Operator: Good day, ladies and gentlemen. Welcome to the Q1 2010 Intel Corporation Earnings Conference Call. My name is Shenelle and I’ll be your coordinator for today. After the speakers’ remarks, there will be a question-and-answer session. (Operating Instructions). As a reminder, this conference is being recorded for replay purposes.
I would now like to turn the presentation over to your host for today’s call, Mr. Kevin Sellers, VP of Investor Relations. Please proceed, sir.
R. Kevin Sellers - VP, Finance, Director, IR: Thank you, Shenelle, and welcome everyone to Intel’s first quarter 2010 earnings conference call. I am here with Paul Otellini, our President and CEO, and Stacy Smith, our Chief Financial Officer.
A few important items before we begin. First, we posted our earnings release, CFO commentary, and updated financial statements to our investor website, intc.com, for anyone who still needs access to that information. Also, if during this call, we use any non-GAAP financial measures or references, we will post the appropriate GAAP financial reconciliation to our website as well. Following brief prepared remarks from both Paul and Stacy, we’ll be happy to take questions.
As we begin, let me remind everyone that today’s discussion contains forward-looking statements based on the environment as we currently see it and as such does include risks and uncertainties. Please refer to our press release for more information on the specific risk factors that could cause actual results to differ materially.
One final note; we’ve scheduled our Annual Investor Day on May 11th at Intel headquarters here in Santa Clara. We look forward to seeing many of you here. If any of you need additional information about that event, please contact Intel Investor Relations directly.
So with that, let me now hand it over to Paul.
Paul S. Otellini - President and CEO: Thanks, Kevin. A year ago, at this time, the industry was in the midst of a sharp correction with many expecting it to continue for an extended period. We saw signals of a bottoming then, and now a year later the industry has nearly fully recovered.
At Intel, we focused on expanding our Nehalem architecture, getting our 32-nanometer process technology ready, and then designing alternatives and derivatives of our new Atom processor for many new market segments. As a result of that focus, we started this year with the best product lineup we've ever had with leadership in all segments and categories. Demand for these new products has been incredible, and as a result, Intel achieved a record first quarter in revenue and in operating income.
It was notable this quarter the demand for our higher-end PC products was particularly strong, which helped improve margins and profitability. Our mobile business set a new revenue record as demand for notebooks continues to be excellent. We’re also seeing signs of corporate demand returning, which we believe will continue to improve given the age of the corporate PC fleet and the compelling ROI that our new generation of servers presents.
Looking at the supply chain, we continue to see aggregate inventories operating within normal, healthy ranges. Intel's own inventory remains lean. OEM inventories are flat quarter-on-quarter and downstream channel inventories are also within normal ranges. We watch inventory levels and sell-through activity very carefully, and we remain comfortable with the supply chain conditions.
In our manufacturing environment, our factory teams have executed the ramp of our 32-nanometer process superbly. We exceeded output expectations with lower costs than originally anticipated and are currently shipping over 50 SKUs on 32 nanometers. 32 nanometers is our fastest-ramping process ever, and I’m pleased to note that we are accelerating the ramp of our third and fourth 32-nanometer factories faster than our original plan, such that by early Q4 we will have four factories in production on 32 nanometers.
Lastly, we are excited about our next generation of processors codenamed Sandy Bridge. We began volume sampling in Q1, shipping thousands of samples to a broad range of customers and are planning for volume production later this year. As we look forward, we are optimistic about the prospects of our business for the rest of 2010 and beyond. Our product portfolio, combined with our excellent execution and the ongoing benefits from restructuring, have us positioned for continued profitable growth. This is a great way to begin 2010, and I look forward to seeing many of you here in May for our investor meeting where we will talk in more detail about how we plan to build on this momentum and further exploit the growth opportunities before us.
With that, let me turn the meeting back over to Stacy.
Stacy J. Smith - CFO and SVP: Thanks, Paul. The strength in our business model can be seen in the first quarter results. Record first quarter revenue of $10.3 billion resulted in record first quarter operating profit of $3.4 billion and cash flow from operations of approximately $4 billion. These better-than-expected financials resulted from strong sales of our new products. Microprocessor unit sales declined slightly less than seasonal and average selling prices for microprocessors were up slightly quarter-on-quarter. Supply chain inventory levels appeared to be healthy after several quarters of replenishment.
The Mobile Computing segment was particularly strong with customer demand for our new products leading to an increase in mobile microprocessor average selling prices and record mobile microprocessor revenue. First quarter gross margin of 63.4% was higher than our expectation. The factory network performed well in the first quarter ramping 32-nanometer process technology, controlling cost, and reacting quickly to meet customer demand. The first quarter demonstrates the impact of our work in improving our cost structure. Spending was 30% of revenue and operating profit of $3.4 billion was 33% of revenue. The number of employees was approximately flat in the first quarter with revenue per employee of a $129,000, the third highest in our history.
Moving to the balance sheet, total cash investments comprised of cash, short-term investments, and trading assets ended the quarter at $16.3 billion, $2.4 billion higher than the fourth quarter. Cash flow from operations was approximately $4 billion. During the first quarter, we paid nearly $900 million in dividends and purchased over $900 million in capital assets.
We are forecasting a revenue decrease for the second quarter that are slightly less than our average seasonal decline taking the midpoint of our forecast range to $10.2 billion, a 27% increase from the second quarter of 2009. We are forecasting the midpoint of the gross margin range to increase one point from the first quarter to 64%. For 2010, we are now forecasting a record annual gross margin with the midpoint of our annual forecast increasing from 61% to 64%.
The investments we are making in leading-edge process technology, the strength of our product line, a continued focus on our cost structure, and strong worldwide demand, led to the record results we saw in the first quarter and the record financial results we are forecasting for the second quarter and the year.
With that, let me turn it back to Kevin.
R. Kevin Sellers - VP, Finance, Director, IR: Okay, thanks. We are now going to move to Q&A. We’d like to limit each of you to one question and then a follow-up if you have one. So with that, Shenelle, go ahead and please introduce our first questioner.