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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the fiscal year ended December 29, 2007.
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the transition period from
to
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Commission File Number
000-06217
INTEL CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
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94-1672743
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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2200 Mission College Boulevard, Santa Clara, California
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95054-1549
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(Address of principal executive offices)
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(Zip Code)
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Registrants telephone number, including area code
(408) 765-8080
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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Common stock, $0.001 par value
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The NASDAQ Global Select Market*
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes x No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the
Act. Yes o No x
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes x No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated filer
x
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller
reporting company)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No x
Aggregate market value of voting and non-voting common equity
held by non-affiliates of the registrant as of June 29,
2007, based upon the closing price of the common stock as
reported by The NASDAQ Global Select Market* on such date, was
approximately
$137.9 billion
5,788 million shares of common stock outstanding as of
February 8, 2008
DOCUMENTS
INCORPORATED BY REFERENCE
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(1) |
Portions of the registrants Proxy Statement relating to
its 2008 Annual Stockholders Meeting, to be filed
subsequentlyPart III.
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INTEL
CORPORATION
FORM 10-K
FOR THE
FISCAL YEAR ENDED DECEMBER 29, 2007
INDEX
PART I
ITEM 1. BUSINESS
Industry
We are the worlds largest semiconductor chip maker, based
on revenue. We develop advanced integrated digital technology
products, primarily integrated circuits, for industries such as
computing and communications. Integrated circuits are
semiconductor chips etched with interconnected electronic
switches. We also develop platforms, which we define as
integrated suites of digital computing technologies that are
designed and configured to work together to provide an optimized
user computing solution compared to ingredients that are used
separately. Our goal is to be the preeminent provider of
semiconductor chips and platforms for the worldwide digital
economy. We offer products at various levels of integration,
allowing our customers flexibility to create advanced computing
and communications systems and products.
We were incorporated in California in 1968 and reincorporated in
Delaware in 1989. Our Internet address is www.intel.com.
On this web site, we publish voluntary reports, which we update
annually, outlining our performance with respect to corporate
responsibility, including environmental, health, and safety
compliance. On our Investor Relations web site, located at
www.intc.com, we post the following filings as soon as
reasonably practicable after they are electronically filed with,
or furnished to, the U.S. Securities and Exchange Commission
(SEC): our annual, quarterly, and current reports on
Forms 10-K,
10-Q, and
8-K; our
proxy statements; and any amendments to those reports or
statements. All such filings are available on our Investor
Relations web site free of charge. The SEC also maintains a web
site (www.sec.gov) that contains reports, proxy and
information statements, and other information regarding issuers
that file electronically with the SEC. The content on any web
site referred to in this
Form 10-K
is not incorporated by reference into this
Form 10-K
unless expressly noted.
Products
We currently offer products in a broad range of categories.
These products include:
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microprocessors with one, two, or four processor cores, designed
for desktops, workstations, servers, notebooks, embedded
products, communications products, and consumer electronics;
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chipsets designed for desktops, workstations, servers,
notebooks, embedded products, communications products, and
consumer electronics;
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motherboard products designed for our desktop, workstation, and
server platforms;
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NAND flash memory products primarily used in digital audio
players, memory cards, and system-level applications, such as
solid-state drives;
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NOR flash memory products (during the first quarter of 2008, we
expect to complete the divestiture of our NOR flash memory
assets to Numonyx; see Note 13: Divestitures in Part
II, Item 8 of this Form 10-K);
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wired and wireless Internet connectivity products, including
network adapters and embedded wireless cards, based on
industry-standard technologies used to translate and transmit
data in packets across networks;
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other communications infrastructure productsincluding
network processors, communications boards, and optical
transpondersthat are basic building blocks for modular
communications platforms;
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networked storage products that allow storage resources to be
added to either of the two most prevalent types of networking
technology: Ethernet or Fibre Channel; and
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software products and services that help enable and advance the
computing ecosystem.
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We offer features to improve microprocessor capabilities that
can enhance system performance and user experience. For example,
we offer
Intel®
Active Management Technology
(Intel®
AMT), which helps information technology managers diagnose, fix,
and protect enabled systems that are plugged into a power source
and connected to a network, even if a computer is turned off or
has a failed hard drive or operating system. We also offer
Intel®
Virtualization Technology
(Intel®
VT), which can enable a single computer system to function as
multiple virtual systems by running multiple operating systems
and applications, thereby consolidating workloads and providing
increased security and management capabilities. In addition, our
Intel®
Coretm
microarchitecture includes other features that can increase
performance and energy efficiency. To take advantage of these
features, a computer system must have a microprocessor that
supports a chipset and BIOS (basic input/output system) that
use, and software that is optimized for, the technology.
Performance will vary depending on the system hardware and
software used.
1
We offer platforms that incorporate various components and
technologies. A platform typically includes a microprocessor,
chipset, and enabling software and may include additional
hardware, services, and support. In developing our platforms, we
may include components made by other companies. A component is
one of any number of software or hardware features that may be
incorporated into a computer, handheld device, or other
computing system, including a microprocessor, chipset,
motherboard, memory, wired or wireless connectivity device, or
software. We refer to the platform brands within our product
offerings as processor technologies.
We strive to design computing and communications systems and
devices with improved overall performance and/or improved
energy-efficient
performance. Improved overall performance can include faster
processing performance and other improved capabilities such as
multithreading and multitasking. Performance can also be
improved through enhanced connectivity, security, manageability,
utilization, reliability, ease of use, and interoperability
among devices. Improved energy-efficient performance involves
balancing the addition of improved performance factors with
lower power consumption. Lower power consumption may reduce
system heat output, thereby providing power savings and reducing
the total cost of ownership for the user.
Following is detailed information on our major product
categories:
A microprocessor is the central processing unit (CPU) of
a computer system. It processes system data and controls other
devices in the system, acting as the brains of the
computer. The following characteristics of a microprocessor may
affect overall performance:
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Multi-core processors. Multi-core processors contain
two or more processor cores, which enable improved multitasking
and energy-efficient performance because computing tasks can be
distributed across multiple cores.
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CPU design. Microprocessor design can refer to the
microarchitecture and/or the architecture. We use the term
microarchitecture when referring to the layout,
density, and logical design of each product generation. The term
architecture generally refers to the largest size of
numerical data that a microprocessor can handle, measured in
bits (the smallest unit of information).
Intel®
Itanium®
branded products are based on our 64-bit architecture (IA-64);
our other microprocessor products are based on our 32-bit
architecture (IA-32). Microprocessors with 64-bit processing
capability can address significantly more memory than 32-bit
microprocessors. One way to provide 64-bit processing capability
is for processors based on 32-bit architecture to have 64-bit
address extensions. The majority of our microprocessors are
equipped with
Intel®
64 architecture, which provides 64-bit address extensions,
supporting both 32-bit and 64-bit software applications.
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Clock speed. Clock speed is the rate at which a
microprocessors internal logic operates and is one measure
of a microprocessors performance.
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Memory size and access speed. Cache is a memory that
can be located directly on the microprocessor, permitting
quicker access to frequently used data and instructions. Some of
our microprocessors have additional levels of cache to enable
higher levels of performance. Memory storage is measured in
bytes (8 bits per byte), with 1,024 bytes equaling a kilobyte
(KB), 1.049 million bytes equaling a megabyte (MB), and
1.074 billion bytes equaling a gigabyte (GB).
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Speed of communication between the CPU and the
chipset. A bus carries data between parts of the
system. A faster bus allows for faster data transfer into and
out of the processor, enabling increased performance.
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The chipset operates as the PCs nervous
system, sending data between the microprocessor and input,
display, and storage devices, such as the keyboard, mouse,
monitor, hard drive, and CD or DVD drive. Chipsets perform
essential logic functions, such as balancing the performance of
the system and removing bottlenecks. Chipsets also extend the
graphics, audio, video, and other capabilities of many systems
based on our microprocessors. Finally, chipsets control the
access between the CPU and main memory.
A motherboard is the principal board within a system. A
motherboard has connectors for attaching devices to the bus, and
typically contains the CPU, memory, and the chipset.
Flash memory is a specialized type of memory component
used to store user data and program code; it retains this
information even when the power is off, and provides faster
access to data than traditional hard drives. Flash memory has no
moving parts, unlike devices such as rapidly spinning disk
drives, allowing flash memory to be more tolerant of bumps and
shocks. Flash memory is based on either NOR or NAND
architecture. NOR flash memory, with its fast access or
read capabilities, has traditionally been used to
store executable code. NAND flash memory, which is slower in
reading data but faster in writing data, has become the
preferred flash memory for storing large quantities of data.
2
Wired and wireless Internet connectivity products, such
as network adapters and embedded wireless cards, are based on
industry-standard
technologies used to translate and transmit data in packets
across networks. Our wireless connectivity products are based on
either the 802.11 or 802.16 industry standard. The 802.11
communication standard refers to a family of specifications
commonly known as WiFi technology. We also have developed and
are developing wireless connectivity products for both mobile
and fixed networks based on the 802.16 industry standard,
commonly known as WiMAX, which is short for Worldwide
Interoperability for Microwave Access. WiMAX is a
standards-based wireless technology providing high-speed
broadband connectivity that makes it possible to connect users
to networks wirelessly, as well as networks to other networks,
up to several miles apart.
Communications infrastructure products include advanced,
programmable processors used in networking equipment that
rapidly manage and direct data moving across the Internet and
networks. Our modular communications platforms are based on
telecommunications industry standards, such as carrier grade,
allowing communications and media services to be managed
independently from the network itself. Unlike proprietary
systems platforms, carrier-grade, rack-mount servers based on
our modular communications platforms are standards-based
solutions that offer network infrastructure builders flexible,
low-cost, low-power-consumption options for designing their
networks.
Below, we discuss our key products and processor technologies,
including some key introductions, for our major operating
segments. For a discussion of our strategy, see
Managements Discussion and Analysis of Financial
Condition and Results of Operation in Part II,
Item 7 of this
Form 10-K.
Digital
Enterprise Group
The Digital Enterprise Group (DEG)s products are
incorporated into desktop computers, enterprise computing
servers, workstations, a broad range of embedded applications,
and other products that help make up the infrastructure for the
Internet. DEGs products include microprocessors and
related chipsets and motherboards designed for the desktop and
enterprise computing market segments; microprocessors, chipsets,
and other components for communications infrastructure
equipment, such as network processors, communications boards,
and embedded processors; wired connectivity devices; and
products for network and server storage.
Net revenue for the DEG operating segment constituted 53% of our
consolidated net revenue in 2007 (56% in 2006 and 65% in 2005).
Revenue from sales of microprocessors within the DEG operating
segment represented 40% of consolidated net revenue in 2007 (41%
in 2006 and 50% in 2005).
Desktop
Market Segment
Our current desktop microprocessor offerings include the:
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Intel®
Coretm2
Quad processor
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Intel®
Celeron®
Dual-Core
processor
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Intel®
Coretm2
Duo processor
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Intel®
Celeron®
processor
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Intel®
Pentium®
Dual-Core processor
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Most of these microprocessors are based on the Intel Core
microarchitecture. Intel Core microarchitecture-based processors
are designed for energy-efficient performance and are
manufactured using either 65- or 45-nanometer (nm) process
technology. We offer microprocessors at a variety of
price/performance points: from the high-end Intel Core 2
Quad processor with four processor cores, designed for
processor-intensive
tasks in demanding multitasking environments, to the Intel
Celeron processor designed to provide value, quality, and
reliability for basic computing needs. The related chipsets for
our desktop microprocessor offerings primarily include the
Intel®
945G Chipset, the
Intel®
Q965 Chipset, and
Intel®
3 Series Chipsets.
We also offer processor technologies based on our
microprocessors, chipsets, and motherboard products that are
optimized for the desktop market segment. For business desktop
PCs, we offer the
Intel®
Coretm2
processor with
vProtm
technology, which is designed to provide increased security and
manageability, energy-efficient performance, and lower cost of
ownership.
3
Our new product offerings in 2007 and early 2008 include:
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Intel Core 2 Quad processors designed for processor-intensive
tasks in demanding multitasking environments.
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Intel 3 Series Chipsets designed to be used with Intel Core
microarchitecture-based processors, including 45nm products.
These chipsets help improve system performance, energy
efficiency, and video and sound quality.
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A new generation of Intel Core 2 processors with vPro
technology, which includes
Intel®
Trusted Execution Technology
(Intel® TXT),
designed to help protect business PCs and data within
virtualized computing environments against hacking, viruses, and
other threats. Intel Core 2 processors with vPro technology
include the
Intel®
Q35 Chipset and feature Intel VT and Intel AMT.
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Intel Core 2 Quad processors and Intel Core 2 Duo processors
designed for mainstream desktop PCs and manufactured using our
new 45nm Hi-k metal gate silicon technology (45nm process
technology).
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Enterprise
Market Segment
Our current server and workstation microprocessor offerings
include the:
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Quad-Core
Intel®
Xeon®
processor
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Dual-Core
Intel®
Xeon®
processor
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Dual-Core
Intel®
Itanium®
processor
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Our
Intel®
Xeon®
processor family of products supports a range of entry-level to
high-end technical and commercial computing applications, and is
based on the Intel Core microarchitecture. Compared to our Intel
Xeon processor family, our Intel Itanium processor family
generally supports an even higher level of reliability and
computing performance for data processing, the handling of high
transaction volumes and other compute-intensive applications for
enterprise-class servers, as well as supercomputing solutions.
We also offer platforms that are optimized for use in the
enterprise market segment, which includes entry-level to
high-end servers and workstations. Servers, which often have
multiple microprocessors or cores working together, manage large
amounts of data, direct data traffic, perform complex
transactions, and control central functions in local and wide
area networks and on the Internet. Workstations typically offer
higher performance than standard desktop PCs, and are used for
applications such as engineering design, digital content
creation, and
high-performance
computing.
Our new product offerings in 2007 and early 2008 include:
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Quad-Core Intel Xeon processors designed for single-socket
servers, dual-processor (DP) servers, and multi-processor (MP)
servers. We also introduced low-voltage versions of the
Quad-Core Intel Xeon processor designed for DP and MP servers.
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An industry-standard, four-processor server platform based on
our processors for MP servers. The platform includes a new
chipset designed to enhance data traffic between the processors,
memory, and I/O connections.
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A new generation of Intel Itanium processors, including both
dual- and single-core versions, designed for high-end
applications. The new series includes extensive virtualization
and other advanced features designed to improve reliability and
reduce power consumption.
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Quad-core and dual-core Intel Xeon processors manufactured using
our new 45nm process technology. The new processors are designed
to increase computer performance while lowering power
consumption. We also introduced three platforms to support the
new 45nm processors, including a platform designed for
high-bandwidth, high-performance computing; a
cost-optimized
platform designed to support either one or two processors and
reduce power consumption by using DDR2 memory; and a platform
designed for single-processor, entry-level servers.
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Modular server building blocks based on
Intel®
Multi-Flex Technology, designed to enable system builders to
easily integrate computing, networking, and storage capabilities
into one system to meet the needs of a small- or mid-size
business. The building blocks support up to six server compute
nodes and 14 serial attached hard disk drives.
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Communications
Infrastructure Products
In 2007, we introduced the Quad-Core Intel Xeon processor 5300
series for the embedded computing segment. In addition, we
announced the
Intel®
IP Network Server NSC2U, powered by two 5300 series processors.
The server includes the
Intel®
5000P chipset and features a rugged chassis and compact form
factor.
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Networked
Storage Products
In 2007, we introduced the
Intel®
Storage Server SSR212MC2. Designed for small- and mid-size
businesses, this storage server is powered by either the
Quad-Core Intel Xeon processor 5300 series or the Dual-Core
Intel Xeon processor 5100 series.
Mobility
Group
The Mobility Groups products include microprocessors and
related chipsets designed for the notebook market segment,
wireless connectivity products, and energy-efficient products
designed for the ultra-mobile market segment. We also offer
Intel®
Centrino®
processor technologies based on our microprocessors, chipsets,
and wireless network connections.
Net revenue for the Mobility Group operating segment constituted
38% of our consolidated net revenue in 2007 (35% in 2006 and 29%
in 2005). Revenue from sales of microprocessors within the
Mobility Group operating segment represented 28% of consolidated
net revenue in 2007 (26% in 2006 and 22% in 2005).
Our current mobile microprocessor offerings include the:
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Intel®
Coretm2
Extreme mobile processor
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Intel®
Coretm2
Solo mobile processor
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Intel®
Coretm2
Duo mobile processor
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Intel®
Celeron®
M processor
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Intel®
Pentium®
Dual-Core mobile processor
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Intel®
Celeron®
processor
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We offer mobile microprocessors at a variety of
price/performance points: from the Intel Core 2 Extreme mobile
processor designed for gaming to the Intel Celeron processor
designed to provide value, quality, and reliability for basic
computing needs. The related chipsets for our mobile
microprocessor offerings primarily include the Mobile
Intel®
965 Express Chipset and the Mobile
Intel®
945 Express Chipset.
We offer our processors in various packaging options, giving our
customers flexibility for a wide range of system designs for
notebook PCs, tablet PCs, and other mobile computing devices. We
also offer low-power microprocessors and chipsets designed for
ultra-mobile devices, including products for ultra-mobile PCs
and mobile Internet devices (MIDs).
