to further support end markets. We see an improved overall PC

enviroment, strong product roadmap with Westmere product refresh in 2010, and solid execution positioning Intel to outperform in coming

months after a period of underperformance. We highlight that in the last three months, Intel shares have traded down around 2.7% vs.

NASDAQ composite up around 10.1% in the same period (September 18th

December 18th

).

Expanding Market, Enterprise Cycle May Balance Margin, FTC, AMD Concerns; We recognize that Intel's gross margins are at the

upper end of the cyclical range, and acknowledge a changing competitive landscape with the AMD settlement, the FTC probing the graph

arena and ARM based offerings targeting the notebook area, however, we consider notebook market growth appears encouraging (recent

checks, reseller, OEM and disti updates) and a potential Enterprise refresh spurred by Nehalem (as suggested by reseller and CIO checks

may support the server outlook and margins into CY10.

Higher End Estimates Edge Upwards; Near-term, based on recent checks we look for a solid 4Q09 with our estimates edging to +8.5%

$10.2B sales and 62.5% GM and EPS of $0.45 vs consensus of +7.8% or $10.1B and 62% GM and we believe our broadly seasonal -8.6%

1Q revenues and $0.35 EPS vs consensus EPS of $0.33 may still prove conservative depending on holiday sell-thru.

New Products, CES Likely Positive; We believe new releases of Pinetrail for Atom this week, Arrandale and Clarksdake at CES on Jan

7th for notebooks and desktops, (along with Nehalem EX ramp in servers) and results and guidance on Jan 14th may support sentiment.

FTC Issues/Modest SoC Expectations; We consider that the recent FTC case highlighting the Graphics market, may be a lengthy proce

and lead to NVIDIA receieving a new license but we believe monetary payments are unlikely. In addition, we consider that SoC progress i

consumer and wireless handsets may be modest in the near to medium term but with encouraging CPU market conditions, generally solid

execution and a valuation at just 12x CY10 and 11x our new CY11 initial estimate of $1.73 we believe the shares may move upwards from

current ranges.

Selective View For Semis For CY10/Product Cycle/Sales Growth Focus; As we look at our Semi group heading into CY10, we consid

that after the dramatic group wide beta move up in CY09 where companies starting the year with weakest margins and balance sheets

offered the most incremental upside, investors may be more selective focusing on companies with strong product cycles and competitive

positioning offering incremental sales growth. With Nehalem and Arrandale, we place Intel in this group along with names such as

Broadcom (1-OW), Cavium (1-OW) and Qualcomm (1-OW). In addition, at just 12x CY10 we consider that Intel offers some more defensiv

support should the broader market prove challenging. We see strong support likely around the $18 level, with upside to the $24 to $25

range or 15x to 16x CY10 estimates in line with the 5-year average multiple of 16x.

Laterals, Stay With AMD, MU; In terms of laterals across semis, we have retained our positive view on MPU and graphics challenger AM

while recognizing upside potential post the recent sharp move upwards may be more limited. We consider AMD may now be poised to se

the structural benefits of the Globalfoundries deconsolidation coupled with the fundamental lift from improved products and solid near term

sales and margin progress. We are using a $10 price target for AMD or around 1.1x CY10 Sales of $5.8B. For Micron (1-OW) in memory w

believe buoyant PC growth coupled with tight supply should underpin a favorable backdrop with improved earnings likely this week onTuesday (12/22). For NVIDIA in graphics we clearly see sentiment boosted by the FTC process against Intel. In addition, capacity remain

constrained with Tegra and Tesla offering longer term opportunities, however, at present given limited visibility on Tegra's potential ramp w

maintain our 2-EW rating.

REVISITING INTEL

Improved PC End Market, Semi Vendors Highlight Solid Order Trends to Date in 4Q with Potential Firmer 1Q2010

We believe general trends to date for microprocessor giant Intel remains encouraging for 4Q09 and believe outlook for core computing

remains solid with new Westmere offerings gaining solid interest with around 40 - 60 design wins currently in the mobile space.

During two days of presentations at Barclays Capital Global Technology Conference December 8th

and 9th

, leading semiconductor playe

highlighted solid order trends to date in 4Q09 and some potential for firmer than seasonal 1Q2010 trends given what appears to


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moderate inventory levels. While 4Q09 sell thru remains key, we remain encouraged by strong consumption data by third party resear

firm NPD suggesting solid PC sales through November with total PC units up +51% y/y in November (versus +20% y/y in October) help

by strong demand for Windows 7. OEM, distributor & semiconductor players continue to describe channel inventory levels as modest.

Expect 4Q Ahead; Margin a Key FocusIntel guided solid December revenues of $10.1B at the midpoint (+/-$400M) up +7.6% QoQ in line with its 10 year average historical

seasonal increase. Intel expects to see a significant improvement in gross margin in Q4 to 62% at the mid point (+/- 3%) from 57.8% in

September attributed to a 3 percentage point positive impact from qualification of 32nm products & previously written off products (split

evenly between the two factors we believe), 1 percentage point impact from higher CPU sales, and 1 percentage point impact from lower

under utilization capacity charges. Management commented that it is currently running utilizations at around the 80-90% range and expec

to see lower costs, improved thru put times, and better yields as they ramp 32nm products.

While risks remain with AMD likely to gain slight share in the notebook arena and gross margins at the upper end of historical range, we

believe our new higher end estimates are achievable. We have edged our estimates for Intels 4Q09 to sales of +8.5% at $10.2 billion and

gross margin edging to 62.5% with EPS of at least $0.45 vs. prior EPS of $0.44. Street estimates $0.37 including the payment to AMD of

$1.25 billion.

Expect Seasonal 1Q2010; Margin Could be ConservativeFor 1Q2010 we look for broadly seasonal trends with sales of $9.3 billion (-8.6% QoQ), gross margins of 59%, and EPS of $0.35. Our

CY2010 estimates edge up with revenues of $39.3 billion vs $38.8 billion prior, gross margins of 60.1% and EPS of $1.60 vs $1.58 prior.

Barclays Capital Estimates vs. Consensus

Revenues 4Q09E 1Q10E FY09 FY10 FY11

Barclays Capital (Old) $10,100 $9,191 $34,658 $38,829 NA

Barclays Capital (New) $10,187 $9,311 $34,745 $39,298 $42,087

Consensus $10,146 $9,246 $34,699 $38,726 $40,867

GM

Barclays Capital (Old) 62.0% 59.0% 54.8% 60.1% NA

Barclays Capital (New) 62.5% 59.0% 55.0% 60.1% 59.3%

Consensus 62.1% 58.6% 54.8% 59.6% 59.2%

Operating Margins

Barclays Capital (Old) 32.7% 28.1% 23.0% 30.2% NA

Barclays Capital (New) 33.4% 28.4% 23.3% 30.3% 30.5%

Consensus 27.4% 27.5% 16.7% 28.9% 33.3%

EPS (excl Options)

Barclays Capital (Old) $0.48 $0.39 $1.24 $1.76 NA

Barclays Capital (New) $0.50 $0.40 $1.25 $1.78 $1.92

Consensus NA NA NA NA NA

EPS (incl Options)

Barclays Capital (Old) $0.44 $0.34 $1.07 $1.58 NA

Barclays Capital (New) $0.45 $0.35 $1.08 $1.60 $1.73

Consensus $0.37 $0.33 $0.71 $1.47 $1.59

Source: Thomson, Barclays Capital

Note: Consensus EPS may include the impact of 1x payment of $1.25 billion to AMD for F4Q

Solid Execution on 32nm ramp, Nehalem and Improving Enterprise May Potentially Extend Gross Margins

Intel posted solid 3Q results and guided robust 4Q guidance that featured a substantial increase in gross margins to 62% - a level not

reached since 4Q03. While we recognize some investor unease around potentially peaking gross margins with management endorsing a

50% to 60% normal range, solid execution on 32nm ramp with lower costs and improved thru-put, strong traction of Nehalem servers and

potentially improving Enterprise and low inventory levels may extend improved margins.

Intel has delivered solid execution on the tock-tock cadence with predictable continued development with 2 year product cycles. Intel is o

track to deliver the next "tick" 32nm Westmere products in 4Q09 and "tock" Sandy Bridge on 32nm in 2010 then on 22nm in 2011.

Management has highlighted that they expect a rapid ramp of 32nm at 1.5x the rate of 45nm production. We believe Intel may benefit from


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lower costs as Intel refreshes it product portfolio with Westmere on 32nm. We see a richer product mix with Westmere which should help

ASPs marginally as Intel launches microprocessors with integrated graphics Arrandale in notebooks and Clarkdale in desktops in 4Q09.

Intel's currently low inventory (at 57 days vs.10 yr historical average of 74 days) should allow Intel to run fabs at least at their current

utilization rates of 80-90% as they aim to build inventory in 4Q supporting margins. We believe 1Q margin may also have the potential to

exceed conservative expectations of 58.6% should sell through remain solid. Costs should also come down as they ramp on 32nm and se

yields and thru put times improve. Intel has indicated that thru-put times have been cut in half transitioning from 45nm to 32nm.

We believe that microprocessor leader Intel is likely to be a key beneficiary of a recovery in enterprise spending as we believe the server

market is likely to favor Intel on solid interest of Intel's Nehalem server offering. While we see solid traction of Nehalem EP, this should be

followed by Westmere EP in the fastest growing 2-socket space in early 2010 and Nehalem EX in the high end in 4Q09. We believe Intel

ability to post strong margins at the higher end of historical range despite the lack of Enterprise SKUs is somewhat encouraging. We note

that financial institutions account for about 15% to 20% of server revenues for Intel in our estimates.

Intel Days of Inventory vs. Average

40

50

60

70

80

90

100

110

3Q93

1Q94

3Q94

1Q95

3Q95

1Q96

3Q96

1Q97

3Q97

1Q98

3Q98

1Q99

3Q99

1Q00

3Q00

1Q01

3Q01

1Q02

3Q02

1Q03

3Q03

1Q04

3Q04

1Q05

3Q05

1Q06

3Q06

1Q07

3Q07

1Q08

3Q08

1Q09

3Q09

DaysofInventor

10 year avg 69 days

5 year avg 74 days

Source: Company reports & Barclays Capital

Intel Gross Margins and Operating Margins

0%

10%

20%

30%

40%

50%

60%

70%

1Q00

3Q00

1Q01

3Q01

1Q02

3Q02

1Q03

3Q03

1Q04

3Q04

1Q05

3Q05

1Q06

3Q06

1Q07

3Q07

1Q08

3Q08

1Q09

3Q09

1Q10E

3Q10E

Gross

Margins

Average GM

Operating

Margins

Average OM

Ests

-->


Expect Flattish Capex in 2010 & Tight Opex Control

While high levels of capital spending have been a key area of concern, Intel has guided capital expenditures at around $4.5B plus/minus

$100M for the full year 2009 down from prior guidance of $4.7B due to improved factory efficiencies. We would continue to look for flattish


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slightly higher capex for CY2010. Management has highlighted the high level of tool re-use moving from 45nm to 32nm with 50-70% of too

re-used.

Separately, Intel has done an impressive job in managing opex in our view. While further cuts in spending are not expected, spending as a

percent of revenue is expected to continue to decline as revenue grows. Intel's R&D + MGA combined declined from 35.2% in Q109 to

31.8% in Q209 to 29% in Q309 and this is despite the shift of some engineers from cogs into the R&D line during the qualification process

Intel guided operating expenses (MG&A and R&D) in 4Q to $2.9B (+5% QoQ) due to higher revenue and profit dependant spendingresulting in full year opex of $10.7B. We are encouraged by managements tight opex control and see MG&A and R&D combined declinin

as a percentage of revenue to 29% in 3Q vs. 32% in 2Q despite the Wind River acquisition and expect spending to remain flat as a

percentage of revenue in 4Q. Intels operating leverage has resulted in significant improvements in operating margins from 18% in 2Q09 t

27.5% in 3Q. We believe operating margins in the low 30% range in 4Q is achievable.

SoC development will leverage CPU Technologies; Expect Progress at CES

We remain encouraged by Intel's technology leadership and ability to scale down Moore's law by applying unconventional technologies

such as high-k metal gate to deliver the performance, power, and economics behind System-on-Chip design. Management has highlighte

a view that the company's two year manufacturing leadership vs. rivals is poised to extend with 32nm, 22nm and then 15nm. As the marke

continues to shift towards mobility, Intel is increasing its focus on the SoC market taking advantage of its Atom architecture and we remain

impressed with Intel management's focus on expanding outside of the core PC market in growth areas of Embedded, Consumer

Electronics, and MIDs. Intel recently launched its 45nm SoC codenamed Sodaville for CE where Intel expects to penetrate the set top boxand digital TV market and where it currently has zero market share. We expect SoC to be a main focus for Intel at the Consumer Electron

Show in Las Vegas Jan 7 10th 2010 where we expect to hear progress on Sodaville, Jasper Forest for Embedded and Lincroft 45nm So

for MIDs. We expect Intel to launch its 32nm SoC Medfield platform sometime in 2011 allowing Intel to penetrate the Handheld market

although highly competitive with slightly lower ASP and gross margin profile relative to core CPU business. We expect a potential

announcement in wireless at the Mobile World Congress in Barcelona in February 15th to 18th 2010.

Cautious Overall Expectations from SoCs in Consumer & Wireless Handheld in Near to Medium Term

In general, however, we retain relatively modest expectations for Intels SoC initiatives in the consumer and wireless handheld space in th

near to medium term. We recognize that developing products in areas that may require signal expertise with generally smaller volume run

with lower average selling prices and lower margins may be somewhat challenging. We do not look for SoCs in the wireless and consume

to marginally add to lift Intels sales and its multiple in the near to medium term.