In 2007, the majority of the revenue in the Mobility Group
operating segment was from sales of our Intel Centrino processor
technology and
Intel®
Centrino®
with
vProtm
technology products. Intel Centrino processor technologies are
designed to provide high performance with improved multitasking,
power-saving features to improve battery life, small form
factor, wireless network connectivity, and improved boot times.
Intel Centrino with vPro technology includes the features of
Intel Centrino processor technology and is designed to provide
mobile business PCs with increased security, manageability, and
energy-efficient performance. These processor technologies
enable users to take advantage of wireless capabilities at work,
at home, and at thousands of wireless hotspots
installed around the world.
Our new product offerings in 2007 and early 2008 include:
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A new generation of Intel Centrino processor technology and
Intel Centrino with vPro technology, based on the Intel Core 2
Duo processor. Intel Centrino with vPro technology is designed
specifically for business users and includes Intel AMT. Both of
these processor technologies include the Mobile Intel 965
Express Chipset and the option of
Intel®
Turbo Memory, a technology that can reduce the amount of time
required for a system to turn on, boot up, or access software
applications. Also included in these processor technologies is
the
Intel®
Next-Gen Wireless-N Network Connection, which is based on the
draft 802.11n WiFi specification. This network connection is
designed to provide faster data transmission over a longer range
than previous Intel WiFi products.
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Intel Core 2 Extreme dual-core mobile processors, including a
version manufactured using our new 45nm process technology.
These processors are designed to bring advanced video, gaming,
and computing performance to laptop systems.
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The
Intel®
Ultra Mobile Platform 2007, which includes a low-power
processor, a chipset, and a controller hub. This platform is
designed for MIDs and ultra-mobile PCs.
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Intel Core 2 Duo mobile processors manufactured using our new
45nm process technology. These processors include new video and
graphics capabilities, as well as a battery-saving Deep Power
Down Technology, which reduces the power of the processor when
it is not running data or instructions.
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NAND
Products Group
We offer NAND flash memory products primarily used in digital
audio players, memory cards, and system-level applications, such
as
solid-state
drives. These products are currently available in densities of
up to 16 gigabits (Gb), and in stacked packaging in densities of
up to 64 Gb. Additionally, we offer multi-level cell NAND flash
memory products, which enable storage of multiple bits of data
within a single cell. Our NAND flash memory products are
manufactured by IM Flash Technologies, LLC (IMFT) using 50nm or
72nm process technology. See Note 19: Ventures
in Part II, Item 8 of this
Form 10-K.
Our new product offerings in 2007 and early 2008 include:
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The
Intel®
Z-U130 Value Solid-State Drive, designed as an alternative to
rotating magnetic disk drive technology for storage in computing
systems and embedded applications. The product is based on NAND
flash memory, has industry-standard USB interfaces, and is
available in densities ranging from 1 GB to 8 GB.
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The
Intel®
Z-P140 Solid-State Drive, designed for storage in MIDs and
digital entertainment and embedded products. This ultra-small,
low-power storage product is based on NAND flash memory, has an
industry-standard parallel-ATA interface, and is available in
densities of 2 GB and 4 GB (extendable up to 16 GB).
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Flash
Memory Group
Currently, we offer NOR flash memory products. During the first
quarter of 2008, we expect to complete the divestiture of our
NOR flash memory assets to Numonyx. We expect to enter into
supply and transition service agreements to provide products,
services, and support to Numonyx following the close of the
transaction.
Digital
Home Group
The Digital Home Group offers products for use in PCs and
in-home consumer electronics devices designed to access and
share Internet, broadcast, optical media, and personal content
through a variety of linked digital devices within the home. In
addition, we offer components for high-end enthusiast PCs,
mainstream PCs with rich audio and video capabilities, and
consumer electronics devices such as digital TVs,
high-definition
media players, and set-top boxes.
We offer the
Intel®
Coretm2
processor with
Viivtm
technology, which is designed to make it easier for users to
download, manage, and share the growing amount of digital
programming available worldwide, and view that programming on a
choice of TVs, PCs, or handheld products. Intel Core 2
processors with Viiv technology include a microprocessor, a
chipset, a network connectivity device, and enabling
softwareall optimized to work together in the digital home
environment. Certain desktop microprocessors offered by DEG may
include
Intel®
Viivtm
technology.
Our current digital home microprocessor offerings also include
the
Intel®
Coretm2
Extreme dual-core processor and the
Intel®
Coretm2
Extreme quad-core processor.
Our new product offerings in 2007 and early 2008 include:
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Intel Core 2 Extreme quad-core processors designed for gamers,
digital design professionals, and PC enthusiasts. Included is
the first Intel Core 2 Extreme quad-core processor manufactured
using our new 45nm process technology. This 45nm processor
incorporates a larger cache than previous Intel Core 2 Extreme
quad-core processors, and is designed to increase computing
performance while using less power.
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The
Intel®
CE 2110 Media Processor, which combines an Intel
XScale®
processor core, hardware video decoders, DDR memory interface,
and 2D/3D graphics accelerators on a single chip. This
system-on-a-chip
architecture is designed for consumer electronics devices such
as digital set-top boxes and networked media players.
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Manufacturing
and Assembly and Test
As of December 29, 2007, 73% of our wafer fabrication,
including microprocessor, chipset, NOR flash memory,
communications, and other silicon fabrication, was conducted
within the U.S. at our facilities in Arizona, New Mexico,
Oregon, Massachusetts, and California. The remaining 27% of our
wafer fabrication was conducted outside the U.S. at our
facilities in Ireland and Israel.
As of December 29, 2007, we primarily manufactured our
products in wafer fabrication facilities at the following
locations:
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Products
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Wafer Size
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Process Technology
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Locations
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Microprocessors
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300mm
|
|
|
45nm
|
|
Oregon, Arizona
|
Microprocessors and chipsets
|
|
|
300mm
|
|
|
65nm
|
|
Arizona, Ireland, Oregon
|
Chipsets and other products
|
|
|
300mm
|
|
|
90nm
|
|
New Mexico, Ireland
|
NOR flash memory
|
|
|
200mm
|
|
|
65nm130nm
|
|
Israel, Ireland, California
|
Chipsets and other products
|
|
|
200mm
|
|
|
130nm and above
|
|
Oregon, Massachusetts, Arizona, Ireland
|
We expect to increase the capacity of certain facilities listed
above through additional investments in capital equipment. In
addition to our current facilities, we are building a facility
in Israel that is expected to begin wafer fabrication for
microprocessors on 300mm wafers using 45nm process technology in
the second half of 2008. Also, we are building a 300mm wafer
fabrication facility in China that is expected to begin
production in 2010.
As of December 29, 2007, the majority of our
microprocessors were manufactured on 300mm wafers using our 65nm
process technology. In 2007, we started manufacturing
microprocessors using our new 45nm process technology, which
enables higher and more energy-efficient processor performance.
The benefits of moving to each succeeding generation of
manufacturing process technology can include using less space
per transistor, reducing heat output from each transistor,
and/or increasing the number of integrated features on each
chip. These advancements can result in microprocessors that are
higher performing, consume less power, and/or cost less to
manufacture.
To augment capacity, we use third-party manufacturing companies
(foundries) to manufacture wafers for certain components,
including chipset, networking, and communications products. In
addition, we primarily use subcontractors to manufacture
board-level products and systems, and purchase certain
communications networking products from external vendors,
principally in the Asia-Pacific region.
Our NAND flash memory products are manufactured by IMFT, a NAND
flash memory manufacturing company that we formed with Micron
Technology, Inc. in 2006. We currently purchase 49% of the
manufactured output of IMFT. See Note 19:
Ventures in Part II, Item 8 of this
Form 10-K.
Following the manufacturing process, the majority of our
components are subject to assembly and test. We perform our
components assembly and test at facilities in Malaysia, China,
the Philippines, and Costa Rica. We plan to continue investing
in new assembly and test technologies as well as increasing the
capacity of our existing facilities and building new facilities
to keep pace with our microprocessor, chipset, and
communications technology improvements. In line with these
plans, we are building a new assembly and test facility in
Vietnam, which is expected to begin production in 2009. This
facility will have greater square footage than each of our
current facilities, which will enable us to take advantage of
greater economies of scale. To augment capacity, we use
subcontractors to perform assembly of certain products,
primarily flash memory, chipsets, and networking and
communications products. Assembly and test of NAND flash memory
products, manufactured by IMFT, is performed by Micron and other
external subcontractors.
Our employment practices are consistent with, and we expect our
suppliers and subcontractors to abide by, local country law. In
addition, we impose a minimum employee age requirement as well
as progressive environmental, health, and safety requirements
regardless of local law.
We have thousands of suppliers, including subcontractors,
providing our various materials and service needs. We set
expectations for supplier performance and reinforce those
expectations with periodic assessments. We communicate those
expectations to our suppliers regularly and work with them to
implement improvements when necessary. We seek, where possible,
to have several sources of supply for all of these materials and
resources, but we may rely on a single or limited number of
suppliers, or upon suppliers in a single country. In those
cases, we develop and implement plans and actions to reduce the
exposure that would result from a disruption in supply. We have
entered into long-term contracts with certain suppliers to
ensure a portion of our silicon supply.
7
Our products typically are produced at multiple Intel facilities
at various sites around the world, or by subcontractors who have
multiple facilities. However, some products are produced in only
one Intel or subcontractor facility, and we seek to implement
actions and plans to reduce the exposure that would result from
a disruption at any such facility. See Risk Factors
in Part I, Item 1A of this
Form 10-K.
Research
and Development
We are committed to investing in world-class technology
development, particularly in the area of the design and
manufacture of integrated circuits. Research and development
(R&D) expenditures in 2007 were $5.8 billion
($5.9 billion in fiscal year 2006 and $5.1 billion in
fiscal year 2005).
Our R&D activities are directed toward developing the
technology innovations that we believe will deliver our next
generation of products and platforms, which will in turn enable
new form factors and new usage models for businesses and
consumers. Our R&D activities range from design and
development of products to developing and refining manufacturing
processes, as well as researching future technologies and
products.
We are focusing our R&D efforts on advanced computing,
communications, and wireless technologies as well as energy
efficiency by developing new microarchitectures, advancing our
silicon manufacturing process technology, delivering the next
generation of microprocessors and chipsets, improving our
platform initiatives, and developing software solutions and
tools to support our technologies. Our R&D efforts enable
new levels of performance and address areas such as scalability
for multi-core architectures, system manageability and security,
energy efficiency, digital content protection, ease of use, and
new communications capabilities. In the area of wireless
communications, our initiatives focus on delivering the
technologies that will enable improved wireless capabilities,
including expanding and proliferating WiMAX technologies and
products.
As part of our R&D efforts, we plan to introduce a new
microarchitecture for our mobile, desktop, and Intel Xeon
processors approximately every two years and ramp the next
generation of silicon process technology in the intervening
years. We refer to this as our tick-tock technology
development cadence. Our leadership in silicon technology has
enabled us to make Moores Law a reality.
Moores Law predicted that transistor density on integrated
circuits would double about every two years. Our leadership in
silicon technology has also helped to expand on the advances
anticipated by Moores Law by bringing new capabilities
into silicon and producing new products and platforms optimized
for a wider variety of applications. In 2007, we started
manufacturing microprocessors on our new 45nm
Hi-k metal
gate silicon technology, and we expect to introduce a new
microarchitecture on 45nm process technology in 2008. We are
currently developing 32nm process technology, our
next-generation process technology, and expect to begin
manufacturing products using that technology in 2009.
Our R&D model is based on a global organization that
emphasizes a collaborative approach in identifying and
developing new technologies, leading standards initiatives, and
influencing regulatory policy to accelerate the adoption of new
technologies. Our R&D initiatives are performed by various
business groups within the company, and we centrally manage key
cross-business group product initiatives to align and prioritize
our R&D activities across these groups. In addition, we may
augment our R&D initiatives by investing in companies or
entering into agreements with companies that have similar
R&D focus areas. For example, we have an agreement with
Micron for joint development of NAND flash memory technologies.
We also work with a worldwide network of academic, government,
and industry researchers, scientists, and engineers in the
computing and communications fields. Our network of technology
professionals allows us, as well as others in our industry, to
benefit from development initiatives in a variety of areas,
eventually leading to innovative technologies for users. We
believe that we are well positioned in the technology industry
to help drive innovation, foster collaboration, and promote
industry standards that will yield innovative and improved
technologies for users.
Employees
In September 2006, we announced a restructuring plan that has
resulted in headcount reductions, primarily through workforce
reductions, attrition, and targeted business divestitures. See
Results of Operations within Managements
Discussion and Analysis of Financial Condition and Results of
Operation in Part II, Item 7 of this
Form 10-K
for further details regarding our restructuring actions. As of
December 29, 2007, we had approximately 86,300 employees
worldwide, with more than 50% of these employees located in the
U.S. Worldwide, we had approximately 94,100 employees as of
December 30, 2006 and 99,900 as of December 31, 2005.
8
Sales and
Marketing
Customers
We sell our products primarily to original equipment
manufacturers (OEMs) and original design manufacturers (ODMs).
ODMs provide design and/or manufacturing services to branded and
unbranded private-label resellers. In addition, we sell our
products to other manufacturers, including makers of a wide
range of industrial and communications equipment. Our customers
also include PC and network communications products users who
buy PC components and our other products through distributor,
reseller, retail, and OEM channels throughout the world. In
certain instances, we have entered into supply agreements to
continue to manufacture and sell products of divested business
lines to acquiring companies during certain transition periods.
Our worldwide reseller sales channel consists of thousands of
indirect customers who are systems builders that purchase Intel
microprocessors and other products from our distributors. We
have a boxed processor program that allows
distributors to sell Intel microprocessors in small quantities
to these systems-builder customers; boxed processors are also
available in direct retail outlets.
In 2007, Dell Inc. accounted for 18% of our net revenue (19% in
2006), and Hewlett-Packard Company accounted for 17% of our net
revenue (16% in 2006). No other customer accounted for more than
10% of our net revenue. For information about revenue and
operating profit by operating segment, and revenue from
unaffiliated customers by geographic region/country, see
Managements Discussion and Analysis of Financial
Condition and Results of Operation in Part II,
Item 7 and Note 22: Operating Segment and
Geographic Information in Part II, Item 8 of
this
Form 10-K.
Sales
Arrangements
Our products are sold or licensed through sales offices
throughout the world. Sales of our products are typically made
via purchase orders that contain standard terms and conditions
covering matters such as pricing, payment terms, and warranties,
as well as indemnities for issues specific to our products, such
as patent and copyright indemnities. From time to time, we may
enter into additional agreements with customers covering, for
example, changes from our standard terms and conditions, new
product development and marketing, private-label branding, and
other matters. Most of our sales are made using electronic and
web-based processes that allow the customer to review inventory
availability and track the progress of specific goods ordered.
Pricing on particular products may vary based on volumes ordered
and other factors. We also offer discounts, rebates, and other
incentives to customers to increase acceptance of our products
and technology.
Our products are typically shipped under terms that transfer
title to the customer, even in arrangements for which the
recognition of revenue on the sale is deferred. Our standard
terms and conditions of sale typically provide that payment is
due at a later date, generally 30 days after shipment,
delivery, or the customers use of the product. Our credit
department sets accounts receivable and shipping limits for
individual customers to control credit risk to Intel arising
from outstanding account balances. We assess credit risk through
quantitative and qualitative analysis, and from this analysis,
we establish credit limits and determine whether we will seek to
use one or more credit support devices, such as obtaining some
form of third-party guaranty or standby letter of credit, or
obtaining credit insurance for all or a portion of the account
balance if necessary. Credit losses may still be incurred due to
bankruptcy, fraud, or other failure of the customer to pay. See
Schedule IIValuation and Qualifying
Accounts in Part IV of this
Form 10-K
for information about our allowance for doubtful receivables.
Distribution
Typically, distributors handle a wide variety of products,
including those that compete with our products, and fill orders
for many customers. Most of our sales to distributors are made
under agreements allowing for price protection on unsold
merchandise and a right of return on stipulated quantities of
unsold merchandise. We also utilize third-party sales
representatives who generally do not offer directly competitive
products but may carry complementary items manufactured by
others. Sales representatives do not maintain a product
inventory; instead, their customers place orders directly with
us or through distributors.
Backlog
We do not believe that backlog as of any particular date is
meaningful, as our sales are made primarily pursuant to standard
purchase orders for delivery of products. Only a small portion
of our orders is non-cancelable, and the dollar amount
associated with the non-cancelable portion is not significant.
9
Seasonal
Trends
Our microprocessor sales generally have followed a seasonal
trend; however, there can be no assurance that this trend will
continue. Historically, our sales of microprocessors have been
higher in the second half of the year than in the first half of
the year. Consumer purchases of PCs have been higher in the
second half of the year, primarily due to back-to-school and
holiday demand. In addition, purchases from businesses have
tended to be higher in the second half of the year.
Marketing
Our corporate marketing focus is on advanced multi-core
microprocessors. Multi-core microprocessors are at the center of
our most advanced processor technologies, which include Intel
Centrino processor technologies, Intel Core 2 processors with
vPro technology, and Intel Core 2 processors with Viiv
technology. The Intel Core 2 Quad, Intel Core 2 Extreme, Intel
Core 2 Duo, Itanium, Intel Xeon, Pentium, and Celeron trademarks
make up our processor brands. We promote brand awareness and
generate demand through our own direct marketing as well as
co-marketing programs. Our direct marketing activities include
television, print and web-based advertising, as well as press
relations, consumer and trade events, and industry and consumer
communications. We market to consumer and business audiences and
focus on building awareness and generating demand for increased
performance, power efficiency, and new capabilities.