Intel Product Roadmap

2007 2008 2009

1H07 2H07 1H08 2H08 1H09 2H09

DesktopsYorkfield (3Q07)

Wolfdale (3Q07)Bloomfield (4Q08)

Lynnfield (45nm) 3Q09

Clarkdale (32nm) 4Q09Gulftown (32nm) 2010

Santa Rosa Refresh (1Q08) Montevina (3Q08)

"Atom"/ Menlow (2Q08)

ServersXeon (1Q07)

Core 2 Quad & Duo

Caneland (3Q07)

Penryn (4Q07)

Harpertown (UP, DP, 4Q07)

Harpertown (MP, 1H08)Dunnington (3Q08)

1P Nehalem (4Q08)Nehalem EP (1Q09)

Nehalem EX (4Q09)Westmere 1P (1Q10)

Westmere EP, EX (2010)

Sandy Bridge (2010)

Notebooks

2010 & Beyond

Clarksfield (45nm) 3Q09

Arrandale (32nm) 4Q09

Calpella NB platform

Santa Rosa (2Q07)

nera nevew nm

Moorestown/Lincroft SoC (45nm

2010 Medfield /Saltwell SoC (32n

2011

Montevina Refresh (2Q)Stealey (3Q07)

Gilo (4Q07)


Notebooks; Strong Interest with 40-60 Design wins in Mobile

In general, Intels execution has continued to be impressive in terms of releases and performance metrics. Given Intels dominance in the

notebook space with around 88% unit share for CY09 in our estimate, we consider AMD is likely to gain some share supported by an

improved product roadmap in the value or mainstream segment. However, we believe outlook for core computing remains solid for Inte

with new Westmere offerings gaining solid interest with around 40 - 60 design wins currently in the mobile space. Intel recently introduced

IDF its 45nm core i7 processor called Clarksfield for mobile (4 cores / 8 threads). Intel expects to bring this technology to the masses nex

year in form of Arrandale 32nm Westmere CPU with 45nm graphics chipset & integrated memory controller on its Calpella notebook

platform.


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Solid Traction on Nehalem Improves Server Outlook

In the Enterprise Server segment, we expect Intel to see uplift from a refresh opportunity. Intel estimates over 12 million servers are over

four years old and the latest Xeon servers with lower power consumption and higher performance may enable IT managers to have recou

their investments in as little as nine months in some cases. We believe Intel should benefit in terms of both ASPs as well as gross margins

as the Enterprise reinitiates spending on IT in the back half of 2010. We note that rival AMD aims to increase its focus on the fastest

growing 2-socket server market with less competitive positioning in the 4-socket space. At the same time, we would expect Nehalem to

expand its profile in the higher end of the market expanding its share over Sun and IBM in high end systems.

With respect to the Enterprise roadmap, in the high-end Mission Critical market (9000 series), Intel is shipping the 9100 Itanium family

series with the new Tukwila processor based on Boxboro chipset on track for 2010. Beyond that, Tukwila is to be followed by Poulson and

Kittson processor later in 2010/2011.

For the Xeon 7000 series core enterprise space, the 45nm 6 core Dunnington is shipping and the Nehalem EX using the Boxboro chipset

should launch in 1Q2010 aiming to compete at the high end with the likes of Sun and IBM. A 32nm Westmere EX should follow Nehalem

EX. Nehalem EX is a 4 socket platform with 8 cores per processor using 64 threads (2 threads per core), Intels scalable memory

interconnect with buffers up to 1 TB memory support, scalable up to 8+ sockets.

In the Efficient performance mid tier area, Tylersberg EP a 45nm Xeon 5500 is shipping with Nehalem EP displaying a very fast ramp with

cross over a month earlier than targeted in July vs. August. We note Intel has seen strength in its dual core Nehalem server processer in 3

as reflected in Mercury Research MPU data which shows Intels server units up 16% QoQ to gain slight share of 0.6% to 90.6%. NehalemEP should transition to the Westmere EP processor in 2010 (refresh of two socket platform with 6 cores and double threading). We highlig

that the Westmere EP is socket compatible.

Atom to Follow Tick Tock Model; Pine Trail Adds Graphics

Intel is on track to launch Menlow's predecessor Moorestown on 45nm in mid 2010 and Medfield in 2011 enabling penetration into smaller

devices such as handhelds. Intel expects to deliver a 50x improvement in Moorestown over Menlow with a highly integrated SoC Lincroft

microprocessor. Within the same power envelop, Moorestown delivers significantly better performance. Meanwhile, next generation Atom

platform for netbooks to be launched today, Pine Trail, is expected to deliver lower overall bill-of-materials, further reduction in power, and

improvement in overall performance by further integration from a three-chip to a two-chip solution. Pine Trail consists of next generation

Atom codenamed Pineview and Tiger Point chipset connected over a DMI. Continuing the two year tick tock cadence, Intel expects to

launch 45nm SoC Lincroft core codenamed Bonnell then 32nm SoC Saltwell.

Graphics; Larrabee Version 1 Scrapped, but Focus Continues on Multi-core Processing

Separately, Intel has decided to scrap plans to launch its first discrete graphics chip based on Larrabee. Instead of launching Intel's first

stand-alone discrete graphics chip, Intel's Larrabee graphics processor will initially appear as a software development platform. While the

timeline of Larrabee's launch has not yet been outlined, Intel demoed Larrabee at its recent Intel Developer Forum in San Francisco in

September 2009. Larrabee, originally expected to appear in 2008, has experienced some significant delays and was expected to eventua

launch sometime in 2010. Larrabee was slated to compete in the stand-alone discrete graphics market with the likes of Nvidia and AMD.

While we believe the setback may negatively impact sentiment, Intel sees Larrabee as a strategic opportunity to position it as Intel's

integrated graphics product for its future generation CPU + GPU core. We believe Intel is likely to continue investments in graphics and

multi core parallel processing. Our checks suggests Intel's first chip with graphics integrated onto the CPU remain on track to be released

4Q09 with Arrandale in Notebooks and Clarkdale in Desktops.

FTC Process; Graphics Dispute with NVIDIA and AMDIn the last week Intels shares have been pressured by the FTCs allegations of Intel abusing a dominant position in the graphics market a

well as CPU. Our broad view here is that ultimately Intel may grant NVIDIA a license to manufacture chips that are interoperable with Intel

CPUs. In addition, as with AMD a revised set of business practices may be established and the agencies may closely monitor Intels pricin

practices. However, it does not appear that the FTC is asking Intel to pay a fine. In addition, we do not expect meaningful impact on Intels

market share in the integrated graphics arena. Meanwhile over time, despite the Larrabee setback, we would expect Intel to continue to

invest in the discrete graphics and 4P GPU.

AMD May Edge Some Share in Notebooks; Aim to Monitor Fusion

As per our earlier reports, we would expect AMD to make some progress in market share in the mainstream notebooks segment. We also

believe that recent AMD settlement and the establishment of new business practices with quarterly reviews and arbitration may lead to


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some lift in AMDs overall share. However, at current multiples given solid near term trends for Intel and a steady expansion of the CPU

TAM, we believe concerns are reflected.

MPU Share Data Suggests Intel Server Traction Remains Solid;

We highlight that based on recent MPU market share data reported in 3Q by Mercury, Intel gained overall MPU market share due to tractio

in desktop and server offerings. Data reported by Mercury suggests that Intels market share in desktops increased to 73.6% in 3Q09 from71.9% in the prior quarter. In servers, data reported by Mercury suggests that Intels market share increased to 90.6%, up .6% from the

prior quarter. We believe Intel gained share due to its Nehalem EP offering, and we expect its higher-end 4P Nehalem offering (EX) to ga

traction as enterprise IT spending activity picks up in the back half of 2010.

In looking at the overall MPU market for CY10, we forecast microprocessor unit shipments to grow 14% year-over-year to 385 million units

led by notebooks up 26% year-over-year to 215 million units. We now model server MPU shipments +14% year-over-year to 14 million un

as we expect some recovery of corporate spending to help in the back half of 2010. We highlight that this is still below 2008 levels of 14.4

million units. We expect desktop MPUs to increase 1% year-over-year to 157 million units in CY10. Excluding Atom, total MPUs are likely

grow 13% year-over-year in CY10. In terms of market share, we expect Intels MPU market share to increase by .8% to 82%, led by

strength in Notebooks and Servers, where we expect market share to increase by .2% and 1% to 88.5% and 91.2%, respectively.

GPU Share Data Suggests Share Gains in Integrated Graphics Led by ChipsetsWe highlight that in graphics, Intel dominates this arena with integrated graphics offerings. The integrated graphics market was up 19%

quarter-over-quarter increasing from 73.3 million units to 86.9 million units. On a year-over-year basis, integrated graphics shipments grew

13% as consumer buying trends favored lower-end desktops and notebooks with integrated graphics chips. NVDA lost share in this

segment from 18.6% in 2Q to 13.5% in 3Q. Intel gained the majority of NVDA's market share loss with their market share climbing 3.7% to

72.3% due to strong mobile and desktop shipments of chipsets. We note that Intel reported a 24% quarter-over-quarter increase in chipse

sales in 3Q while units increased 25% quarter-over-quarter per Mercury Research estimates.

GPU Market TrendsTotal GPU (M) Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309DT Discrete 20.6 21.5 24.9 26.1 24.2 18.6 21.9 15.2 16.3 17.7 20.0NB Discrete 5.3 6.5 8.2 9.8 8.8 9.1 13.6 8.7 6.8 9.5 12.1

DT Integrated 32.6 36.3 43.9 41.4 38.1 40.0 40.3 22.1 26.9 40.0 45.4NB Integrated 18.2 19.8 24.8 26.8 24.7 26.4 36.6 26.3 24.7 33.2 41.5

Total (NB+DT) Integrated 50.8 56.1 68.7 68.2 62.7 66.5 76.9 48.4 51.6 73.3 86.9Total (NB+DT) Discrete 25.9 28.0 33.1 35.9 33.0 27.7 35.5 23.9 23.0 27.2 32.1Total Desktop (Discrete+ Inte 53.2 57.8 68.7 67.5 62.3 58.6 62.2 37.3 43.1 57.7 65.4Total Notebook (Discrete+ Int 23.5 26.3 33.0 36.6 33.5 35.5 50.3 35.0 31.5 42.7 53.6Total 76.7 84.1 101.8 104.1 95.7 94.1 112.4 72.3 74.6 100.4 118.9

Market Share Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309

DT Discrete 27% 26% 24% 25% 25% 20% 19% 21% 22% 18% 17%NB Discrete 7% 8% 8% 9% 9% 10% 12% 12% 9% 9% 10%

DT Integrated 42% 43% 43% 40% 40% 43% 36% 31% 36% 40% 38%NB Integrated 24% 24% 24% 26% 26% 28% 33% 36% 33% 33% 35%

Total (NB+DT) Integrated 66% 67% 68% 66% 66% 71% 68% 67% 69% 73% 73%Total (NB+DT) Discrete 34% 33% 32% 34% 34% 29% 32% 33% 31% 27% 27%Total Desktop (Discrete+ Inte 69% 69% 68% 65% 65% 62% 55% 52% 58% 57% 55%Total Notebook (Discrete+ Int 31% 31% 32% 35% 35% 38% 45% 48% 42% 43% 45%

Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Source: Mercury Research, Barclays Capital estimates

PCs; Expect Stronger Overall Growth in CY2010, Corporate Refresh Cycle in 2H2010

Looking at end-markets, Barclays Capital IT Hardware analyst, Ben Reitzes, expects overall PC unit growth of 11% year-over-year for CY

(excluding servers), which includes notebook growth of 21%, a desktop decline of 1%, and 38 million netbooks. Momentum in CY10 is

likely to be driven by Windows 7 upgrades in the corporate sector, but likely not until 2H10. Our IT Hardware analyst expects to see more

corporate upgrades in 2010 driven by an aging installed base, offset by some adverse impacts from desktop virtualization, which will likely

be more impactful on PC shipments in CY11 but with some momentum starting in CY10.


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Our IT Hardware team forecasts growth for the server market of around +8% YoY in CY2010. From a semiconductor perspective, an

improved server market is likely to be viewed as constructive for microprocessor leader Intel given the current Nehalem based upgrade

cycle as well as for AMD to some extent. In CY2010, our forecast calls for a 14% YoY increase in server unit shipments to 14 million units

We highlight that this is off a lower base with CY09 down approximately 15% in our estimates. We expect corporate sentiment to improve

the back half of 2010 and believe Intel is well positioned to benefit from pent up demand for Nehalem Servers.

Barclays Capital PC EstimatesPC Shipment 2007 2008 2009E 2010E

Atom Netbook 0 11 30 38

YoY Growth NM NM 181% 29%

Notebooks (ex Atom) 107 133 136 163

YoY Growth 34% 23% 3% 20%

Overall Notebooks 107 143 166 201

YoY Growth 34% 33% 16% 21%

Desktops 152 145 127 126

YoY Growth 5% -5% -12% -1%

Servers 8 8 6 7

YoY Growth 9% 3% -20% 8%

Total PC 267 296 299 333

YoY Growth 15% 11% 1% 11%

Total PC (ex Atom) 267 285 270 295

YoY Growth 15% 7% -5% 10%

Barclays Capital MPU EstimatesMicroprocessors 2007 2008 2009E 2010E

Atom MPUs 0 13 36 46

YoY Growth NM NM 179% 27%

Notebooks (ex Atom) 109 134 134 169

YoY Growth 33% 23% 0% 26%

Overall Notebooks 109 147 170 215

YoY Growth 33% 35% 16% 26%

Desktops 161 158 154 157

YoY Growth 5% -2% -2% 1%

Servers 14 14 12.2 14

YoY Growth 9% 4% -15% 14%

Total MPU 284 319 337 385

YoY Growth 15% 12% 6% 14%

Total MPU (ex Atom) 284 306 300 339

YoY Growth 15% 8% -2% 13%

Source: Barclays Capital (IT Hardware Analyst, Ben Reitzes) and Mercury Research

Estimates and Valuation

Based on recent checks we look for a solid 4Q09 with our estimates edging to +8.5% $10.2 sales and 62.5% GM and EPS of $0.45

consensus of +7.8% or $10.1 and 62% GM and we believe our broadly seasonal -8.6% 1Q10 revenues and $0.35 EPS vs. consens

$0.33 may still prove conservative depending on holiday sell-thru. For CY10, we model revenues and EPS of $39.3B and $1.respectively. We also take this opportunity to introduce our CY11 estimates, where we model revenues and EPS of $42.1B and $1.

respectively.

Our price target of $24 is based on 15x our CY10 EPS estimate of $1.60. We highlight that on a 5-year average basis, Intel has historica

traded at around 16x, with a trough of 11x and peak of 21x. We see strong support likely around the $18 level.