Purchases by customers often allow them to participate in
cooperative advertising and marketing programs such as the Intel
Inside®
program. This program broadens the reach of our brands beyond
the scope of our own direct advertising. Through the Intel
Inside program, certain customers are licensed to place Intel
logos on computers containing our microprocessors and processor
technologies, and to use our brands in marketing activities. The
program includes a market development component that accrues
funds based on purchases and partially reimburses the OEMs for
marketing activities for products featuring Intel brands,
subject to the OEMs meeting defined criteria. These marketing
activities primarily include television, web-based marketing,
and print, and in the beginning of 2008, we increased our focus
on web-based marketing. We have also entered into joint
marketing arrangements with certain customers.
Competition
Our products compete primarily based on performance, features,
price, quality, brand recognition, and availability. Our ability
to compete depends on our ability to provide innovative products
and worldwide support for our customers at competitive prices,
including providing improved energy-efficient performance,
enhanced security, manageability, and integrated solutions. In
addition to our various computing, networking, and
communications products, we offer platforms that incorporate
various components designed and configured to work together to
provide an optimized user computing solution compared to
ingredients that are used separately.
The semiconductor industry is characterized by rapid advances in
technology and new product introductions. As unit volumes of a
particular product grow, production experience is accumulated
and costs typically decrease, further competition develops, and
as a result, prices decline. The life cycle of our products is
very short, sometimes less than a year. Our ability to compete
depends on our ability to improve our products and processes
faster than our competitors, anticipate changing customer
requirements, and develop and launch new products and platforms,
while reducing our average
per-unit
costs. See Risk Factors in Part I, Item 1A
of this
Form 10-K.
Many companies compete with us in the various computing,
networking, and communications market segments, and are engaged
in the same basic business activities, including R&D.
Worldwide, these competitors range in size from large
established multinational companies with multiple product lines
to smaller companies and new entrants to the marketplace that
compete in specialized market segments. Some of our competitors
may have development agreements with other companies, and in
some cases our competitors may also be our customers and/or
suppliers. Product offerings may cross over into multiple
product categories, offering us new opportunities but also
resulting in more competition. It may be difficult for us to
compete in market segments where our competitors have
established products and brand recognition.
10
We believe that our network of manufacturing facilities and
assembly and test facilities gives us a competitive advantage.
This network enables us to have more direct control over our
processes, quality control, product cost, volume, timing of
production, and other factors. These facilities require
significant up-front capital spending, and many of our
competitors do not own such facilities because they may not be
able to afford to do so or because their business models involve
the use of third-party facilities for manufacturing and assembly
and test. These fabless semiconductor companies
include Broadcom Corporation, NVIDIA Corporation, QUALCOMM
Incorporated, and VIA Technologies, Inc. (VIA). Some of our
competitors own portions of such facilities through investment
or joint-venture arrangements with other companies. A group of
foundries and assembly and test subcontractors offer their
services to companies that do not own facilities or to companies
needing additional capacity. These foundries and subcontractors
may also offer intellectual property, design services, and other
goods and services to our competitors. Competitors who outsource
their manufacturing and assembly and test operations can
significantly reduce their capital expenditures.
We plan to continue to cultivate new businesses and work with
the computing and communications industries through standards
bodies, trade associations, OEMs, ODMs, and independent software
and operating system vendors to help align the industry to offer
products that take advantage of the latest market trends and
usage models. We frequently participate in industry initiatives
designed to discuss and agree upon technical specifications and
other aspects of technologies that could be adopted as standards
by standards-setting organizations. Our competitors may also
participate in the same initiatives and specification
development. Our participation does not ensure that any
standards or specifications adopted by these organizations will
be consistent with our product planning.
Microprocessors
We continue to be largely dependent on the success of our
microprocessor business. Our ability to compete depends on our
ability to deliver new microprocessor products with improved
overall performance and/or improved energy-efficient performance
at competitive prices. Some of our microprocessor competitors,
such as Advanced Micro Devices, Inc. (AMD), market
software-compatible products that compete with our processors.
We also face competition from companies offering rival
architecture designs, such as Cell Broadband Engine Architecture
developed jointly by International Business Machines Corporation
(IBM), Sony Corporation, and Toshiba Corporation; Power
Architecture* offered by IBM; ARM architecture (Advanced RISC
Machine) developed by ARM Limited; and Scalable Processor
Architecture (SPARC*) offered by Sun Microsystems, Inc.
The following is a list of our main microprocessor competitors
by market segment:
|
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Desktop: AMD and VIA
|
|
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Mobile: AMD and VIA
|
|
|
Enterprise: AMD, IBM, and Sun Microsystems
|
|
|
Embedded: AMD, Freescale Semiconductor, Inc., and VIA
|
Chipsets
Our chipsets compete in the various market segments against
different types of chipsets that support either our
microprocessor products or rival microprocessor products.
Competing chipsets are produced by companies such as AMD
(including chipsets marketed under the ATI Technologies, Inc.
brand), NVIDIA, Silicon Integrated Systems Corporation (SIS),
and VIA.
We also compete with companies offering graphics components and
other special-purpose products used in the desktop, mobile, and
enterprise market segments. One aspect of our business model is
to incorporate improved performance and advanced properties into
our microprocessors and chipsets, the demand for which may
increasingly be affected by competition from companies, such as
NVIDIA, whose business models are based on incorporating
improved performance into dedicated chipsets and other
components, such as graphics controllers.
Flash
Memory
Our NAND flash memory products currently compete with NOR and
NAND products primarily manufactured by Hynix Semiconductor
Inc., Samsung Electronics Co., Ltd., SanDisk Corporation,
Spansion Inc., STMicroelectronics, and Toshiba.
Connectivity
We offer products designed for wired and wireless connectivity;
for the communications infrastructure, including network
processors; and for networked storage. Our WiFi and WiMAX
products currently compete with WiFi products manufactured by
Atheros Communications, Inc. and Broadcom, and products
manufactured by QUALCOMM.
11
Acquisitions
and Strategic Investments
During 2007, we completed one acquisition qualifying as a
business combination. See Note 12: Acquisitions
in Part II, Item 8 of this
Form 10-K.
Also, we made two significant strategic investments that we
discuss in Part II, Item 8 of this
Form 10-K.
See Note 19: Ventures for information on our
investment in IM Flash Singapore, LLP (IMFS), a venture formed
with Micron to manufacture NAND flash memory products, and
Note 7: Investments for information on our
investment in VMware, Inc.
During the first quarter of 2008, we expect to complete the
divestiture of our NOR flash memory assets to Numonyx, and we
expect to receive an ownership interest in the new company. See
Note 13: Divestitures in Part II,
Item 8 of this
Form 10-K.
Intellectual
Property and Licensing
Intellectual property rights that apply to our various products
and services include patents, copyrights, trade secrets,
trademarks, and maskwork rights. We maintain a program to
protect our investment in technology by attempting to ensure
respect for our intellectual property rights. The extent of the
legal protection given to different types of intellectual
property rights varies under different countries legal
systems. We intend to license our intellectual property rights
where we can obtain adequate consideration. See
Competition in Part I, Item 1 of this
Form 10-K;
Legal Proceedings in Part I, Item 3 of
this
Form 10-K;
and Risk Factors in Part I, Item 1A of
this
Form 10-K.
We have filed and obtained a number of patents in the U.S. and
other countries. While our patents are an important element of
our success, our business as a whole is not significantly
dependent on any one patent. We and other companies in the
computing, telecommunications, and related high-technology
fields typically apply for and receive, in the aggregate, tens
of thousands of overlapping patents annually in the U.S. and
other countries.
We believe that the duration of the applicable patents that we
are granted is adequate relative to the expected lives of our
products. Because of the fast pace of innovation and product
development, our products are often obsolete before the patents
related to them expire, and sometimes are obsolete before the
patents related to them are even granted. As we expand our
product offerings into new industries, we also seek to extend
our patent development efforts to patent such product offerings.
Established competitors in existing and new industries, as well
as companies that purchase and enforce patents and other
intellectual property, may already have patents covering similar
products. There is no assurance that we will be able to obtain
patents covering our own products, or that we will be able to
obtain licenses from such companies on favorable terms or at all.
The majority of the software that we distribute, including
software embedded in our component- and system-level products,
is entitled to copyright protection.
To distinguish Intel products from our competitors
products, we have obtained certain trademarks and trade names
for our products, and we maintain cooperative advertising
programs with certain customers to promote our brands and to
identify products containing genuine Intel components.
We also protect certain details about our processes, products,
and strategies as trade secrets, keeping confidential the
information that we believe provides us with a competitive
advantage. We have ongoing programs designed to maintain the
confidentiality of such information.
12
Compliance
with Environmental, Health, and Safety Regulations
We are committed to achieving high standards of environmental
quality and product safety, and we strive to provide a safe and
healthy workplace for our employees, contractors, and the
communities in which we do business. We have environmental,
health, and safety (EHS) policies and expectations that apply to
our global operations. Each of our worldwide production
facilities is in compliance with the International Organization
for Standardization (ISO) 14001 environmental management system
standard. Our internal EHS auditing program addresses not only
compliance but also business risk and management systems. We
focus on minimizing and properly managing the hazardous
materials used in our facilities and products. We monitor
regulatory and resource trends and set company-wide short- and
long-term performance targets for key resources and emissions.
These targets address several parameters, including energy and
water use, climate change, waste recycling, and emissions. For
example, we continue to take action to achieve our global
greenhouse gas reduction goal by investing in energy
conservation projects in our factories and working with
suppliers of manufacturing tools to improve energy efficiency.
We also focus on developing innovative solutions to improve the
energy efficiency of our products and those of our customers. We
take a holistic approach to power management, addressing the
challenge at all levels, including the silicon, package,
circuit,
micro/macro
architecture, platform, and software levels.
The production of our products requires the use of hazardous
materials that are subject to a broad array of EHS laws and
regulations. We actively monitor the materials used in the
production of our products. We have specific restrictions on the
content of certain hazardous materials in our products, as well
as those of our suppliers and outsourced manufacturers and
subcontractors. We continue to make efforts to reduce hazardous
materials in our products to position us to meet various
environmental restrictions on product content throughout the
world. For example, processors manufactured using our new 45nm
Hi-k metal gate silicon technology are manufactured using a
lead-free process. As we continue to advance process technology,
the materials, technologies, and products themselves become
increasingly complex. Our evaluations of materials for use in
R&D and production take into account EHS considerations.
Compliance with these complex laws and regulations, as well as
internal voluntary programs, is integrated into our Design
for EHS programs.
We are committed to protecting the environment and human rights
throughout our supply chain. We expect suppliers and
subcontractors to understand and fully comply with all EHS and
related laws and regulations and labor laws, including, at a
minimum, those covering non-discrimination in the terms and
conditions of employment, child labor, minimum wages, employee
benefits, and work hours. In addition, we expect suppliers to
abide by our policies, such as our Code of Conduct and the
Electronic Industry Code of Conduct.
13
Executive
Officers of the Registrant
The following sets forth certain information with regard to our
executive officers as of February 19, 2008 (ages are as of
December 29, 2007):
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Craig R. Barrett, age 68
|
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Arvind Sodhani, age 53
|
2005 present,
|
|
Chairman of the Board
|
|
2007 present,
|
|
Executive VP of Intel, President of Intel
|
1998 2005,
|
|
Chief Executive Officer
|
|
|
|
Capital
|
Member of Intel Board of Directors since 1992
|
|
2005 2007,
|
|
Senior VP of Intel, President of Intel
|
Joined Intel 1974
|
|
|
|
Capital
|
|
|
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1998 2005,
|
|
VP, Treasurer
|
Paul S. Otellini, age 57
|
|
Joined Intel 1981
|
2005 present,
|
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President, Chief Executive Officer
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2002 2005,
|
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President, Chief Operating Officer
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Robert J. Baker, age 52
|
Member of Intel Board of Directors since 2002
|
|
2001 present,
|
|
Senior VP, GM of Technology and
|
Member of Google, Inc. Board of Directors
|
|
|
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Manufacturing Group
|
Joined Intel 1974
|
|
Joined Intel 1979
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Andy D. Bryant, age 57
|
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Patrick P. Gelsinger, age 46
|
2007 present,
|
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Executive VP, Finance and Enterprise
|
|
2005 present,
|
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Senior VP, GM of Digital Enterprise Group
|
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Services, Chief Administrative Officer
|
|
2001 2005,
|
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Chief Technology Officer
|
2001 2007,
|
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Executive VP, Chief Financial and
|
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Joined Intel 1979
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Enterprise Services Officer
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Member of Columbia Sportswear Company and McKesson
|
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William M. Holt, age 55
|
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Board of Directors
|
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2006 present,
|
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Senior VP, GM of Technology and
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Joined Intel 1981
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Manufacturing Group
|
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2005 2006,
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VP, Co-GM of Technology and
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Stacy J. Smith, age 45
|
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Manufacturing Group
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2007 present,
|
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VP, Chief Financial Officer
|
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1999 2005,
|
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VP, Director of Logic Technology
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2006 2007,
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VP, Assistant Chief Financial Officer
|
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Development
|
2004 2006,
|
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VP of Finance and Enterprise Services,
|
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Joined Intel 1974
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Chief Information Officer
|
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2002 2004,
|
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VP of Sales and Marketing Group, General
|
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D. Bruce Sewell, age 49
|
|
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Manager (GM) of EMEA
|
|
2005 present,
|
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Senior VP, General Counsel
|
Joined Intel 1988
|
|
2005
|
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VP, General Counsel
|
|
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2001 2004,
|
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VP of Legal and Government Affairs,
|
Sean M. Maloney, age 51
|
|
|
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Deputy General Counsel
|
2006 present,
|
|
Executive VP, GM of Sales and Marketing
|
|
Joined Intel 1995
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|
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Group, Chief Sales and Marketing Officer
|
|
|
|
|
2005 2006,
|
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Executive VP, GM of Mobility Group
|
|
Thomas M. Kilroy, age 50
|
2001 2005,
|
|
Executive VP, GM of Intel
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2005 present,
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VP, GM of Digital Enterprise Group
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Communications Group
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2003 2005,
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VP of Sales and Marketing Group,
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Member of AutoDesk, Inc. Board of Directors
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Co-President of Intel Americas
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Joined Intel 1982
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2003
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VP of Sales and Marketing Group, GM of
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Communication Sales Organization
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David Perlmutter, age 54
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Joined Intel 1990
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2007 present,
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Executive VP, GM of Mobility Group
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2005 2007,
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Senior VP, GM of Mobility Group
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2005
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VP, GM of Mobility Group
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2000 2005,
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VP, GM of Mobile Platforms Group
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Joined Intel 1980
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14
ITEM 1A. RISK
FACTORS
Fluctuations
in demand for our products may harm our financial results and
are difficult to forecast.
If demand for our products fluctuates, our revenue and gross
margin could be harmed. Important factors that could cause
demand for our products to fluctuate include:
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changes in business and economic conditions, including a
downturn in the semiconductor industry and/or the overall
economy;
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changes in consumer confidence caused by changes in market
conditions, including changes in the credit market;
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competitive pressures, including pricing pressures, from
companies that have competing products, chip architectures,
manufacturing technologies, and marketing programs;
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changes in customer product needs;
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changes in the level of customers components inventory;
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strategic actions taken by our competitors; and
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market acceptance of our products.
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If product demand decreases, our manufacturing or assembly and
test capacity could be underutilized, and we may be required to
record an impairment on our long-lived assets including
facilities and equipment, as well as intangible assets, which
would increase our expenses. In addition, factory-planning
decisions may shorten the useful lives of long-lived assets,
including facilities and equipment, and cause us to accelerate
depreciation. In the long term, if product demand increases, we
may not be able to add manufacturing or assembly and test
capacity fast enough to meet market demand. These changes in
demand for our products, and changes in our customers
product needs, could have a variety of negative effects on our
competitive position and our financial results, and, in certain
cases, may reduce our revenue, increase our costs, lower our
gross margin percentage, or require us to recognize impairments
of our assets. In addition, if product demand decreases or we
fail to forecast demand accurately, we could be required to
write off inventory or record underutilization charges, which
would have a negative impact on our gross margin.
The
semiconductor industry and our operations are characterized by a
high percentage of costs that are fixed or difficult to reduce
in the short term, and by product demand that is highly variable
and subject to significant downturns that may harm our business,
results of operations, and financial condition.
The semiconductor industry and our operations are characterized
by high costs, such as those related to facility construction
and equipment, R&D, and employment and training of a highly
skilled workforce, that are either fixed or difficult to reduce
in the short term. At the same time, demand for our products is
highly variable and there have been downturns, often in
connection with maturing product cycles as well as downturns in
general economic market conditions. These downturns have been
characterized by reduced product demand, manufacturing
overcapacity, high inventory levels, and lower average selling
prices. The combination of these factors may cause our revenue,
gross margin, cash flow, and profitability to vary significantly
in both the short and long term.
We
operate in intensely competitive industries, and our failure to
respond quickly to technological developments and incorporate
new features into our products could harm our ability to
compete.
We operate in intensely competitive industries that experience
rapid technological developments, changes in industry standards,
changes in customer requirements, and frequent new product
introductions and improvements. If we are unable to respond
quickly and successfully to these developments, we may lose our
competitive position, and our products or technologies may
become uncompetitive or obsolete. To compete successfully, we
must maintain a successful R&D effort, develop new products
and production processes, and improve our existing products and
processes at the same pace or ahead of our competitors. We may
not be able to develop and market these new products
successfully, the products we invest in and develop may not be
well received by customers, and products developed and new
technologies offered by others may affect demand for our
products. These types of events could have a variety of negative
effects on our competitive position and our financial results,
such as reducing our revenue, increasing our costs, lowering our
gross margin percentage, and requiring us to recognize
impairments of our assets.
Fluctuations
in the mix of products sold may harm our financial
results.
Because of the wide price differences among mobile, desktop, and
server microprocessors, the mix and types of performance
capabilities of microprocessors sold affect the average selling
price of our products and have a substantial impact on our
revenue and gross margin. Our financial results also depend in
part on the mix of other products that we sell, such as
chipsets, flash memory, and other semiconductor products. In
addition, more recently introduced products tend to have higher
associated costs because of initial overall development and
production ramp. Fluctuations in the mix and types of our
products may also affect the extent to which we are able to
recover the fixed costs and investments associated with a
particular product, and as a result can harm our financial
results.
15
Our
global operations subject us to risks that may harm our results
of operations and financial condition.
We have sales offices, R&D, manufacturing, and assembly and
test facilities in many countries, and as a result, we are
subject to risks associated with doing business globally. Our
global operations may be subject to risks that may limit our
ability to manufacture, assemble and test, design, develop, or
sell products in particular countries, which could, in turn,
harm our results of operations and financial condition,
including:
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security concerns, such as armed conflict and civil or military
unrest, crime, political instability, and terrorist activity;
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health concerns;
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natural disasters;
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inefficient and limited infrastructure and disruptions, such as
large-scale outages or interruptions of service from utilities
or telecommunications providers and supply chain interruptions;
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differing employment practices and labor issues;
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local business and cultural factors that differ from our normal
standards and practices;
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regulatory requirements and prohibitions that differ between
jurisdictions; and
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restrictions on our operations by governments seeking to support
local industries, nationalization of our operations, and
restrictions on our ability to repatriate earnings.
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In addition, although most of our products are priced and paid
for in U.S. dollars, a significant amount of certain types of
expenses, such as payroll, utilities, tax, and marketing
expenses, are paid in local currencies. Our hedging programs
reduce, but do not entirely eliminate, the impact of currency
exchange rate movements, and therefore fluctuations in exchange
rates could harm our business operating results and financial
condition. In addition, changes in tariff and import regulations
and to U.S. and
non-U.S.
monetary policies may harm our operating results and financial
condition by increasing our expenses and reducing our revenue.
Varying tax rates in different jurisdictions could harm our
operating results and financial condition by increasing our
overall tax rate.
We also maintain a program of insurance coverage for various
types of property, casualty, and other risks. We place our
insurance coverage with various carriers in numerous
jurisdictions. The types and amounts of insurance that we obtain
vary from time to time and from location to location, depending
on availability, cost, and our decisions with respect to risk
retention. The policies are subject to deductibles and
exclusions that result in our retention of a level of risk on a
self-insurance basis. Losses not covered by insurance may be
substantial and may increase our expenses, which could harm our
results of operations.
Failure
to meet our production targets, resulting in undersupply or
oversupply of products, may harm our business and results of
operations.
Production of integrated circuits is a complex process.
Disruptions in this process can result from interruptions in our
processes, errors, and difficulties in our development and
implementation of new processes; defects in materials;
disruptions in our supply of materials or resources; and
disruptions at our fabrication and assembly and test facilities
due to, for example, accidents, maintenance issues, or unsafe
working conditionsall of which could affect the timing of
production ramps and yields. We may not be successful or
efficient in developing or implementing new production
processes. The occurrence of any of the foregoing may result in
our failure to meet or increase production as desired, resulting
in higher costs or substantial decreases in yields, which could
affect our ability to produce sufficient volume to meet specific
product demand. The unavailability or reduced availability of
certain products could make it more difficult to implement our
platform strategy. We may also experience increases in yields. A
substantial increase in yields could result in higher inventory
levels and the possibility of resulting excess capacity charges
as we slow production to reduce inventory levels. The occurrence
of any of these events could harm our business and results of
operations.
We may
have difficulties obtaining the resources or products we need
for manufacturing, assembling and testing our products, or
operating other aspects of our business, which could harm our
ability to meet demand for our products and may increase our
costs.
We have thousands of suppliers providing various materials that
we use in the production of our products and other aspects of
our business, and we seek, where possible, to have several
sources of supply for all of those materials. However, we may
rely on a single or a limited number of suppliers, or upon
suppliers in a single country, for these materials. The
inability of such suppliers to deliver adequate supplies of
production materials or other supplies could disrupt our
production processes or could make it more difficult for us to
implement our business strategy. In addition, production could
be disrupted by the unavailability of the resources used in
production, such as water, silicon, electricity, and gases. The
unavailability or reduced availability of the materials or
resources that we use in our business may require us to reduce
production of products or may require us to incur additional
costs in order to obtain an adequate supply of those materials
or resources. The occurrence of any of these events could harm
our business and results of operations.
16
Costs
related to product defects and errata may harm our results of
operations and business.
Costs associated with unexpected product defects and errata
(deviations from published specifications) due to, for example,
unanticipated problems in our manufacturing processes include,
the costs of:
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writing off the value of inventory of defective products;
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disposing of defective products that cannot be fixed;
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recalling defective products that have been shipped to customers;
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providing product replacements for, or modifications to,
defective products; and/or
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defending against litigation related to defective products.
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These costs could be substantial and may therefore increase our
expenses and lower our gross margin. In addition, our reputation
with our customers or users of our products could be damaged as
a result of such product defects and errata, and the demand for
our products could be reduced. These factors could harm our
financial results and the prospects for our business.
We may
be subject to claims of infringement of third-party intellectual
property rights, which could harm our business.
From time to time, third parties may assert against us or our
customers alleged patent, copyright, trademark, or other
intellectual property rights to technologies that are important
to our business. We may be subject to intellectual property
infringement claims from certain individuals and companies who
have acquired patent portfolios for the sole purpose of
asserting such claims against other companies. Any claims that
our products or processes infringe the intellectual property
rights of others, regardless of the merit or resolution of such
claims, could cause us to incur significant costs in responding
to, defending, and resolving such claims, and may divert the
efforts and attention of our management and technical personnel
away from our business. As a result of such intellectual
property infringement claims, we could be required or otherwise
decide it is appropriate to:
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pay third-party infringement claims;
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discontinue manufacturing, using, or selling particular products
subject to infringement claims;
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discontinue using the technology or processes subject to
infringement claims;
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develop other technology not subject to infringement claims,
which could be time-consuming and costly or may not be possible;
and/or
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license technology from the third party claiming infringement,
which license may not be available on commercially reasonable
terms.
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The occurrence of any of the foregoing could result in
unexpected expenses or require us to recognize an impairment of
our assets, which would reduce the value of our assets and
increase expenses. In addition, if we alter or discontinue our
production of affected items, our revenue could be negatively
impacted.
We may
be subject to litigation proceedings that could harm our
business.
In addition to the litigation risks mentioned above, we may be
subject to legal claims or regulatory matters involving
stockholder, consumer, antitrust, and other issues. As described
in Note 21: Contingencies in Part II,
Item 8 of this
Form 10-K,
we are currently engaged in a number of litigation matters.
Litigation is subject to inherent uncertainties, and unfavorable
rulings could occur. An unfavorable ruling could include
monetary damages or, in cases for which injunctive relief is
sought, an injunction prohibiting us from manufacturing or
selling one or more products. Were an unfavorable ruling to
occur, our business and results of operations could be
materially harmed.
We may
not be able to enforce or protect our intellectual property
rights, which may harm our ability to compete and harm our
business.
Our ability to enforce our patents, copyrights, software
licenses, and other intellectual property rights is subject to
general litigation risks, as well as uncertainty as to the
enforceability of our intellectual property rights in various
countries. When we seek to enforce our rights, we are often
subject to claims that the intellectual property right is
invalid, is otherwise not enforceable, or is licensed to the
party against whom we are asserting a claim. In addition, our
assertion of intellectual property rights often results in the
other party seeking to assert alleged intellectual property
rights of its own against us, which may harm our business. If we
are not ultimately successful in defending ourselves against
these claims in litigation, we may not be able to sell a
particular product or family of products due to an injunction,
or we may have to pay damages that could, in turn, harm our
results of operations. In addition, governments may adopt
regulations or courts may render decisions requiring compulsory
licensing of intellectual property to others, or governments may
require that products meet specified standards that serve to
favor local companies. Our inability to enforce our intellectual
property rights under these circumstances may harm our
competitive position and our business.
17
Our
licenses with other companies and our participation in industry
initiatives may allow other companies, including our
competitors, to use our patent rights.
Companies in the semiconductor industry often rely on the
ability to license patents from each other in order to compete.
Many of our competitors have broad licenses or cross-licenses
with us, and under current case law, some of these licenses may
permit these competitors to pass our patent rights on to others.
If one of these licensees becomes a foundry, our competitors
might be able to avoid our patent rights in manufacturing
competing products. In addition, our participation in industry
initiatives may require us to license our patents to other
companies that adopt certain industry standards or
specifications, even when such organizations do not adopt
standards or specifications proposed by us. As a result, our
patents implicated by our participation in industry initiatives
might not be available for us to enforce against others who
might otherwise be deemed to be infringing those patents, our
costs of enforcing our licenses or protecting our patents may
increase, and the value of our intellectual property may be
impaired.
Changes
in our decisions with regard to our announced restructuring and
efficiency efforts, and other factors, could affect our results
of operations and financial condition.
Factors that could cause actual results to differ materially
from our expectations with regard to our announced restructuring
include:
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timing and execution of plans and programs that may be subject
to local labor law requirements, including consultation with
appropriate works councils;
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changes in assumptions related to severance and postretirement
costs;
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future dispositions;
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new business initiatives and changes in product roadmap,
development, and manufacturing;
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changes in employment levels and turnover rates;
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changes in product demand and the business environment; and
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changes in the fair value of certain long-lived assets.
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In
order to compete, we must attract, retain, and motivate key
employees, and our failure to do so could harm our results of
operations.
In order to compete, we must attract, retain, and motivate
executives and other key employees, including those in
managerial, technical, sales, marketing, and support positions.
Hiring and retaining qualified executives, scientists,
engineers, technical staff, and sales representatives are
critical to our business, and competition for experienced
employees in the semiconductor industry can be intense. To help
attract, retain, and motivate qualified employees, we use
share-based incentive awards such as employee stock options and
non-vested share units (restricted stock units). If the value of
such stock awards does not appreciate as measured by the
performance of the price of our common stock or if our
share-based compensation otherwise ceases to be viewed as a
valuable benefit, our ability to attract, retain, and motivate
employees could be weakened, which could harm our results of
operations.
Our
results of operations could vary as a result of the methods,
estimates, and judgments that we use in applying our accounting
policies.
The methods, estimates, and judgments that we use in applying
our accounting policies have a significant impact on our results
of operations (see Critical Accounting Estimates in
Part II, Item 7 of this
Form 10-K).
Such methods, estimates, and judgments are, by their nature,
subject to substantial risks, uncertainties, and assumptions,
and factors may arise over time that lead us to change our
methods, estimates, and judgments. Changes in those methods,
estimates, and judgments could significantly affect our results
of operations.
Our
failure to comply with applicable environmental laws and
regulations worldwide could harm our business and results of
operations.
The manufacturing and assembling and testing of our products
require the use of hazardous materials that are subject to a
broad array of environmental, health, and safety laws and
regulations. Our failure to comply with any of these applicable
laws or regulations could result in:
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regulatory penalties, fines, and legal liabilities;
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suspension of production;
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alteration of our fabrication and assembly and test processes;
and
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curtailment of our operations or sales.
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In addition, our failure to manage the use, transportation,
emission, discharge, storage, recycling, or disposal of
hazardous materials could subject us to increased costs or
future liabilities. Existing and future environmental laws and
regulations could also require us to acquire pollution abatement
or remediation equipment, modify our product designs, or incur
other expenses associated with such laws and regulations. Many
new materials that we are evaluating for use in our operations
may be subject to regulation under existing or future
environmental laws and regulations that may restrict our use of
one or more of such materials in our manufacturing, assembly and
test processes, or products. Any of these restrictions could
harm our business and results of operations by increasing our
expenses or requiring us to alter our manufacturing and assembly
and test processes.
18
Changes
in our effective tax rate may harm our results of
operations.
A number of factors may increase our future effective tax rates,
including:
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the jurisdictions in which profits are determined to be earned
and taxed;
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the resolution of issues arising from tax audits with various
tax authorities;
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changes in the valuation of our deferred tax assets and
liabilities;
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adjustments to estimated taxes upon finalization of various tax
returns;
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increases in expenses not deductible for tax purposes, including
write-offs of acquired in-process R&D and impairments of
goodwill in connection with acquisitions;
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changes in available tax credits;
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changes in share-based compensation;
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changes in tax laws or the interpretation of such tax laws, and
changes in generally accepted accounting principles; and
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the repatriation of
non-U.S.
earnings for which we have not previously provided for U.S.
taxes.
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Any significant increase in our future effective tax rates could
reduce net income for future periods.
We
invest in companies for strategic reasons and may not realize a
return on our investments.
We make investments in companies around the world to further our
strategic objectives and support our key business initiatives.
Such investments include investments in equity securities of
public companies and non-marketable equity investments in
private companies, which range from early-stage companies that
are often still defining their strategic direction to more
mature companies with established revenue streams and business
models. The success of these companies is dependent on product
development, market acceptance, operational efficiency, and
other key business factors. The private companies in which we
invest may fail because they may not be able to secure
additional funding, obtain favorable investment terms for future
financings, or take advantage of liquidity events such as
initial public offerings, mergers, and private sales. If any of
these private companies fail, we could lose all or part of our
investment in that company. If we determine that an
other-than-temporary decline in the fair value exists for an
equity investment in a public or private company in which we
have invested, we write down the investment to its fair value
and recognize the related write-down as an investment loss.
Furthermore, when the strategic objectives of an investment have
been achieved, or if the investment or business diverges from
our strategic objectives, we may decide to dispose of the
investment. Our non-marketable equity investments in private
companies are not liquid, and we may not be able to dispose of
these investments on favorable terms or at all. The occurrence
of any of these events could harm our results of operations.
Additionally, for cases in which we are required under equity
method accounting to recognize a proportionate share of another
companys income or loss, such income and loss may impact
our earnings.
Interest
and other, net could vary from expectations, which could harm
our results of operations.
Factors that could cause interest and other, net in our
consolidated statements of income to fluctuate include:
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fixed-income and credit market volatility;
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fluctuations in interest rates;
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changes in our cash and investment balances;
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fluctuations in foreign currency exchange rates;
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other-than-temporary impairments in the fair value of
fixed-income instruments;
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changes in our hedge accounting treatment; and
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gains or losses from divestitures.
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Our
acquisitions, divestitures, and other transactions could disrupt
our ongoing business and harm our results of
operations.
In pursuing our business strategy, we routinely conduct
discussions, evaluate opportunities, and enter into agreements
regarding possible investments, acquisitions, divestitures, and
other transactions, such as joint ventures. Acquisitions and
other transactions involve significant challenges and risks,
including risks that:
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we may not be able to identify suitable opportunities at terms
acceptable to us;
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the transaction may not advance our business strategy;
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we may not realize a satisfactory return on the investment we
make;
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we may not be able to retain key personnel of the acquired
business; or
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we may experience difficulty in integrating new employees,
business systems, and technology.
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When we decide to sell assets or a business, we may encounter
difficulty in finding or completing divestiture opportunities or
alternative exit strategies on acceptable terms in a timely
manner, and the agreed terms and financing arrangements could be
renegotiated due to changes in business or market conditions.
These circumstances could delay the accomplishment of our
strategic objectives or cause us to incur additional expenses
with respect to businesses that we want to dispose of, or we may
dispose of a business at a price or on terms that are less than
we had anticipated, resulting in a loss on the transaction.
19
If we do enter into agreements with respect to acquisitions,
divestitures, or other transactions, we may fail to complete
them due to:
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failure to obtain required regulatory or other approvals;
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intellectual property or other litigation;
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difficulties that we or other parties may encounter in obtaining
financing for the transaction; or other factors.
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Further, acquisition, divestiture, and other transactions
require substantial management resources and have the potential
to divert our attention from our existing business. These
factors could harm our business and results of operations.
The
proposed Numonyx transaction may be delayed or not
consummated.
In May 2007, we announced that we entered into an agreement to
form a private, independent semiconductor company with
STMicroelectronics N.V. and Francisco Partners L.P., later named
Numonyx (see Note 13: Divestitures in
Part II, Item 8 of this
Form 10-K).
If the transaction is delayed or not consummated, we may record
additional charges.