Intel 5-Yr Historical Fwd P/E Chart (based on consensus)

10x

12x

14x

16x

18x

20x

12/17/04

02/25/05

05/06/05

07/15/05

09/23/05

12/02/05

02/10/06

04/21/06

06/30/06

09/08/06

11/17/06

01/26/07

04/06/07

06/15/07

08/24/07

11/02/07

01/11/08

03/21/08

05/30/08

08/08/08

10/17/08

12/26/08

03/06/09

05/15/09

07/24/09

10/02/09

12/11/09

INTC P/ E Ratio Min Max Average

Intel 5-Yr Historical EV/Sales Chart

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

4.0x

4.5x

5.0x

5.5x

6.0x

12/17/04

02/25/05

05/06/05

07/15/05

09/23/05

12/02/05

02/10/06

04/21/06

06/30/06

09/08/06

11/17/06

01/26/07

04/06/07

06/15/07

08/24/07

11/02/07

01/11/08

03/21/08

05/30/08

08/08/08

10/17/08

12/26/08

03/06/09

05/15/09

07/24/09

10/02/09

INTC EV/ Sales Min Max Average

Source: FactSet


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Intel Financial Model ($ in Millions, except per share data)Fiscal Fiscal Fiscal Fisc

Fiscal Year-End: December Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4E Q1E Q2E Q3E Q4E Q1E Q2E Q3E Q4E 2008 2009E 2010E 201

R even ues $9, 673 $9,470 $10 ,217 $8 ,226 $7, 145 $8, 024 $9,389 $10 ,187 $9, 311 $9, 255 $9, 977 $10 ,755 $10 ,002 $9, 902 $10, 675 $11 ,507 $37 ,586 $34 ,745 $39 ,298 $42 ,0

Q/Q -9.7% -2.1% 7.9% -19.5% -13.1% 12.3% 17.0% 8.5% -8.6% -0.6% 7.8% 7.8% -7.0% -1.0% 7.8% 7.8%

Y/Y 9.3% 9.1% 1.3% -23.2% -26.1% -15.3% -8.1% 23.8% 30.3% 15.3% 6.3% 5.6% 7.4% 7.0% 7.0% 7.0% -2.0% -7.6% 13.1% 7.1

Cost of Goods 4,466 4,221 4,198 3,857 3,884 3,945 3,985 3,820 3,818 3,795 3,941 4,141 4,201 4,159 4,270 4,488 16,742 15,634 15,694 17,1

Gross Pr ofit $5,207 $ 5,249 $ 6,019 $4,369 $3,261 $4,079 $5,404 $6,367 $5,493 $5,461 $6,036 $6,614 $5,801 $5,743 $6,405 $7,019 $20,844 $19,111 $23,6 05 $24,9

R&D $1, 467 $1,468 $1,471 $1,316 $1,317 $1,303 $1,430 $1,500 $1,470 $1,470 $1,520 $1,570 $1,540 $ 1,530 $1,580 $1,630 $5,722 $5,550 $6,030 $6,2

SG&A $1, 349 $1,430 $1,416 $ 1,263 $1,200 $1,250 $1,320 $1,400 $1,340 $ 1,340 $1,390 $1,445 $ 1,385 $ 1,385 $1,435 $1,490 $5,458 $5,170 $5,515 $5,6

Restructuring & asset impairment $329 $96 $34 $251 $74 $91 $63 $40 $40 $40 $40 $40 $40 $40 $40 $40 $710 $268 $160 $16

Amortization of Acq. $0 $0 $0 $0 $0 $0 $12 $20 $0 $0 $0 $0 $0 $0 $0 $0 $0 $32 $0 $0

O pera tin g In co me $2, 062 $2,255 $3 ,098 $1, 539 $670 $1, 435 $2,579 $3, 407 $2, 643 $2, 611 $3, 086 $3, 559 $2,836 $2, 788 $3,350 $3, 859 $8, 954 $8, 091 $11 ,900 $12 ,8

Gain On Investments ($59) ($109) ($396) ($1,192) ($113) ($69) ($79) ($25) ($15) ($10) ($10) ($10) ($10) ($10) ($10) ($10) ($1,756) ($286) ($45) ($4

Interest & Other $168.0 $167.0 $131.0 $22.0 $95.0 $31.0 $32.0 $25.0 $30.0 $35.0 $40.0 $45.0 $40.0 $40.0 $45.0 $45.0 $488 $183 $150 $17

P ro fi t Be fo re T axes $2, 171 $2, 313 $2, 833 $369 $652 $1, 397 $2, 532 $3,407 $2,658 $2, 636 $3,116 $3, 594 $2, 866 $2 ,818 $3, 385 $3,894 $7,686 $7, 988 $12 ,005 $12 ,9

Taxes $728 $712 $819 $135 $5 $348 $676 $886 $691 $685 $810 $935 $745 $733 $880 $1,013 $2,394 $1,915 $3,121 $3,3

N et I ncom e $1, 443 $1, 601 $2,014 $234 $647 $1, 049 $1 ,856 $2, 521 $1, 967 $1, 950 $2 ,306 $2, 660 $2,121 $2 ,086 $2,505 $2, 882 $5, 292 $6,073 $8, 883 $9, 5

Net Income-Ex Options $1,662 $1 ,844 $2,252 $403 $860 $1,307 $2,111 $2,775 $2,221 $2,203 $2,558 $2,912 $2,373 $2,337 $2,756 $3,133 $6,160 $7,053 $9,895 $10 ,5

Diluted Com mon & Equiv Sh (M) 5,879 5,800 5,692 5,623 5,634 5,678 5,616 5, 586 5,576 5,566 5,556 5,556 5,546 5,536 5,526 5,526 5,749 5,629 5,564 5,53

EPS - Cont Ops $0.25 $0.28 $0.35 $0.04 $0.11 $0.18 $0.33 $0.45 $0.35 $0.35 $0.42 $0.48 $0.38 $0.38 $0.45 $0.52 $0.92 $1.08 $1.60 $1.7

EPS- Ex Options $0.28 $0.32 $0.40 $0.07 $0.15 $0.23 $0.38 $0.50 $0.40 $0.40 $0.46 $0.52 $0.43 $0.42 $0.50 $0.57 $1.07 $1.25 $1.78 $1.9

Percent of Sales

Gross Margin 53.8% 55.4% 58.9% 53.1% 45.6% 50.8% 57.6% 62.5% 59.0% 59.0% 60.5% 61.5% 58.0% 58.0% 60.0% 61.0% 55.5% 55.0% 60.1% 59.3

R&D 15.2% 15.5% 14.4% 16.0% 18.4% 16.2% 15.2% 14.7% 15.8% 1 5.9% 15.2% 14.6% 1 5.4% 1 5.5% 14.8% 14.2% 15.2% 16.0% 15.3% 14.9

SG&A 13.9% 15.1% 13.9% 15.4% 16.8% 15.6% 14.1% 13.7% 14.4% 14.5% 13.9% 13.4% 13.8% 14.0% 13.4% 12.9% 14.5% 14.9% 14.0% 13.5

Operating Income 21.3% 23.8% 30.3% 18.7% 9.4% 17.9% 27.5% 33.4% 28.4% 28.2% 30.9% 33.1% 28.4% 28.2% 31.4% 33.5% 23.8% 23.3% 30.3% 30.5

Depreciation 11.4% 11.0% 10.8% 13.4% 15.4% 15.1% 12.8% 12.7% 11.8% 11.9% 11.0% 10.2% 11.0% 11.1% 10.3% 9.6% 11.6% 13.8% 11.2% 10.5

Net Income 14.9% 16.9% 19.7% 2.8% 9.1% 13.1% 19.8% 24.7% 21.1% 21.1% 23.1% 24.7% 21.2% 21.1% 23.5% 25.0% 14.1% 17.5% 22.6% 22.8Tax Rate 33.5% 30.8% 28.9% 36.6% 0.8% 24.9% 26.7% 26.0% 26.0% 26.0% 26.0% 26.0% 26.0% 26.0% 26.0% 26.0% 31.1% 24.0% 26.0% 26.0

Fiscal 2011EFiscal 2010EFiscal 2008 Fiscal 2009E

Source: Company Data and Barclays Capital estimates


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Intel Segment Model ($ in Millions, except per share data)Revenue by Segment Fiscal Fiscal Fiscal Fisc

Q1 Q2 Q3 Q4 Q1 Q2E Q3E Q4E Q1E Q2E Q3E Q4E Q1E Q2E Q3E Q4E 2008 2009E 2010E 201

D ig ital E nterpr ise $5, 441 $5 ,373 $5, 318 $4, 500 $4, 009 $4,304 $4, 913 $5, 145 $4, 514 $4, 508 $4,835 $5,097 $16 ,067 $4, 824 $4, 993 $5, 479 $20 ,632 $18 ,371 $18 ,953 $31 ,3

Microprocessor $4,236 $4,108 $4,069 $3,665 $3,258 $3,418 $3,873 $4,053 $3,531 $3,614 $3,923 $4,130 $15 ,197 $4 ,032 $4,185 $4,623 $16 ,078 $14 ,602 $15 ,197 $28 ,0

Des kt op $2, 782 $2, 524 $2, 621 $ 2, 467 $2, 200 $2, 242 $2, 513 $2,600 $2 ,227 $ 2, 262 $2, 441 $2, 526 $ 9, 456 $ 2, 497 $2, 567 $2,860 $10, 394 $9, 554 $9, 456 $17 ,3

Server $1,454 $1,584 $1,448 $ 1,198 $1,058 $1,176 $1,360 $1,454 $1,304 $1,351 $1,482 $1,604 $ 5,741 $ 1, 535 $1,618 $1,763 $5,684 $5,049 $5,741 $10,6

Chipset, motherboard, other $1,205 $1,265 $1,249 $835 $751 $886 $1,040 $1,092 $983 $894 $912 $967 $870 $792 $808 $856 $4,554 $3,769 $3,756 $3,3

Mob ilit y $3,669 $3,797 $4,681 $ 3,501 $2,914 $3,481 $4,131 $4,5 52 $3 ,935 $4,173 $4,7 98 $5,284 $14,682 $5,325 $5,688 $6,439 $15,648 $15,078 $18,190 $32,

Microprocessor $2,726 $2,742 $3,387 $2,584 $2,188 $2,554 $2,924 $3,249 $2,762 $3,082 $3,674 $4,082 $13 ,599 $4 ,319 $4,652 $5,330 $11 ,439 $10 ,915 $13 ,599 $27 ,8

Chipset & other $943 $1,055 $1,294 $917 $726 $927 $1,207 $1,304 $1,173 $1,091 $1,124 $1,202 $1,082 $1,006 $1,037 $1,109 $4,209 $4,164 $4,591 $4,2

Flash memory $497 $245 $170 $150 $150 $170 $235 $250 $290 $250 $225 $230 $290 $250 $225 $230 $1,062 $805 $995 $99

Other $66 $55 $48 $75 $72 $70 $110 $239 $572 $325 $119 $144 -$21,037 -$497 -$231 -$641 $244 $491 $1,160 -$22,

TO TAL $9, 673 $9, 470 $10 ,217 $8 ,226 $7, 145 $8, 024 $9, 389 $10, 187 $9 ,311 $9, 255 $9, 977 $10, 755 $10 ,002 $9 ,902 $10 ,675 $11 ,507 $37 ,586 $34 ,745 $39 ,298 $42 ,0

Revenue QoQ

Digital Enterprise -9% -1% -1% -15% -11% 7% 14% 5% -12% 0% 7% 5% 215% -70% 3% 10%

Microprocessor -6% -3% -1% -10% -11% 5% 13% 5% -13% 2% 9% 5% 268% -73% 4% 10%

Desktop -9% -9% 4% -6% -11% 2% 12% 3% -14% 2% 8% 4% 274% -74% 3% 11%

Server 1% 9% -9% -17% -12% 11% 16% 7% -10% 4% 10% 8% 258% -73% 5% 9%

Chipset, motherboard, other -18% 5% -1% -33% -10% 18% 17% 5% -10% -9% 2% 6% -10% -9% 2% 6%

Mobility -11% 3% 23% -25% -17% 19% 19% 10% -14% 6% 15% 10% 178% -64% 7% 13%

Microprocessor -9% 1% 24% -24% -15% 17% 15% 11% -15% 12% 19% 11% 233% -68% 8% 15%

Chipset & other -16% 12% 23% -29% -21% 28% 30% 8% -10% -7% 3% 7% -10% -7% 3% 7%

Flash memory -15% -51% -31% -12% 0% 13% 38% 6% 16% -14% -10% 2% 26% -14% -10% 2%

All Other 14% -17% -13% 56% -4% -3% 58% 118% 139% -43% -63% 22% -14680% -98% -53% 177%

TOTAL -9.7% -2% 8% -19% -13% 12% 17% 9% -9% -1% 8% 8% -7% -1% 8% 8%

Revenue YoY

Digital Enterprise 9% 11% -4% -25% -26% -20% -8% 14% 13% 5% -2% -1% 256% 7% 3% 8% -3% -11% 3% 65%

Microprocessor 13% 14% -1% -18% -23% -17% -5% 11% 8% 6% 1% 2% 330% 12% 7% 12% 1% -9% 4% 84%

Desktop 4% 7% -7% -19% -21% -11% -4% 5% 1% 1% -3% -3% 325% 10% 5% 13% -5% -8% -1% 84%

Server 37% 26% 13% -17% -27% -26% -6% 21% 23% 15% 9% 10% 340% 14% 9% 10% 13% -11% 14% 86%

Chipset, motherboard, other -4% 3% -11% -43% -38% -30% -17% 31% 31% 1% -12% -11% -11% -11% -11% -11% -15% -17% 0% -11

Mobility 11% 15% 18% -15% -21% -8% -12% 30% 35% 20% 16% 16% 273% 28% 19% 22% 7% -4% 21% 77%

Microprocessor 12% 14% 20% -14% -20% -7% -14% 26% 26% 21% 26% 26% 392% 40% 27% 31% 7% -5% 25% 105

Chipset & other 9% 17% 14% -18% -23% -12% -7% 42% 62% 18% -7% -8% -8% -8% -8% -8% 5% -1% 10% -8%

Flash memory 6% -50% -69% -74% -70% -31% 38% 67% 93% 47% -4% -8% 0% 0% 0% 0% -49% -24% 24% 0%

All Other -20% 4% -11% 29% 9% 26% 129% 219% 695% 367% 8% -40% -3776% -253% -295% -544% -1% 101% 136% -203

TOTAL 9% 9% 1% -23% -26% -15% -8% 24% 30% 15% 6% 6% 7% 7% 7% 7% -2% -8% 13% 7%

Rev Breakdown from Total (%)

Digital Enterprise 56% 57% 52% 55% 56% 54% 52% 51% 48% 49% 48% 47% 161% 49% 47% 48% 55% 53% 48% 80%

Microprocessor 44% 43% 40% 45% 46% 43% 41% 40% 38% 39% 39% 38% 152% 41% 39% 40% 43% 42% 39% 71%

Desktop 29% 27% 26% 30% 31% 28% 27% 26% 24% 24% 24% 23% 95% 25% 24% 25% 28% 27% 24% 44%

Server 15% 17% 14% 15% 15% 15% 14% 14% 14% 15% 15% 15% 57% 16% 15% 15% 15% 15% 15% 27%