ITEM 1B. UNRESOLVED
STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
At December 29, 2007, our major facilities consisted of:
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(Square Feet in Millions)
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United States
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Other Countries
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Total
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Owned
facilities1
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28.1
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15.6
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43.7
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Leased
facilities2
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1.7
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2.7
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4.4
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Total facilities
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29.8
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18.3
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48.1
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1 |
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Leases on portions of the land used for these facilities
expire at varying dates through 2062. |
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2 |
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Leases expire at varying dates through 2021 and generally
include renewals at our option. |
Our principal executive offices are located in the U.S. The
majority of our wafer fabrication and R&D activities are
also located in the U.S. Outside the U.S., we have wafer
fabrication at our facilities in Ireland and Israel. We are
building a new wafer fabrication facility in Israel, which is
expected to begin production in the second half of 2008. In
addition, we are building a new wafer fabrication facility in
China that is expected to begin production in 2010. Our assembly
and test facilities are located overseas, specifically in
Malaysia, China, the Philippines, and Costa Rica. We are
building a new assembly and test facility in Vietnam, which is
expected to begin production in 2009. This facility will have
more square footage than each of our current assembly and test
facilities, which will enable us to take advantage of greater
economies of scale. In addition, we have sales and marketing
offices located worldwide. These facilities are generally
located near major concentrations of users.
With the exception of certain facilities that we have placed for
sale (see Note 16: Restructuring and Asset Impairment
Charges in Part II, Item 8 of this
Form 10-K),
we believe that our existing facilities are suitable and
adequate for our present purposes and that the productive
capacity in such facilities is substantially being utilized or
we have plans to utilize it.
We do not identify or allocate assets by operating segment. For
information on net property, plant and equipment by country, see
Note 22: Operating Segment and Geographic
Information in Part II, Item 8 of this
Form 10-K.
ITEM 3. LEGAL
PROCEEDINGS
For a discussion of legal proceedings, see Note 21:
Contingencies in Part II, Item 8 of this
Form 10-K.
ITEM 4. SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
20
PART II
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ITEM 5.
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MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
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Information regarding the market price range of Intel common
stock and dividend information may be found in Financial
Information by Quarter (Unaudited) in Part II,
Item 8 of this
Form 10-K.
In each quarter during 2007, we paid a cash dividend of $0.1125
per common share, for a total of $0.45 for the year ($0.10 each
quarter during 2006 for a total of $0.40 for the year). We have
paid a cash dividend in each of the past 61 quarters. In January
2008, our Board of Directors declared a cash dividend of $0.1275
per common share for the first quarter of 2008. The dividend is
payable on March 1, 2008 to stockholders of record on
February 7, 2008.
As of February 8, 2008, there were approximately 185,000
registered holders of record of Intels common stock. A
substantially greater number of holders of Intel common stock
are street name or beneficial holders, whose shares
are held of record by banks, brokers, and other financial
institutions.
Issuer
Purchases of Equity Securities
We have an ongoing authorization, amended in November 2005, from
our Board of Directors to repurchase up to $25 billion in
shares of our common stock in open market or negotiated
transactions. As of December 29, 2007, $14.5 billion
remained available for repurchase under the existing repurchase
authorization. A portion of our purchases in the fourth quarter
of 2007 were executed under a privately negotiated forward
purchase agreement.
Common stock repurchases under our authorized plan in each
quarter of 2007 were as follows (in millions, except per share
amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
|
|
Average
|
|
Purchased
|
|
|
Total
|
|
Price
|
|
as Part of
|
|
|
Number
|
|
Paid
|
|
Publicly
|
|
|
of Shares
|
|
Per
|
|
Announced
|
Period
|
|
Purchased
|
|
Share
|
|
Plans
|
December 31, 2006March 31, 2007
|
|
|
19.2
|
|
$
|
20.82
|
|
|
19.2
|
April 1, 2007June 30, 2007
|
|
|
4.6
|
|
$
|
21.95
|
|
|
4.6
|
July 1, 2007September 29, 2007
|
|
|
30.4
|
|
$
|
24.63
|
|
|
30.4
|
September 30, 2007December 29, 2007
|
|
|
57.1
|
|
$
|
26.29
|
|
|
57.1
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
111.3
|
|
$
|
24.71
|
|
|
111.3
|
|
|
|
|
|
|
|
|
|
|
Common stock repurchases under our authorized plan during the
fourth quarter of 2007 were as follows (in millions, except per
share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Number of
|
|
Dollar Value
|
|
|
|
|
|
|
Shares
|
|
of Shares
|
|
|
|
|
Average
|
|
Purchased
|
|
That May
|
|
|
Total
|
|
Price
|
|
as Part of
|
|
Yet Be
|
|
|
Number
|
|
Paid
|
|
Publicly
|
|
Purchased
|
|
|
of Shares
|
|
Per
|
|
Announced
|
|
Under the
|
Period
|
|
Purchased
|
|
Share
|
|
Plans
|
|
Plans
|
September 30, 2007October 27, 2007
|
|
|
4.0
|
|
$
|
26.53
|
|
|
4.0
|
|
$
|
15,913
|
October 28, 2007November 24, 2007
|
|
|
18.0
|
|
$
|
25.85
|
|
|
18.0
|
|
$
|
15,449
|
November 25, 2007December 29, 2007
|
|
|
35.1
|
|
$
|
26.48
|
|
|
35.1
|
|
$
|
14,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
57.1
|
|
$
|
26.29
|
|
|
57.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
For the majority of restricted stock units granted, the number
of shares issued on the date the restricted stock units vest is
net of the statutory withholding requirements that we pay on
behalf of our employees. These withheld shares are not included
within the common stock repurchase totals in the tables above.
See Note 5: Common Stock Repurchases in
Part II, Item 8 of this
Form 10-K
for further discussion.
Stock
Performance Graph
The line graph below compares the cumulative total stockholder
return on our common stock with the cumulative total return of
the Dow Jones Technology Index and the Standard &
Poors (S&P) 500 Index for the five fiscal years ended
December 29, 2007. The graph and table assume that $100 was
invested on December 27, 2002 (the last day of trading for
the fiscal year ended December 28, 2002) in each of
our common stock, the Dow Jones Technology Index, and the
S&P 500 Index, and that all dividends were reinvested. Dow
Jones and Company, Inc. and Standard & Poors
Compustat Services, Inc. furnished the data. Cumulative total
stockholder returns for our common stock, the Dow Jones
Technology Index, and the S&P 500 Index are based on our
fiscal year.
Comparison
of Five-Year Cumulative Return for Intel, the Dow Jones
Technology Index, and the S&P 500 Index
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
Intel Corporation
|
|
$
|
100
|
|
|
$
|
191
|
|
|
$
|
144
|
|
|
$
|
152
|
|
|
$
|
123
|
|
|
$
|
163
|
|
Dow Jones Technology Index
|
|
$
|
100
|
|
|
$
|
146
|
|
|
$
|
151
|
|
|
$
|
156
|
|
|
$
|
172
|
|
|
$
|
201
|
|
S&P 500 Index
|
|
$
|
100
|
|
|
$
|
127
|
|
|
$
|
143
|
|
|
$
|
151
|
|
|
$
|
174
|
|
|
$
|
185
|
|
22
ITEM 6. SELECTED
FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions, Except Per Share Amounts)
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
Net revenue
|
|
$
|
38,334
|
|
$
|
35,382
|
|
$
|
38,826
|
|
$
|
34,209
|
|
$
|
30,141
|
Gross margin
|
|
$
|
19,904
|
|
$
|
18,218
|
|
$
|
23,049
|
|
$
|
19,746
|
|
$
|
17,094
|
Research and development
|
|
$
|
5,755
|
|
$
|
5,873
|
|
$
|
5,145
|
|
$
|
4,778
|
|
$
|
4,360
|
Operating income
|
|
$
|
8,216
|
|
$
|
5,652
|
|
$
|
12,090
|
|
$
|
10,130
|
|
$
|
7,533
|
Net income
|
|
$
|
6,976
|
|
$
|
5,044
|
|
$
|
8,664
|
|
$
|
7,516
|
|
$
|
5,641
|
Earnings per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.20
|
|
$
|
0.87
|
|
$
|
1.42
|
|
$
|
1.17
|
|
$
|
0.86
|
Diluted
|
|
$
|
1.18
|
|
$
|
0.86
|
|
$
|
1.40
|
|
$
|
1.16
|
|
$
|
0.85
|
Weighted average diluted shares outstanding
|
|
|
5,936
|
|
|
5,880
|
|
|
6,178
|
|
|
6,494
|
|
|
6,621
|
Dividends per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Declared
|
|
$
|
0.45
|
|
$
|
0.40
|
|
$
|
0.32
|
|
$
|
0.16
|
|
$
|
0.08
|
Paid
|
|
$
|
0.45
|
|
$
|
0.40
|
|
$
|
0.32
|
|
$
|
0.16
|
|
$
|
0.08
|
Share-based
compensation1
|
|
$
|
952
|
|
$
|
1,375
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
Dec. 29, 2007
|
|
Dec. 30, 2006
|
|
Dec. 31, 2005
|
|
Dec. 25, 2004
|
|
Dec. 27, 2003
|
Property, plant and equipment, net
|
|
$
|
16,918
|
|
$
|
17,602
|
|
$
|
17,111
|
|
$
|
15,768
|
|
$
|
16,661
|
Total assets
|
|
$
|
55,651
|
|
$
|
48,368
|
|
$
|
48,314
|
|
$
|
48,143
|
|
$
|
47,143
|
Long-term debt
|
|
$
|
1,980
|
|
$
|
1,848
|
|
$
|
2,106
|
|
$
|
703
|
|
$
|
936
|
Stockholders equity
|
|
$
|
42,762
|
|
$
|
36,752
|
|
$
|
36,182
|
|
$
|
38,579
|
|
$
|
37,846
|
Additions to property, plant and equipment
|
|
$
|
5,000
|
|
$
|
5,860
|
|
$
|
5,871
|
|
$
|
3,843
|
|
$
|
3,656
|
Employees (in thousands)
|
|
|
86.3
|
|
|
94.1
|
|
|
99.9
|
|
|
85.0
|
|
|
79.7
|
|
|
|
1 |
|
We began recognizing the provisions of
SFAS No. 123(R) beginning in fiscal year 2006. See
Note 2: Accounting Policies and
Note 3: Employee Equity Incentive Plans in
Part II, Item 8 of this
Form 10-K. |
The ratio of earnings to fixed charges for each of the five
years in the period ended December 29, 2007 was as follows:
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
72x
|
|
50x
|
|
169x
|
|
107x
|
|
72x
|
Fixed charges consist of interest expense, the estimated
interest component of rent expense, and capitalized interest.
23
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
|
Our Managements Discussion and Analysis of Financial
Condition and Results of Operation (MD&A) is provided in
addition to the accompanying consolidated financial statements
and notes to assist readers in understanding our results of
operations, financial condition, and cash flows. MD&A is
organized as follows:
|
|
|
|
|
Overview. Discussion of our business and overall
analysis of financial and other highlights affecting the company
in order to provide context for the remainder of MD&A.
|
|
|
Strategy. Overall strategy and the strategy for our
operating segments.
|
|
|
Critical Accounting Estimates. Accounting estimates
that we believe are important to understanding the assumptions
and judgments incorporated in our reported financial results and
forecasts.
|
|
|
Results of Operations. An analysis of our financial
results comparing 2007 to 2006 and comparing 2006 to 2005.
|
|
|
Liquidity and Capital Resources. An analysis of
changes in our balance sheets and cash flows, and discussion of
our financial condition.
|
|
|
Business Outlook. Our forecasts for selected data
points for the 2008 fiscal year.
|
The various sections of this MD&A contain a number of
forward-looking statements. Words such as expects,
goals, plans, believes,
continues, may, and variations of such
words and similar expressions are intended to identify such
forward-looking statements. In addition, any statements that
refer to projections of our future financial performance, our
anticipated growth and trends in our businesses, and other
characterizations of future events or circumstances are
forward-looking statements. Such statements are based on our
current expectations and could be affected by the uncertainties
and risk factors described throughout this filing and
particularly in the Business Outlook section (see
also Risk Factors in Part I, Item 1A of
this
Form 10-K).
Our actual results may differ materially, and these
forward-looking
statements do not reflect the potential impact of any
divestitures, mergers, acquisitions, or other business
combinations that had not been completed as of February 15,
2008, with the exception of the Numonyx transaction. Our
forward-looking statements for 2008 reflect the expectation that
the Numonyx transaction will close during the first quarter.
Overview
We make, market, and sell advanced integrated digital technology
products, primarily integrated circuits, for industries such as
computing and communications. Integrated circuits are
semiconductor chips etched with interconnected electronic
switches. Our goal is to be the preeminent provider of
semiconductor chips and platforms for the worldwide digital
economy. Our products include chips, boards, and other
semiconductor products that are the building blocks integral to
computers, servers, consumer electronics and handheld devices,
and networking and communications products. Our primary
component-level products include microprocessors, chipsets, and
flash memory. We offer products at various levels of
integration, allowing our customers the flexibility to create
advanced computing and communications systems and products.
The life cycle of our products is very short, sometimes less
than a year. Our ability to compete depends on our ability to
improve our products and processes faster than our competitors,
anticipate changing customer requirements, and develop and
launch new products and platforms. Our failure to respond
quickly to technological developments and incorporate new
features into our products could harm our ability to compete.
Maintaining scale is key to our strategy of ramping new
manufacturing technologies and platforms quickly, delivering
high-performance
products, and lowering unit costs.
As of December 29, 2007, our operating segments included
the Digital Enterprise Group, Mobility Group, NAND Products
Group, Flash Memory Group, Digital Home Group, Digital Health
Group, and Software Solutions Group.
Net revenue, gross margin, and operating income for 2007 and
2006 were as follows:
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
|
2006
|
|
Net revenue
|
|
$
|
38,334
|
|
|
$
|
35,382
|
|
Gross margin
|
|
$
|
19,904
|
|
|
$
|
18,218
|
|
Operating income
|
|
$
|
8,216
|
|
|
$
|
5,652
|
|
24
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
Overall microprocessor revenue continues to grow, and we
continue to see a shift in our sales mix from desktop
microprocessors to mobile microprocessors. Microprocessor
revenue within the Mobility Group operating segment increased by
16% in 2007 compared to 2006. The growth in mobile
microprocessors has outpaced the growth in desktop
microprocessors, and we believe this trend will continue, with a
crossover occurring as early as 2009. As demand for mobile
microprocessors continues to grow in the PC market segment,
system price points have expanded to include new lower prices.
We expect continuing erosion in average selling prices for
mobile microprocessors due to this expansion in lower price
points and a continued competitive market segment. However,
mobile microprocessor average selling prices remain higher than
desktop microprocessor average selling prices, and therefore the
shift in our mix to mobile microprocessors has a positive effect
on our results. Due to the price differences among mobile,
desktop, and server microprocessors, the mix and types of
performance capabilities of microprocessors sold affect the
average selling price of our products and have a substantial
impact on our revenue.
The gross margin percentage was relatively flat in 2007 compared
to 2006. During 2007, gross margin benefited from lower
microprocessor unit costs as well as a mix shift toward higher
margin businesses. The decline in unit costs has been possible
as we continued to gain production experience on our 65nm
process technology. In addition, we are running our factories at
high volumes. However, during 2007 our gross margin was
negatively impacted by declining average selling prices as well
as higher
start-up
costs related to our 45nm process technology.
Our operating income grew faster than revenue during 2007 as we
continued to implement our restructuring program and focused on
our commitment to efficiency and on spending controls. As a
result, R&D and marketing, general and administrative
expenses as a percentage of revenue decreased from 34% in 2006
to 29% in 2007, and the number of employees decreased by 8%
compared to the end of 2006. Results for 2007 included
restructuring and asset impairment charges of $516 million,
and to date we have incurred $1.1 billion in charges
related to the program, which began in the third quarter of
2006. We expect to continue the program in 2008, and expect
charges to decline in the second half of the year. As part of
the restructuring program, we divested some of our lower margin
businesses, and we expect to divest our NOR flash memory assets
in the first quarter of 2008. As a result of these divestitures,
we expect a negative impact on revenue and a benefit to our
gross margin percentage in 2008. Our efficiency efforts have
also contributed to faster factory throughput, higher yields,
and improved equipment utilization. Improvements in our
equipment utilization helped enable us to reduce our capital
spending from $5.9 billion in 2006 to $5.0 billion in
2007.
The combination of our technological innovation and our renewed
commitment to customer orientation has differentiated our
products and technology from our competition and has contributed
to our revenue growth, which occurred in nearly all product
lines and across all geographies. We are setting the pace for
innovation within the industry by executing on our plan to
introduce a new microarchitecture approximately every two years
and to ramp the next generation of silicon process technology in
the intervening years. In 2007, we completed our transition to
the Intel Core microarchitecture, initially launched in 2006, in
all market segments. We also started manufacturing
microprocessors using our industry-leading 45nm Hi-k metal gate
silicon technology, which enables higher and more
energy-efficient
processor performance. Our next-generation microarchitecture is
scheduled for production in the second half of 2008; and we are
also developing our next-generation 32nm process technology and
expect to begin manufacturing products using that technology in
2009.
From a financial condition perspective, we ended 2007 with an
investment portfolio valued at $19.3 billion, consisting of
cash and cash equivalents, fixed-income debt instruments
included in trading assets, and short- and long-term
investments. During 2007, we repurchased $2.75 billion of
stock through our stock repurchase program and paid
$2.6 billion to stockholders as dividends.