Chipset, motherboard, other 12% 13% 12% 10% 11% 11% 11% 11% 11% 10% 9% 9% 9% 8% 8% 7% 12% 11% 10% 8%

Mobility 38% 40% 46% 43% 41% 43% 44% 45% 42% 45% 48% 49% 147% 54% 53% 56% 42% 43% 46% 82%

Microprocessor 28% 29% 33% 31% 31% 32% 31% 32% 30% 33% 37% 38% 136% 44% 44% 46% 30% 31% 35% 71%

Chipset & other 10% 11% 13% 11% 10% 12% 13% 13% 13% 12% 11% 11% 11% 10% 10% 10% 11% 12% 12% 11%

Flash memory 5% 3% 2% 2% 2% 2% 3% 2% 3% 3% 2% 2% 3% 3% 2% 2% 3% 2% 3% 3%

All Other 1% 1% 0% 1% 1% 1% 1% 2% 6% 4% 1% 1% -210% -5% -2% -6% 1% 1% 3% -57

TOTAL 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 107

Fiscal 2008 Fiscal 2009E Fiscal 2010EFiscal 2010E



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Intel Segment Model ($ in Millions, except per share data)Fiscal Fiscal Fiscal Fisc

Fiscal Year-End: December Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4E Q1E Q2E Q3E Q4E Q1E Q2E Q3E Q4E 2008 2009E 2010E 201

ASSETS

Cash & Sec uri ties 13, 692 1 1,96 1 12, 204 11, 843 10, 599 11,624 12, 930 13, 142 13, 060 13, 114 13,251 13, 548 13, 866 14, 070 14, 379 14,870 11,843 13, 142 13, 548 14, 8

Accounts Receivable 2,725 2,399 2,782 1,712 2,086 1,938 2,025 2,289 2,724 2,576 2,624 2,593 2,927 2,756 2,808 2,774 1,712 2,289 2,593 2,77

Inventory - Raw Material 545 580 583 608 380 385 398

Inventory - WIP 1,361 1,355 1,427 1,577 1,448 1,209 1,072Invent ory - Fi ni shed Goods 1, 366 1, 330 1, 388 1, 559 1, 217 1, 211 1, 020

Total Inventories 3,272 3 ,265 3 ,398 3,744 3,045 2,805 2,490 3,274 3,482 3,253 3,291 3,640 3,832 3,565 3,566 3,945 3,744 3,274 3,640 3,94

Other Current Assets 2,375 2,153 3,039 2,572 2,407 2,100 1,802 1,802 1,802 1,802 1,802 1,802 1,802 1,802 1,802 1,802 2,572 1,802 1,802 1,80

Total Cur rent Assets 22,064 19 ,778 21,423 19,871 18,137 18,467 19,247 20,507 21,068 20,744 20,968 21,583 22,426 22,193 22,555 23,392 19,871 20,507 21,583 23,3

Net PP&E 16,667 16,723 17,026 17,544 17,815 17,515 17,354 17,220 17,020 16,820 16,620 16,420 16,220 16,020 15,820 15,620 17,544 17,220 16,420 15,6

Mktable Strategic Equity Sec. 530 644 401 352 412 513 766 766 766 766 766 766 766 766 766 766 352 766 766 76

Other LT Investments 4,473 4,651 3,820 2,924 2,513 3,002 3,611 3,611 3,611 3,611 3,611 3,611 3,611 3,611 3,611 3,611 2,924 3,611 3,611 3,6

Goodwill and Other Acq. Intang 3,916 3,915 3,924 3,932 3,932 3,932 4,421 4,360 4,296 4,237 4,174 4,113 4,049 3,990 3,927 3,866 3,932 4,360 4,113 3,86

Other Assets 5,737 6 ,681 6 ,125 6,092 5,615 5,632 5,597 5,597 5,597 5,597 5,597 5,597 5,597 5,597 5,597 5,597 6,092 5,597 5,597 5,59

------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ -------

Tot al Ass et s 53, 387 52, 392 52, 719 5 0, 715 48, 424 49,061 50, 996 52,061 52 ,358 51, 775 51,736 52, 090 52, 669 52, 177 52, 276 52,852 50,715 52, 061 52, 090 52, 8

======== ======= =============== ======== ======== ======== ======== ================ ======== ======================== ======== ======== ======== ======== ======== =====

LIAB. & SHRHLDRS' EQUITY

Short-Term Debt 189 175 467 102 31 24 23 23 23 23 23 23 23 23 23 23 102 23 23 23

Ac count s P ayabl e & Acc rued Li ab. 4,42 2 4, 824 5,247 4, 405 3, 541 3, 856 4, 428 3, 988 4, 61 5 4, 378 4, 331 4, 323 5,078 4, 799 4, 692 4, 685 4, 405 3, 988 4, 323 4,68

Deferred inc. on disti shipments 643 665 656 463 468 480 602 602 602 602 602 602 602 602 602 602 463 602 602 60

Other Current Liabilities 3,414 2,368 3,698 2,848 2,253 2,719 2,696 2,696 2, 696 2,696 2,696 2,696 2,696 2,696 2,696 2,696 2,848 2,696 2,696 2,69

Total Current Liabilities 8,668 8,032 1 0,068 7,818 6,293 7,079 7,749 7,309 7,936 7,699 7,652 7,644 8,399 8,120 8,013 8,006 7,818 7,309 7,644 8,00

Long-Term Debt 1,990 1,892 1,889 1,886 1,170 1,174 2,201 2,201 2,201 2,201 2,201 2,201 2,201 2,201 2,201 2,201 1,886 2,201 2,201 2,20

Other Liabilities 2,069 2 ,107 1 ,851 1,923 1,879 1,761 2,013 2,013 2,013 2,013 2,013 2,013 2,013 2,013 2,013 2,013 1,923 2,013 2,013 2,0

Tot al Li abi li ti es 12, 727 12, 031 13, 808 11,627 9, 342 10, 014 11, 963 11, 523 1 2, 150 11, 913 11, 866 11, 858 12,613 12, 334 12, 227 12, 220 11, 627 11,523 11, 858 12, 2

Shareho lders' Equ ity 40,660 40,361 38 ,911 39,088 39,082 39,047 39,033 40,538 40,209 39 ,862 39,870 40,233 40 ,056 39,843 40,049 40,632 39,088 40,538 40,233 40,6

-------------------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------Total L iab. and Equ ity 53,387 52 ,392 52,719 50,715 48,424 49,061 50,996 52,061 52,358 51,775 51,736 52,090 52,669 52,177 52,276 52,852 50,715 52,061 52,090 52,8

======== ======= =============== ======== ======== ======== ======== ================ ======== ======================== ======== ======== ======== ======== ======== =====

Fiscal 2008 Fiscal 2009E Fiscal 2011EFiscal 2010E


Analyst Certification:

I, Tim Luke, hereby certify (1) that the views expressed in this research report accurately reflect my personal views about any or all of the

subject securities or issuers referred to in this research report and (2) 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.

Other Team Members:

Chung, Jennifer (BCI, New York) 1.212.526.3828 [email protected]

Mahtani, Aniel, CFA (BCI, New York) 1.212.526.2021 [email protected]

Keller, Franklin (BCI, New York) 1.212.526.0866 [email protected]

Company Description:Intel is the largest manufacturer of semiconductor devices in the world. Its principal products are microprocessors that serve as the CPUs personal computers.


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On September 20, 2008, Barclays Capital acquired Lehman Brothers' North American investment banking, capital markets, and private investmenmanagement businesses. All ratings and price targets prior to this date relate to coverage under Lehman Brothers Inc.

Important Disclosures:

Intel Corp. (INTC) US$ 19.07 (17-Dec-2009) 1-Overweight / 2-Neut

Rating and Price Target Chart:

10-06 1-07 4-07 7-07 10-07 1-08 4-08 7-08 10-08 1-09 4-09 7-09 10-0910.00

12.00

14.00

16.00

18.00

20.00

22.00

24.00

26.00

28.00

30.00

32.00

Source: FactSet

INTEL CORP.As of 06-Oct-2009

Currency = USD

Closing Price Price TargetRecommendation Change Drop Coverage

Currency=US$Date Closing Price Rating Price Target28-Aug-09 20.25 22.0015-Jul-09 18.05 19.0013-May-09 15.13 18.0006-Apr-09 15.86 17.0025-Feb-09 13.03 16.0016-Jan-09 13.74 15.0005-Dec-08 13.29 14.0011-Nov-08 13.93 16.0013-Oct-08 16.99 20.00

Date Closing Price Rating Price Targe29-Sep-08 17.27 21.029-Sep-08 17.27 2 -Equal weight08-Sep-08 20.97 24.015-May-08 24.97 26.007-Apr-08 21.75 24.016-Jan-08 19.88 23.017-Oct-07 26.72 30.018-Jul-07 25.06 28.021-Feb-07 20.88 24.0

FOR EXPLANATIONS OF RATINGS REFER TO THE STOCK RATING KEYS LOCATED ON THE PAGE FOLLOWING THE LAST PRICE CHART.

Barclays Bank PLC and/or an affiliate is a market-maker and/or liquidity provider in securities issued by Intel Corp. or one of its affiliates.

Barclays Bank PLC and/or an affiliate has received compensation for investment banking services from Intel Corp. in the past 12 months.Barclays Bank PLC and/or an affiliate expects to receive or intends to seek compensation for investment banking services from Intel Corpwithin the next 3 months.Barclays Bank PLC and/or an affiliate trades regularly in the shares of Intel Corp..Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation from Intel Corp. within the past 12months.Intel Corp. is or during the past 12 months has been an investment banking client of Barclays Bank PLC and/or an affiliate.Intel Corp. is or during the last 12 months has been a non-investment banking client (securities related services) of Barclays Bank PLCand/or an affiliate.

Valuation Methodology: PT is $24 or 15x our CY10 EPS estimate of $1.60

Risks Which May Impede the Achievement of the Price Target: Intel is heavily dependent to PC sales. If the number of PCs solddeclines, Intel's processor opportunity will directly be affected by the units. Intel's average selling prices are also impacted by supply anddemand conditions of PCs. Although the company typically reduces processor prices once a quarter, the company may increase the


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severity of the price cut to drive sell through demand. Also the competitive position of AMD products and any market share gains couldadversely affect Intel. Intel's Architecture group, which includes the processor revenue, generates about 85% of total revenue and over100% of operating profit.


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In addition to the stock rating, we provide sector views which rate the outlook for the sector coverage universe as 1-Positive, 2-Neutral or3-Negative (see definitions below). A rating system using terms such as buy, hold and sell is not the equivalent of our rating system.Investors should carefully read the entire research report including the definitions of all ratings and not infer its contents from ratings alone

Stock Rating1-Overweight - The stock is expected to outperform the unweighted expected total return of the sector coverage universe over a 12-montinvestment horizon.2-Equal Weight - The stock is expected to perform in line with the unweighted expected total return of the sector coverage universe over 12- month investment horizon.3-Underweight - The stock is expected to underperform the unweighted expected total return of the sector coverage universe over a12- month investment horizon.RS-Rating Suspended - The rating and target price have been suspended temporarily due to market events that made coverageimpracticable or to comply with applicable regulations and/or firm policies in certain circumstances including when Barclays Capital is actinin an advisory capacity in a merger or strategic transaction involving the company.

Sector View1-Positive - sector coverage universe fundamentals/valuations are improving.2-Neutral - sector coverage universe fundamentals/valuations are steady, neither improving nor deteriorating.3-Negative - sector coverage universe fundamentals/valuations are deteriorating.

Distribution of Ratings:

Barclays Capital Equity Research has 1399 companies under coverage.40% have been assigned a 1-Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating; 43%of companies with this rating are investment banking clients of the Firm.45% have been assigned a 2-Equal Weight rating which, for purposes of mandatory regulatory disclosures, is classified as a Hold rating;38% of companies with this rating are investment banking clients of the Firm.13% have been assigned a 3-Underweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating; 32of companies with this rating are investment banking clients of the Firm.

Barclays Capital offices involved in the production of Equity Research:LondonBarclays Capital, the investment banking division of Barclays Bank PLC (Barclays Capital, London)

New YorkBarclays Capital Inc. (BCI, New York)

TokyoBarclays Capital Japan Limited (BCJL, Tokyo)

So PauloBanco Barclays S.A. (BBSA, So Paulo)

Hong KongBarclays Bank PLC, Hong Kong branch (BB, Hong Kong)

Toronto

Barclays Capital Canada Inc. (BCC, Toronto)

This publication has been prepared by Barclays Capital; the investment banking division of Barclays Bank PLC, and/or one or more of its affiliates provided below. This publication is provided to you for information purposes only. Prices shown in this publication are indicative and Barclays Capital is

offering to buy or sell or soliciting offers to buy or sell any f inancial instrument. Other than disclosures relating to Barclays Capital, the information containedthis publication has been obtained from sources that Barclays Capital believes to be reliable, but Barclays Capital does not represent or warrant that itaccurate or complete. The views in this publication are those of Barclays Capital and are subject to change, and Barclays Capital has no obligation to updaits opinions or the information in this publication. Barclays Capital and its affiliates and their respective officers, directors, partners and employees, includpersons involved in the preparation or issuance of this document, may from time to time act as manager, co-manager or underwriter of a public offering otherwise, in the capacity of principal or agent, deal in, hold or act as market-makers or advisors, brokers or commercial and/or investment bankers in relatto the securities or related derivatives which are the subject of this publication.The analyst recommendations in this report reflect solely and exclusively those of the author(s), and such opinions were prepared independently of any othinterests, including those of Barclays Capital and/or its affiliates.Neither Barclays Capital, nor any affiliate, nor any of their respective officers, directors, partners, or employees accepts any liability whatsoever for any direor consequential loss arising from any use of this publication or its contents. The securities discussed in this publication may not be suitable for all investoBarclays Capital recommends that investors independently evaluate each issuer, security or instrument discussed in this publication and consult aindependent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevaeconomic markets (including changes in market liquidity). The information in this publication is not intended to predict actual results, which may difsubstantially from those reflected. Past performance is not necessarily indicative of future results.


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Equity ResearThis communication is being made available in the UK and Europe to persons who are investment professionals as that term is defined in Article 19 of tFinancial Services and Markets Act 2000 (Financial Promotion Order) 2005. It is directed at, and therefore should only be relied upon by, persons who haprofessional experience in matters relating to investments. The investments to which it relates are available only to such persons and will be entered into owith such persons. Barclays Capital is authorized and regulated by the Financial Services Authority (FSA) and member of the London Stock Exchange.

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