We exited 2007 with what we believe is the strongest combination
of products, manufacturing, and silicon technology leadership in
our history as we continue to ramp our 45nm process technology
and plan to introduce our next-generation microarchitecture in
2008. Also in 2008, we plan to introduce products geared to
future growth markets. Specifically, we plan to introduce new
microprocessors,
code-named
Silverthorne, that are designed for notebooks,
low-power and low-cost products, MIDs, and consumer electronics
devices. In addition to our microprocessor and chipset
development, we expect to make significant investments in
R&D in 2008 in growth areas such as
system-on-a-chip,
MIDs, embedded applications, consumer electronics, and graphics.
Although there is uncertainty in the global economy, we are
planning for another year of growth in which profits grow faster
than revenue and our investments in products, manufacturing, and
silicon technology continue to generate competitive advantages.
25
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
Strategy
Our goal is to be the preeminent provider of semiconductor chips
and platforms for the worldwide digital economy. As part of our
overall strategy to compete in each relevant market segment, we
use our core competencies in the design and manufacture of
integrated circuits, as well as our financial resources, global
presence, and brand recognition. We believe that we have the
scale, capacity, and global reach to establish new technologies
and respond to customers needs quickly.
Some of our key focus areas are listed below:
|
|
|
|
|
Customer Orientation. Our strategy focuses on
developing our next generation of products based on the needs
and expectations of our customers. In turn, our products help
enable the design and development of new form factors and usage
models for businesses and consumers. We offer platforms with
ingredients designed and configured to work together to provide
an optimized user computing solution compared to ingredients
that are used separately.
|
|
|
Energy-Efficient Performance. We believe that users
of computing and communications systems and devices want
improved overall and energy-efficient performance. Improved
overall performance can include faster processing performance
and other capabilities such as multithreading and multitasking.
Performance can also be improved through enhanced connectivity,
security, manageability, reliability, ease of use, and
interoperability among devices. Improved energy-efficient
performance involves balancing the addition of these and other
types of improved performance factors with lower power
consumption. Our microprocessors have one, two, or four
processor cores, and we continue to develop processors with an
increasing number of cores, which enable improved multitasking
and energy efficiency.
|
|
|
Design and Manufacturing Technology Leadership. Our
strategy for developing microprocessors with improved
performance is to synchronize the introduction of a new
microarchitecture with improvements in silicon process
technology. We plan to introduce a new microarchitecture
approximately every two years and ramp the next generation of
silicon process technology in the intervening years. This
coordinated schedule allows us to develop and introduce new
products based on a common microarchitecture quickly, without
waiting for the next generation of silicon process technology.
We refer to this as our tick-tock technology
development cadence. For more information, see Research
and Development in Part I, Item 1 of this Form
10-K.
|
|
|
Strategic Investments. We make equity investments in
companies around the world to further our strategic objectives
and to support our key business initiatives, including
investments through our Intel Capital program. We generally
focus on investing in companies and initiatives to stimulate
growth in the digital economy, create new business opportunities
for Intel, and expand global markets for our products. Our
current investment focus areas include those that we believe
help to enable mobile wireless devices, advance the digital
home, enhance the digital enterprise, advance high-performance
communications infrastructures, and develop the next generation
of silicon process technologies. Our focus areas tend to develop
and change over time due to rapid advancements in technology.
|
|
|
Business Environment and Software. We plan to
continue to cultivate new businesses and work to encourage the
industry to offer products that take advantage of the latest
market trends and usage models. We also provide development
tools and support to help software developers create software
applications and operating systems that take advantage of our
platforms. We frequently participate in industry initiatives
designed to discuss and agree upon technical specifications and
other aspects of technologies that could be adopted as standards
by standards-setting organizations. In addition, we work
collaboratively with other companies to protect digital content
and the consumer. Lastly, through our Software and Solutions
Group, we help enable and advance the computing ecosystem by
developing value-added software products and services.
|
We believe that the proliferation of the Internet, including
user demand for premium content and rich media, is the primary
driver of the need for greater performance in PCs and servers. A
growing number of older PCs are increasingly incapable of
handling the tasks that users are demanding, such as streaming
video, uploading photos, and online gaming. As these tasks
become even more demanding and require more computing power, we
believe that users will need and want to buy new PCs to perform
everyday tasks on the Internet. We also believe that increased
Internet traffic is creating a need for greater server
infrastructure, including server products optimized for
energy-efficient performance.
We have experienced an overall shift in sales mix from desktop
microprocessors to mobile microprocessors. We believe that,
based on customer demand and market trends, mobile
microprocessor shipments will exceed desktop microprocessor
shipments as early as 2009. Mobile microprocessors generally
have higher average selling prices compared to desktop
microprocessors, so the continued shift in sales mix to mobile
microprocessors is expected to positively impact our revenue.
Therefore, our strategy focuses on advancing mobile
microprocessors to accelerate this shift in sales mix.
26
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
We are investing in areas in which we believe the application of
highly integrated
Intel®
architecture provides growth opportunities, such as scalable,
high-performance visual computing solutions that integrate vivid
graphics and supercomputing performance for scientific,
financial services, and other compute-intensive applications. In
addition, our design and manufacturing technology leadership,
including the recent introduction of our new 45nm process
technology, allows us to develop low-cost, low-power
microprocessors for new uses and form factors. We believe that
these new microprocessors will give us the ability to extend
Intel architecture and drive growth in new market segments,
including MIDs, a new category of small, mobile consumer devices
enabling a PC-like Internet experience; consumer electronics
devices, which will deliver media and services to set-top boxes
and TVs over broadband Internet connections; and ultra-low-cost
PCs designed for emerging markets. We believe that the common
elements for products in these new market segments are low
power, low cost, and the ability to access the Internet.
Strategy
by Operating Segment
Our Digital Enterprise Group (DEG) offers
computing and communications products for businesses, service
providers, and consumers. DEG products are incorporated into
desktop computers, enterprise computer servers, workstations,
and products that make up the infrastructure for the Internet.
We also offer products for embedded designs, such as industrial
equipment, point-of-sale systems, panel PCs, automotive
information/entertainment systems, and medical equipment. Within
DEG, our largest market segments are in desktop and enterprise
computing. Our strategy for the desktop computing market segment
is to offer products that provide increased manageability,
security, and energy-efficient performance while at the same
time lowering total cost of ownership for businesses. Our
strategy for the enterprise computing market segment is to offer
products that provide energy-efficient performance, ease of use,
manageability, reliability, and security for entry-level to
high-end servers and workstations.
The strategy for our Mobility Group is to offer
notebook PC products designed to improve performance, battery
life, and wireless connectivity, as well as to allow for the
design of smaller, lighter, and thinner form factors. We are
also increasing our focus on notebooks designed for the business
environment by offering products that provide increased
manageability and security, and we continue to invest in the
build-out of WiMAX. For the ultra-mobile market segment, we
offer energy-efficient products that are designed primarily for
mobile processing of digital content and Internet access, and we
are developing new products to support this evolving market
segment, including products for MIDs and ultra-mobile PCs.
The strategy for our NAND Products Group is to
offer advanced NAND flash memory products, primarily used in
digital audio players, memory cards, and system-level
applications, such as solid-state drives. In support of our
strategy to provide advanced flash memory products, we continue
to focus on the development of innovative products designed to
address the needs of customers for reliable,
non-volatile,
low-cost, high-density memory.
For the Flash Memory Group, we expect to complete
the divestiture of our NOR flash memory assets to Numonyx during
the first quarter of 2008. We expect to enter into supply and
transition service agreements to provide products, services, and
support to Numonyx following the close of the transaction. See
Note 13: Divestitures in Part II,
Item 8 of this
Form 10-K.
The strategy for our Digital Home Group is to
offer products for use in PCs and in-home consumer electronics
devices designed to access and share Internet, broadcast,
optical media, and personal content through a variety of linked
digital devices within the home. We are focusing on the design
of components for high-end enthusiast PCs, mainstream PCs with
rich audio and video capabilities, and consumer electronic
devices such as digital TVs, high-definition media players, and
set-top boxes.
The strategy for our Digital Health Group is to
design and deliver technology-enabled products and explore
global business opportunities in healthcare information
technology, healthcare research, and productivity, as well as
personal healthcare. In support of this strategy, we are
focusing on the design of technology solutions and platforms for
the digital hospital and consumer/home health products.
The strategy for our Software and Solutions Group
(SSG) is to promote Intel architecture as the platform
of choice for software and services. SSG works with the
worldwide software and services ecosystem by providing software
products, engaging with developers, and driving strategic
software investments.
27
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
Critical
Accounting Estimates
The methods, estimates, and judgments that we use in applying
our accounting policies have a significant impact on the results
that we report in our financial statements. Some of our
accounting policies require us to make difficult and subjective
judgments, often as a result of the need to make estimates
regarding matters that are inherently uncertain. Our most
critical accounting estimates include:
|
|
|
|
|
the valuation of non-marketable equity investments, which
impacts net gains (losses) on equity investments when we record
impairments;
|
|
|
the assessment of recoverability of long-lived assets, which
primarily impacts gross margin or operating expenses when we
record asset impairments or accelerate their depreciation;
|
|
|
the recognition and measurement of current and deferred income
tax assets and liabilities (including the measurement of
uncertain tax positions), which impact our tax provision;
|
|
|
the valuation of inventory, which impacts gross margin; and
|
|
|
the valuation and recognition of share-based compensation, which
impact gross margin; R&D expenses; and marketing, general
and administrative expenses.
|
Below, we discuss these policies further, as well as the
estimates and judgments involved. We also have other policies
that we consider key accounting policies, such as those for
revenue recognition, including the deferral of revenue on sales
to distributors; however, these policies typically do not
require us to make estimates or judgments that are difficult or
subjective.
Non-Marketable
Equity Investments
We regularly invest in non-marketable equity investments of
private companies, which range from early-stage companies that
are often still defining their strategic direction to more
mature companies with established revenue streams and business
models. The carrying value of our non-marketable equity
investment portfolio, excluding equity derivatives, totaled
$3.4 billion at December 29, 2007 ($2.8 billion
at December 30, 2006) and included our investment in
IMFT of $2.2 billion ($1.3 billion at
December 30, 2006). Our non-marketable equity investments
are classified in other long-term assets on the consolidated
balance sheets.
Non-marketable equity investments are inherently risky, and a
number of these companies are likely to fail. Their success is
dependent on product development, market acceptance, operational
efficiency, and other factors. In addition, depending on their
future prospects and market conditions, they may not be able to
raise additional funds when needed or they may receive lower
valuations, with less favorable investment terms than in
previous financings, and our investments would likely become
impaired.
We review our investments quarterly for indicators of
impairment; however, for non-marketable equity investments, the
impairment analysis requires significant judgment to identify
events or circumstances that would significantly harm the fair
value of the investment. The indicators that we use to identify
those events or circumstances include:
|
|
|
|
|
the investees revenue and earnings trends relative to
predefined milestones and overall business prospects;
|
|
|
the technological feasibility of the investees products
and technologies;
|
|
|
the general market conditions in the investees industry or
geographic area, including adverse regulatory or economic
changes;
|
|
|
factors related to the investees ability to remain in
business, such as the investees liquidity, debt ratios,
and the rate at which the investee is using its cash; and
|
|
|
the investees receipt of additional funding at a lower
valuation. If an investee obtains additional funding at a
valuation lower than our carrying amount or a new round of
equity funding is required for the investee to remain in
business, and the new round of equity does not appear imminent,
it is presumed that the investment is other than temporarily
impaired, unless specific facts and circumstances indicate
otherwise.
|
Investments that we identify as having an indicator of
impairment are subject to further analysis to determine if the
investment is other than temporarily impaired, in which case we
write down the investment to its estimated fair value. For
non-marketable equity investments that we do not consider viable
from a financial or technological point of view, we write down
the entire investment, since we consider the estimated fair
value to be nominal. Over the past 12 quarters, including the
fourth quarter of 2007, impairments of non-marketable equity
investments have ranged between $10 million and
$44 million per quarter.
28
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
Long-Lived
Assets
We assess the impairment of long-lived assets when events or
changes in circumstances indicate that the carrying value of the
assets or the asset grouping may not be recoverable. Factors
that we consider in deciding when to perform an impairment
review include significant under-performance of a business or
product line in relation to expectations, significant negative
industry or economic trends, and significant changes or planned
changes in our use of the assets. Recoverability of assets that
will continue to be used in our operations is measured by
comparing the carrying amount of the asset grouping to our
estimate of the related total future undiscounted net cash
flows. If an asset groupings carrying value is not
recoverable through the related undiscounted cash flows, the
asset grouping is considered to be impaired. The impairment is
measured by comparing the difference between the asset
groupings carrying amount and its fair value, based on the
best information available, including market prices or
discounted cash flow analysis.
Impairments of long-lived assets are determined for groups of
assets related to the lowest level of identifiable independent
cash flows. Due to our asset usage model and the interchangeable
nature of our semiconductor manufacturing capacity, we must make
subjective judgments in determining the independent cash flows
that can be related to specific asset groupings. In addition, as
we make manufacturing process conversions and other factory
planning decisions, we must make subjective judgments regarding
the remaining useful lives of assets, primarily process-specific
semiconductor manufacturing tools and building improvements.
When we determine that the useful lives of assets are shorter
than we had originally estimated, we accelerate the rate of
depreciation over the assets new, shorter useful lives.
Over the past 12 quarters, including the fourth quarter of 2007,
impairments and accelerated depreciation of long-lived assets
have ranged between $1 million and $320 million per
quarter. This range includes restructuring charges for asset
impairments between zero and $317 million per quarter.
Income
Taxes
We must make certain estimates and judgments in determining
income tax expense for financial statement purposes. These
estimates and judgments occur in the calculation of tax credits,
benefits, and deductions, and in the calculation of certain tax
assets and liabilities, which arise from differences in the
timing of recognition of revenue and expense for tax and
financial statement purposes, as well as the interest and
penalties related to these uncertain tax positions. Significant
changes to these estimates may result in an increase or decrease
to our tax provision in a subsequent period.
We must assess the likelihood that we will be able to recover
our deferred tax assets. If recovery is not likely, we must
increase our provision for taxes by recording a valuation
allowance against the deferred tax assets that we estimate will
not ultimately be recoverable. We believe that we will
ultimately recover a substantial majority of the deferred tax
assets recorded on our consolidated balance sheets. However,
should there be a change in our ability to recover our deferred
tax assets, our tax provision would increase in the period in
which we determined that the recovery was not likely.
The calculation of our tax liabilities involves dealing with
uncertainties in the application of complex tax regulations. In
the first quarter of 2007, we adopted Financial Accounting
Standards Board (FASB) Interpretation No. 48,
Accounting for Uncertainty in Income Taxesan
interpretation of SFAS No. 109 (FIN 48),
and related guidance (see Note 17: Taxes in
Part II, Item 8 of this
Form 10-K).
As a result of the implementation of FIN 48, we recognize
liabilities for uncertain tax positions based on the two-step
process prescribed in the interpretation. The first step is to
evaluate the tax position for recognition by determining if the
weight of available evidence indicates that it is more likely
than not that the position will be sustained on audit, including
resolution of related appeals or litigation processes, if any.
The second step requires us to estimate and measure the tax
benefit as the largest amount that is more than 50% likely to be
realized upon ultimate settlement. It is inherently difficult
and subjective to estimate such amounts, as we have to determine
the probability of various possible outcomes. We reevaluate
these uncertain tax positions on a quarterly basis. This
evaluation is based on factors including, but not limited to,
changes in facts or circumstances, changes in tax law,
effectively settled issues under audit, and new audit activity.
Such a change in recognition or measurement would result in the
recognition of a tax benefit or an additional charge to the tax
provision.
29
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
Inventory
The valuation of inventory requires us to estimate obsolete or
excess inventory as well as inventory that is not of saleable
quality. The determination of obsolete or excess inventory
requires us to estimate the future demand for our products. The
demand forecast is included in the development of our short-term
manufacturing plans to enable consistency between inventory
valuation and build decisions.
Product-specific
facts and circumstances reviewed in the inventory valuation
process include a review of the customer base, the stage of the
product life cycle of our products, consumer confidence, and
customer acceptance of our products, as well as an assessment of
the selling price in relation to the product cost. If our demand
forecast for specific products is greater than actual demand and
we fail to reduce manufacturing output accordingly, or if we
fail to forecast the demand accurately, we could be required to
write off inventory, which would negatively impact our gross
margin.
Share-Based
Compensation
Effective January 1, 2006, we adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 123
(revised 2004), Shared-Based Payment
(SFAS No. 123(R)). SFAS No. 123(R) requires
employee equity awards to be accounted for under the fair value
method. Total share-based compensation during 2007 was
$952 million ($1.4 billion in 2006). Determining the
appropriate fair-value model and calculating the fair value of
employee stock options and rights to purchase shares under stock
purchase plans at the date of grant require judgment. We use the
Black-Scholes option pricing model to estimate the fair value of
these share-based awards consistent with the provisions of
SFAS No. 123(R). Option pricing models, including the
Black-Scholes model, also require the use of input assumptions,
including expected volatility, expected life, expected dividend
rate, and expected risk-free rate of return. The assumptions for
expected volatility and expected life are the two assumptions
that significantly affect the grant date fair value. Changes in
the expected dividend rate and expected risk-free rate of return
do not significantly impact the calculation of fair value, and
determining these inputs is not highly subjective.
We use implied volatility based on freely traded options in the
open market, as we believe implied volatility is more reflective
of market conditions and a better indicator of expected
volatility than historical volatility. In determining the
appropriateness of implied volatility, we considered the
following:
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|
|
|
|
the volume of market activity of freely traded options, and
determined that there was sufficient market activity;
|
|
|
the ability to reasonably match the input variables of freely
traded options to those of options granted by the company, such
as the date of grant and the exercise price, and determined that
the input assumptions were comparable; and
|
|
|
the term of freely traded options used to derive implied
volatility, which is generally one to two years, and determined
that the length of term was sufficient.
|
Due to significant differences in the vesting terms and
contractual life of current option grants compared to the
majority of our historical grants, management does not believe
that our historical share option exercise data provides us with
sufficient evidence to estimate expected term. Therefore, we use
the simplified method of calculating expected life described in
the SECs Staff Accounting Bulletin 107
(SAB 107). In December 2007, the SEC issued Staff
Accounting Bulletin 110 (SAB 110) to amend the
SECs views discussed in SAB 107 regarding the use of
the simplified method in developing an estimate of expected life
of share options in accordance with SFAS No. 123(R).
SAB 110 is effective for us beginning in the first quarter
of fiscal year 2008. We will continue to use the simplified
method until we have the historical data necessary to provide a
reasonable estimate of expected life, in accordance with
SAB 107, as amended by SAB 110.
30
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
Higher volatility and longer expected lives result in an
increase to share-based compensation determined at the date of
grant. The effect that changes in the volatility and the
expected life would have on the weighted average fair value of
option awards and the increase in total fair value during 2007
and 2006 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
Weighted Average
|
|
|
Increase in Total
|
|
|
Weighted Average
|
|
|
Increase in Total
|
|
|
|
Fair Value Per
|
|
|
Fair
Value1
|
|
|
Fair Value Per
|
|
|
Fair
Value1
|
|
|
|
Share
|
|
|
(In Millions)
|
|
|
Share
|
|
|
(In Millions)
|
|
As reported
|
|
$
|
5.79
|
|
|
|
|
|
|
$
|
5.21
|
|
|
|
|
|
Hypothetical:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase expected volatility by 5 percentage
points2
|
|
$
|
6.56
|
|
|
$
|
20
|
|
|
$
|
5.92
|
|
|
$
|
36
|
|
Increase expected life by 1 year
|
|
$
|
6.24
|
|
|
$
|
12
|
|
|
$
|
5.68
|
|
|
$
|
24
|
|
|
|
|
1 |
|
Amounts represent the hypothetical increase in the total fair
value determined at the date of grant, which would be amortized
over the service period, net of estimated forfeitures. |
|
2 |
|
For example, an increase from 26% reported volatility for
2007 to a hypothetical 31% volatility. |
In addition, SFAS No. 123(R) requires us to develop an
estimate of the number of share-based awards that will be
forfeited due to employee turnover. Quarterly adjustments in the
estimated forfeiture rates can have a significant effect on
reported share-based compensation, as we recognize the
cumulative effect of the rate adjustments for all expense
amortization after January 1, 2006 in the period in which
the estimated forfeiture rates are adjusted. We estimate and
adjust forfeiture rates based on a quarterly review of recent
forfeiture activity and expected future employee turnover. If a
revised forfeiture rate is higher than our previously estimated
forfeiture rate, we make an adjustment that will result in a
decrease in the expense recognized in the financial statements.
If a revised forfeiture rate is lower than the previously
estimated forfeiture rate, we make an adjustment that will
result in an increase in the expense recognized in the financial
statements. These adjustments affect our gross margin; R&D
expenses; and marketing, general and administrative expenses.
The effect of forfeiture adjustments in 2006 and 2007 was
insignificant. We record cumulative adjustments to the extent
that the related expense is recognized in the financial
statements, beginning with implementation of
SFAS No. 123(R) in the first quarter of 2006.
Therefore, the potential impact from cumulative forfeiture
adjustments will increase in future periods. The expense that we
recognize in future periods could also differ significantly from
the current period and from our forecasts due to adjustments in
the assumed forfeiture rates.
Recent
Accounting Pronouncements and Accounting Changes
See Note 2: Accounting Policies in
Part II, Item 8 of this
Form 10-K
for a description of accounting changes and recent accounting
pronouncements, including the expected dates of adoption and
estimated effects, if any, on our consolidated financial
statements.
31
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
Results
of Operations
The following table sets forth certain consolidated statements
of income data as a percentage of net revenue for the periods
indicated:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
% of
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
(Dollars in Millions, Except Per Share Amounts)
|
|
Dollars
|
|
Revenue
|
|
|
Dollars
|
|
Revenue
|
|
|
Dollars
|
|
|
Revenue
|
|
Net revenue
|
|
$
|
38,334
|
|
|
100.0
|
%
|
|
$
|
35,382
|
|
|
100.0
|
%
|
|
$
|
38,826
|
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
18,430
|
|
|
48.1
|
%
|
|
|
17,164
|
|
|
48.5
|
%
|
|
|
15,777
|
|
|
|
40.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
19,904
|
|
|
51.9
|
%
|
|
|
18,218
|
|
|
51.5
|
%
|
|
|
23,049
|
|
|
|
59.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
5,755
|
|
|
15.0
|
%
|
|
|
5,873
|
|
|
16.6
|
%
|
|
|
5,145
|
|
|
|
13.3
|
%
|
Marketing, general and administrative
|
|
|
5,401
|
|
|
14.1
|
%
|
|
|
6,096
|
|
|
17.2
|
%
|
|
|
5,688
|
|
|
|
14.7
|
%
|
Restructuring and asset impairment charges
|
|
|
516
|
|
|
1.3
|
%
|
|
|
555
|
|
|
1.6
|
%
|
|
|
|
|
|
|
|
|
Amortization of acquisition-related intangibles and costs
|
|
|
16
|
|
|
0.1
|
%
|
|
|
42
|
|
|
0.1
|
%
|
|
|
126
|
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
8,216
|
|
|
21.4
|
%
|
|
|
5,652
|
|
|
16.0
|
%
|
|
|
12,090
|
|
|
|
31.1
|
%
|
Gains (losses) on equity investments, net
|
|
|
157
|
|
|
0.4
|
%
|
|
|
214
|
|
|
0.6
|
%
|
|
|
(45
|
)
|
|
|
(0.1
|
)%
|
Interest and other, net
|
|
|
793
|
|
|
2.1
|
%
|
|
|
1,202
|
|
|
3.4
|
%
|
|
|
565
|
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
9,166
|
|
|
23.9
|
%
|
|
|
7,068
|
|
|
20.0
|
%
|
|
|
12,610
|
|
|
|
32.5
|
%
|
Provision for taxes
|
|
|
2,190
|
|
|
5.7
|
%
|
|
|
2,024
|
|
|
5.7
|
%
|
|
|
3,946
|
|
|
|
10.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,976
|
|
|
18.2
|
%
|
|
$
|
5,044
|
|
|
14.3
|
%
|
|
$
|
8,664
|
|
|
|
22.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
1.18
|
|
|
|
|
|
$
|
0.86
|
|
|
|
|
|
$
|
1.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth revenue information of geographic
regions for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
% of
|
|
|
|
|
% of
|
|
|
|
|
% of
|
|
(Dollars in Millions)
|
|
Dollars
|
|
Total
|
|
|
Dollars
|
|
Total
|
|
|
Dollars
|
|
Total
|
|
Asia-Pacific
|
|
$
|
19,432
|
|
|
51
|
%
|
|
$
|
17,477
|
|
|
49
|
%
|
|
$
|
19,330
|
|
|
50
|
%
|
Americas
|
|
|
7,715
|
|
|
20
|
%
|
|
|
7,512
|
|
|
21
|
%
|
|
|
7,574
|
|
|
19
|
%
|
Europe
|
|
|
7,262
|
|
|
19
|
%
|
|
|
6,587
|
|
|
19
|
%
|
|
|
8,210
|
|
|
21
|
%
|
Japan
|
|
|
3,925
|
|
|
10
|
%
|
|
|
3,806
|
|
|
11
|
%
|
|
|
3,712
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
$
|
38,334
|
|
|
100
|
%
|
|
$
|
35,382
|
|
|
100
|
%
|
|
$
|
38,826
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our net revenue was $38.3 billion in 2007, an increase of
8% compared to 2006. Higher microprocessor unit sales were
partially offset by lower microprocessor average selling prices.
Higher mobile chipset unit sales also contributed to the
increase in net revenue.
Lower NOR flash memory revenue was mostly offset by the ramp of
our NAND flash memory business. The decrease in NOR flash memory
revenue was due to a significant decline in average selling
prices. Lower royalty revenue was offset by higher unit sales.
Revenue in the Asia-Pacific region increased 11% and revenue in
the Europe region increased 10% in 2007 compared to 2006, and
revenue in both the Americas region and Japan increased 3% in
2007 compared to 2006. Revenue from both mature and emerging
markets increased in 2007 compared to 2006. While the revenue in
mature markets increased in all four geographic regions, the
majority of the growth in revenue occurred in the Asia-Pacific
region. A substantial majority of the increase in emerging
markets also occurred in the Asia-Pacific region.
32
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
Our overall gross margin dollars for 2007 were
$19.9 billion, an increase of $1.7 billion, or 9%,
compared to 2006. Our overall gross margin percentage was
relatively flat at 51.9% in 2007 compared to 51.5% in 2006. The
gross margin percentage increase in the Digital Enterprise Group
operating segment was mostly offset by a decrease in the gross
margin percentage in the Mobility Group operating segment and
costs associated with the ramp of our NAND flash memory
business. We derived most of our overall gross margin dollars
and operating profit in 2007 and 2006 from the sale of
microprocessors in the Digital Enterprise Group and Mobility
Group operating segments. See Business Outlook for a
discussion of gross margin expectations.
Our net revenue was $35.4 billion in 2006, a decrease of 9%
compared to 2005. Substantially all of the decrease was due to
significantly lower average selling prices of microprocessors.
Fiscal year 2006 was a 52-week fiscal year in contrast to fiscal
year 2005, which was a
53-week
fiscal year.
Revenue from sales of NOR flash memory products decreased in
2006 compared to 2005, primarily due to lower average selling
prices, partially offset by higher royalty revenue. In 2006, we
began shipping NAND flash memory products manufactured by IMFT.
Revenue in the Asia-Pacific region decreased 10% and revenue in
the Europe region decreased 20% in 2006 compared to 2005. These
decreases were slightly offset by revenue in Japan, which
increased slightly in 2006 compared to 2005. Revenue in the
Americas region was approximately flat in 2006 compared to 2005.
Mature and emerging markets both declined in 2006 compared to
2005. The decrease within mature markets occurred in the Europe
and Asia-Pacific regions, and a substantial majority of the
decrease within the emerging markets occurred in the Europe and
Asia-Pacific regions.
Our overall gross margin dollars for 2006 were
$18.2 billion, a decrease of $4.8 billion, or 21%,
compared to 2005. Our overall gross margin percentage decreased
to 51.5% in 2006 from 59.4% in 2005. The gross margin percentage
for the Digital Enterprise Group and the Mobility Group were
both lower in 2006 compared to 2005. A mix shift of our total
revenue to the Mobility Group, which has a higher gross margin
percentage, slightly offset these decreases to the overall gross
margin. We derived most of our overall gross margin dollars in
2006 and 2005 from the sale of microprocessors in the Digital
Enterprise Group and Mobility Group operating segments. The
2006 gross margin included the impact of share-based
compensation, which we began recognizing in 2006. The
2005 gross margin was affected by a litigation settlement
agreement with MicroUnity, Inc. in which we recorded a
$140 million charge to cost of sales, of which
$110 million was allocated to the Digital Enterprise Group
and $30 million was allocated to the Mobility Group.
Digital
Enterprise Group
The revenue and operating income for the Digital Enterprise
Group (DEG) for the three years ended December 29, 2007
were as follows:
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
2006
|
|
2005
|
Microprocessor revenue
|
|
$
|
15,234
|
|
$
|
14,606
|
|
$
|
19,412
|
Chipset, motherboard, and other revenue
|
|
|
5,106
|
|
|
5,270
|
|
|
5,725
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
20,340
|
|
$
|
19,876
|
|
$
|
25,137
|
Operating income
|
|
$
|
5,169
|
|
$
|
3,510
|
|
$
|
9,020
|
Net revenue for the DEG operating segment increased by
$464 million, or 2%, in 2007 compared to 2006.
Microprocessors within DEG include microprocessors designed for
the desktop and enterprise computing market segments as well as
embedded microprocessors. The increase in microprocessor revenue
was due to higher microprocessor unit sales and higher
enterprise average selling prices. These increases were
partially offset by lower desktop average selling prices in a
competitive pricing environment. The decrease in chipset,
motherboard, and other revenue was due to lower motherboard unit
sales as well as a decrease in communications infrastructure
revenue, which is primarily due to divestitures of certain
communications infrastructure businesses that were completed in
2006 and 2007. Partially offsetting these decreases was higher
chipset revenue.
Operating income increased by $1.7 billion, or 47%, in 2007
compared to 2006. The increase in operating income was primarily
due to lower desktop microprocessor unit costs and lower
operating expenses, and to a lesser extent, sales of desktop
microprocessor inventory that had been previously written off.
Partially offsetting these increases were higher chipset unit
costs and approximately $425 million of higher
start-up
costs, primarily related to our 45nm process technology. In
2007, we began including shared-based compensation in the
computation of operating income (loss) for each operating
segment and adjusted the 2006 operating segment results to
reflect this change.
33
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
For 2006, net revenue for the DEG operating segment decreased by
$5.3 billion, or 21%, compared to 2005. The decline in net
revenue was mostly due to a significant decline in
microprocessor revenue, and to a lesser extent, a decline in
chipset, motherboard, and other revenue. The decline in
microprocessor revenue was due to lower average selling prices
and unit sales of desktop microprocessors. Enterprise
microprocessor revenue increased in 2006. The decline in
chipset, motherboard, and other revenue was due equally to lower
chipset revenue and motherboard revenue.
Operating income decreased by $5.5 billion, or 61%, in 2006
compared to 2005. Substantially all of the decrease was due to
the revenue decline. Higher microprocessor unit costs, along
with $210 million of higher factory under-utilization
charges, were offset by approximately $540 million of lower
start-up
costs. Unit costs were higher in 2006 compared to 2005 due
primarily to a mix shift to dual-core microprocessors. Results
for 2006 included the recognition of share-based compensation.
Results for 2005 did not include share-based compensation.
Results for 2005 included a charge related to a settlement
agreement with MicroUnity.
Mobility
Group
The revenue and operating income for the Mobility Group (MG) for
the three years ended December 29, 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
2006
|
|
2005
|
Microprocessor revenue
|
|
$
|
10,660
|
|
$
|
9,212
|
|
$
|
8,704
|
Chipset and other revenue
|
|
|
4,021
|
|
|
3,097
|
|
|
2,427
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
14,681
|
|
$
|
12,309
|
|
$
|
11,131
|
Operating income
|
|
$
|
5,606
|
|
$
|
4,595
|
|
$
|
5,335
|
Net revenue for the MG operating segment increased by
$2.4 billion, or 19%, in 2007 compared to 2006.
Microprocessor revenue increased by $1.4 billion, or 16%,
in 2007 compared to 2006, while chipsets and other revenue
increased by $924 million, or 30%, in 2007 compared to
2006. The increase in microprocessor revenue was due to a
significant increase in unit sales, partially offset by
significantly lower average selling prices. The increase in
chipset and other revenue was due to higher unit sales of
chipsets, and to a lesser extent, higher revenue from sales of
cellular baseband products. In the fourth quarter of 2006, we
sold certain assets of the business line that included
application and cellular baseband processors used in handheld
devices; however, in 2007 we continued to manufacture and sell
these products as part of a manufacturing and transition
services agreement.
Operating income increased by $1.0 billion, or 22%, in 2007
compared to 2006. The increase in operating income was primarily
due to higher revenue. Lower microprocessor unit costs were more
than offset by approximately $330 million of higher
start-up
costs, primarily related to our 45nm process technology. Lower
unit costs on wireless connectivity and cellular baseband
products were offset by higher chipset unit costs. Operating
expenses were higher in 2007 compared to 2006; however,
operating expenses as a percentage of revenue decreased in 2007
compared to 2006.
For 2006, net revenue for the MG operating segment increased by
$1.2 billion, or 11%, compared to 2005. Microprocessor
revenue increased by $508 million, or 6%, in 2006 compared
to 2005, while chipsets and other revenue increased by
$670 million, or 28%, in 2006 compared to 2005. The
increase in microprocessor revenue was due to higher unit sales,
largely offset by lower average selling prices. The majority of
the increase in chipset and other revenue was due to higher
revenue from sales of chipsets, and to a lesser extent, higher
revenue from sales of wireless connectivity products. Sales of
these products increased primarily due to increased sales of our
Intel Centrino processor technologies.
Operating income decreased by $740 million, or 14%, in 2006
compared to 2005. The decline was primarily caused by higher
operating expenses, due in part to the recognition of
share-based compensation. Results for 2005 did not include
share-based compensation. The effects of higher revenue were
offset by higher unit costs for microprocessors.
Start-up
costs were approximately $170 million lower in 2006
compared to 2005.
34
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
Operating
Expenses
Operating expenses for the three years ended December 29,
2007 were as follows:
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
2006
|
|
2005
|
Research and development
|
|
$
|
5,755
|
|
$
|
5,873
|
|
$
|
5,145
|
Marketing, general and administrative
|
|
$
|
5,401
|
|
$
|
6,096
|
|
$
|
5,688
|
Restructuring and asset impairment charges
|
|
$
|
516
|
|
$
|
555
|
|
$
|
|
Amortization of acquisition-related intangibles and costs
|
|
$
|
16
|
|
$
|
42
|
|
$
|
126
|
Research and Development. R&D spending
decreased $118 million, or 2%, in 2007 compared to 2006,
and increased $728 million, or 14%, in 2006 compared to
2005. The decrease in 2007 compared to 2006 was primarily due to
lower process development costs as we transitioned from R&D
to manufacturing using our 45nm process technology, partially
offset by higher profit-dependent compensation. The increase in
2006 compared to 2005 was primarily due to share-based
compensation resulting from the implementation of
SFAS No. 123(R) in 2006, and to a lesser extent,
higher development costs driven by our 45nm process technology.
Marketing, General and Administrative. Marketing,
general and administrative expenses decreased $695 million,
or 11%, in 2007 compared to 2006, and increased
$408 million, or 7%, in 2006 compared to 2005. The decrease
in 2007 compared to 2006 was primarily due to lower headcount,
lower share-based compensation, and lower cooperative
advertising expenses, partially offset by higher
profit-dependent compensation. The increase in 2006 compared to
2005 was primarily due to share-based compensation resulting
from the implementation of SFAS No. 123(R) in 2006,
and to a lesser extent, higher headcount. Partially offsetting
these increases were lower marketing program spending and lower
profit-dependent compensation.
R&D along with marketing, general and administrative
expenses were 29% of net revenue in 2007, 34% of net revenue in
2006, and 28% of net revenue in 2005. Fiscal year 2005 included
53 weeks. The percentage decline in 2007 compared to 2006
is an indication of our progress toward improving our cost
structure and efficiency as we grew revenue at a faster rate
than operating expenses.
Restructuring and Asset Impairment Charges. In the
third quarter of 2006, management approved several actions that
were recommended by our structure and efficiency task force as
part of a restructuring plan designed to improve operational
efficiency and financial results. Some of these activities
involve cost savings or other actions that do not result in
restructuring charges, such as better utilization of assets,
reduced spending, and organizational efficiencies. The
efficiency program includes headcount targets for various groups
within the company, and these targets are being met through
ongoing employee attrition and terminations. In addition,
business divestitures further reduce our headcount.
Restructuring and asset impairment charges for the three years
ended December 29, 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
2006
|
|
2005
|
Employee severance and benefit arrangements
|
|
$
|
289
|
|
$
|
238
|
|
$
|
|
Asset impairments
|
|
|
227
|
|
|
317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restructuring and asset impairment charges
|
|
$
|
516
|
|
$
|
555
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
During 2006, we completed the divestiture of three businesses
concurrently with the ongoing execution of our efficiency
program. See Note 13: Divestitures in
Part II, Item 8 of this
Form 10-K
for further discussion. In connection with the divestiture of
certain assets of our communications and application processor
business, we recorded impairment charges of $103 million
related to the write-down of manufacturing tools to their fair
value, less the cost to dispose of the assets. We determined the
fair value using a market-based valuation technique. In
addition, as a result of both this divestiture and a subsequent
assessment of our worldwide manufacturing capacity operations,
we placed for sale our fabrication facility in Colorado Springs,
Colorado. This plan resulted in an impairment charge of
$214 million to write down to fair value the land,
building, and equipment asset grouping that has been principally
used to support our communications and application processor
business. We determined the fair market value of the asset
grouping using an average of the results from using the cost
approach and market approach valuation techniques.
35
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
During 2007, we incurred an additional $54 million in asset
impairment charges as a result of softer than anticipated market
conditions related to the Colorado Springs facility. Also, we
recorded land and building write-downs related to certain
facilities in Santa Clara, California. In addition, during
the fourth quarter we incurred $85 million in asset
impairment charges related to the anticipated divestiture of our
NOR flash memory business. The impairment charges were
determined using the revised fair value, less selling costs,
that we expected to receive upon completion of the divestiture.
See Note 13: Divestitures in Part II,
Item 8 of this
Form 10-K
for further information on this divestiture, which is expected
to be completed during the first quarter of 2008.
The following table summarizes the restructuring and asset
impairment activity for 2006 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Severance
|
|
|
|
|
|
|
|
(In Millions)
|
|
and Benefits
|
|
|
Asset Impairments
|
|
|
Total
|
|
Accrued restructuring balance as of December 31, 2005
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Additional accruals
|
|
|
238
|
|
|
|
317
|
|
|
|
555
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments
|
|
|
(190
|
)
|
|
|
|
|
|
|
(190
|
)
|
Non-cash settlements
|
|
|
|
|
|
|
(317
|
)
|
|
|
(317
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued restructuring balance as of December 30, 2006
|
|
$
|
48
|
|
|
$
|
|
|
|
$
|
48
|
|
Additional accruals
|
|
|
299
|
|
|
|
227
|
|
|
|
526
|
|
Adjustments
|
|
|
(10
|
)
|
|
|
|
|
|
|
(10
|
)
|
Cash payments
|
|
|
(210
|
)
|
|
|
|
|
|
|
(210
|
)
|
Non-cash settlements
|
|
|
|
|
|
|
(227
|
)
|
|
|
(227
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued restructuring balance as of December 29, 2007
|
|
$
|
127
|
|
|
$
|
|
|
|
$
|
127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded the additional accruals, net of adjustments, as
restructuring and asset impairment charges on the consolidated
statements of income. The remaining accrual as of
December 29, 2007 was related to severance benefits that we
recorded as a current liability within accrued compensation and
benefits on the consolidated balance sheets.
From the third quarter of 2006 through the fourth quarter of
2007, we incurred a total of $1.1 billion in restructuring
and asset impairment charges related to this plan. These charges
included a total of $527 million related to employee
severance and benefit arrangements due to the termination of
approximately 9,900 employees, of which
7,700 employees had left the company as of
December 29, 2007. A substantial majority of these employee
terminations affected employees within manufacturing,
information technology, and marketing. Of the employee severance
and benefit charges incurred as of December 29, 2007, we
had paid $400 million. The restructuring and asset
impairment charges also included $544 million in asset
impairment charges.
We estimate that employee severance and benefit charges to date
will result in gross annual savings of approximately
$1.0 billion, a portion of which we began to realize in the
third quarter of 2006. We are realizing these savings within
marketing, general and administrative expenses, cost of sales,
and R&D. Our outlook for the first quarter of 2008 is for
additional restructuring and asset impairment charges of
$100 million. We may incur additional restructuring charges
in the future for employee severance and benefit arrangements,
as well as facility-related or other exit activities.
Amortization of Acquisition-Related Intangibles and
Costs. Amortization of acquisition-related intangibles
and costs was $16 million in 2007 ($42 million in 2006
and $126 million in 2005). The decreased amortization each
year compared to the previous year was primarily due to a
portion of the intangibles related to prior acquisitions
becoming fully amortized.
36
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
Gains
(losses) on Equity Investments, Interest and Other, and
Provision for Taxes
Gains (losses) on equity investments, net; interest and other,
net; and provision for taxes for the three years ended
December 29, 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Gains (losses) on equity investments, net
|
|
$
|
157
|
|
|
$
|
214
|
|
|
$
|
(45
|
)
|
Interest and other, net
|
|
$
|
793
|
|
|
$
|
1,202
|
|
|
$
|
565
|
|
Provision for taxes
|
|
$
|
(2,190
|
)
|
|
$
|
(2,024
|
)
|
|
$
|
(3,946
|
)
|
Net gains on equity investments were $157 million in 2007
compared to $214 million in 2006. During 2007, we
recognized higher losses from our equity method investments,
primarily from our investment in Clearwire Corporation. In
addition, we recognized higher impairment charges, partially
offset by higher gains on sales of equity investments and other
equity transactions. Impairment charges were $120 million
in 2007.
Net gains on equity investments were $214 million in 2006
compared to net losses of $45 million in 2005. During 2006,
we recognized higher gains on sales of equity investments and
lower impairment charges compared to 2005. Net gains on equity
investments in 2006 included the gain of $103 million on
the sale of a portion of our investment in Micron, which was
sold for $275 million. Impairment charges were
$79 million in 2006 compared to $208 million in 2005.
During 2005, impairment charges included a $105 million
impairment charge on our investment in Micron.
Interest and other, net decreased to $793 million in 2007
compared to $1.2 billion in 2006, primarily due to lower
divestiture gains, partially offset by higher interest income
resulting primarily from higher average investment balances, and
to a lesser extent higher interest rates. Interest and other,
net increased to $1.2 billion in 2006 compared to
$565 million in 2005, reflecting net gains of
$612 million for three divestitures (see
Note 13: Divestitures in Part II,
Item 8 of this
Form 10-K)
and higher interest income as a result of higher interest rates,
partially offset by lower average investment balances.
Our effective income tax rate was 23.9% in 2007 (28.6% in 2006
and 31.3% in 2005). The rate decreased in 2007 compared to 2006,
primarily due to the reversal of previously accrued taxes of
$481 million (including $50 million of accrued
interest) related to settlements with the U.S. Internal
Revenue Service in the first and second quarters of 2007. Our
effective income tax rate was lower in 2006 compared to 2005,
primarily due to a higher percentage of our profits being
derived from lower tax jurisdictions. In addition, the rate for
2005 included an increase to the tax provision of approximately
$265 million as a result of the decision to repatriate
non-U.S. earnings
under the American Jobs Creation Act of 2004. Partially
offsetting the decrease in the effective tax rate was the impact
of share-based compensation. In 2006, the phasing out of the tax
benefit for export sales only slightly increased the effective
tax rate compared to 2005, given the decrease in income before
taxes.
Share-Based
Compensation
Share-based compensation totaled $952 million in 2007,
$1.4 billion in 2006, and zero in 2005. Share-based
compensation was included in cost of sales and operating
expenses. We adopted SFAS No. 123(R) under the
modified prospective transition method, effective beginning in
2006. Prior to the adoption of SFAS No. 123(R), we
accounted for our equity incentive plans under the intrinsic
value recognition and measurement principles of Accounting
Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees and related interpretations.
Accordingly, no share-based compensation was recognized in net
income. The decrease in share-based compensation from 2006 to
2007 was a result of fewer equity awards vesting in 2007
compared to 2006.
37
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
As of December 29, 2007, unrecognized share-based
compensation costs and the weighted average periods over which
the costs are expected to be recognized were as follows:
|
|
|
|
|
|
|
|
|
Unrecognized
|
|
|
|
|
|
Share-Based
|
|
|
Weighted
|
|
|
Compensation
|
|
|
Average
|
(Dollars in Millions)
|
|
Costs
|
|
|
Period
|
Stock options
|
|
$
|
524
|
|
|
1.1 years
|
Restricted stock units
|
|
$
|
707
|
|
|
1.6 years
|
Stock purchase plan
|
|
$
|
16
|
|
|
1 month
|
Liquidity
and Capital Resources
Cash, short-term investments, fixed-income debt instruments
included in trading assets, and debt at the end of each period
were as follows:
|
|
|
|
|
|
|
|
|
|
|
Dec. 29,
|
|
|
Dec. 30,
|
|
(Dollars in Millions)
|
|
2007
|
|
|
2006
|
|
Cash, short-term investments, and fixed-income debt instruments
included in trading assets
|
|
$
|
14,871
|
|
|
$
|
9,552
|
|
Short-term and long-term debt
|
|
$
|
2,122
|
|
|
$
|
2,028
|
|
Debt as % of stockholders equity
|
|
|
5.0
|
%
|
|
|
5.5
|
%
|
In summary, our cash flows were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Net cash provided by operating activities
|
|
$
|
12,625
|
|
|
$
|
10,632
|
|
|
$
|
14,851
|
|
Net cash used for investing activities
|
|
|
(9,926
|
)
|
|
|
(4,988
|
)
|
|
|
(6,415
|
)
|
Net cash used for financing activities
|
|
|
(1,990
|
)
|
|
|
(6,370
|
)
|
|
|
(9,519
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
709
|
|
|
$
|
(726
|
)
|
|
$
|
(1,083
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities
Cash provided by operating activities is net income adjusted for
certain non-cash items and changes in assets and liabilities.
For 2007 compared to 2006, the increase in cash provided by
operating activities was primarily due to higher net income.
Changes to working capital in 2007 from 2006 were approximately
flat, with a decrease in inventory levels in 2007 compared to an
increase in 2006, offset by higher purchases of trading assets
exceeding maturities. Lower product costs and the
reclassification of NOR inventory to held for sale in
conjunction with our anticipated divestiture of the NOR flash
memory business contributed to the lower inventory balance in
2007. In comparison, our inventory increased in 2006 as a result
of higher product costs. In 2007, we began designating
floating-rate securitized financial instruments purchased after
2006 as trading assets.
For 2007 and 2006, our two largest customers accounted for 35%
of our net revenue. In 2007, one of these customers accounted
for 18% of our net revenue (19% in 2006) and another
customer accounted for 17% of our net revenue (16% in 2006).
Additionally, these two largest customers accounted for 35% of
our accounts receivable at December 29, 2007 and
December 30, 2006.
For 2006 compared to 2005, the largest contributing factors to
the decrease in cash provided by operating activities were lower
net income, lower net maturities of trading assets, and changes
in the amount of estimated tax payments, partially offset by a
decrease in accounts receivable balances. Fiscal year 2006
included share-based compensation charges of $1.4 billion
(zero for 2005).
38
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
Investing
Activities
Investing cash flows consist primarily of capital expenditures
and net investment purchases, maturities, and disposals. For
2007 compared to 2006, the increase in cash used for investing
activities was primarily due to higher purchases of
available-for-sale investments. Lower capital spending was
mostly offset by lower proceeds from divestitures.
During 2007, we purchased more available-for-sale investments,
particularly short-term, highly liquid investments, as our level
of cash available to invest increased. We received lower cash
from divestitures: $32 million for one divestiture in 2007
compared to $752 million for three divestitures in 2006
(see Note 13: Divestitures in Part II,
Item 8 of this
Form 10-K).
Our capital expenditures were $5.0 billion in 2007 and were
primarily for the ramping of our new fabrication facilities.
Capital expenditures for fiscal 2008 are currently expected to
be approximately $5.2 billion, plus or minus
$200 million. Capital expenditures during fiscal 2008 are
expected to be funded by cash flows from operating activities.
Capital expenditures were $5.9 billion in 2006 and 2005.
The decrease in cash used in investing activities in 2006
compared to 2005 was primarily due to higher net maturities and
sales of available-for-sale investments, cash received from
divestitures in 2006, and the sale of a portion of our
investment in Micron for $275 million. Partially offsetting
these impacts, in 2006 we paid $600 million in cash for our
equity investment in Clearwire and $615 million in cash for
our equity investment in IMFT. In addition to the
$615 million paid in cash, our initial investment in IMFT
of $1.2 billion included the issuance of $581 million
in notes (reflected as a financing activity) and a capital
contribution of $128 million.
Financing
Activities
Financing cash flows consist primarily of repurchases and
retirement of common stock, payment of dividends to
stockholders, and proceeds from sales of shares through employee
equity incentive plans.
For 2007 compared to 2006, the lower cash used in financing
activities was primarily due to an increase in proceeds from
sales of shares through employee equity incentive plans and a
decrease in repurchases and retirement of common stock. Proceeds
from sales of shares through employee equity incentive plans
totaled $3.1 billion in 2007 compared to $1.0 billion
in 2006, due to a higher volume of exercises of stock options
because of our stock price trading at higher levels in 2007
compared to 2006, and a higher weighted average exercise price.
During 2007, we repurchased 111 million shares of common
stock as part of our common stock repurchase program at a cost
of $2.75 billion (226 million shares at a cost of
$4.6 billion during 2006). As of December 29, 2007,
$14.5 billion remained available for repurchase under the
existing repurchase authorization of $25 billion. We base
our level of stock repurchases on internal cash management
decisions, and this level may fluctuate. Our dividend payments
for 2007 were $2.6 billion. On January 17, 2008, our
Board of Directors declared a cash dividend of $0.1275 per
common share for the first quarter of 2008, which represents a
13% increase in our quarterly cash dividend amount.
The lower cash used in financing activities in 2006 compared to
2005 was primarily due to a decrease in repurchases and
retirement of common stock, partially offset by additions to
long-term debt in 2005 of $1.7 billion.
39
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
Liquidity
Cash generated by operations is used as our primary source of
liquidity. As of December 29, 2007, we also had an
investment portfolio valued at $19.3 billion, consisting of
cash and cash equivalents, fixed-income debt instruments
included in trading assets, and short- and long-term
investments. Substantially all of our investments in debt
instruments are with A/A2 or better rated issuers, and the
substantial majority of the issuers are rated AA/Aa2 or better.
In addition to requiring all investments with original
maturities of up to six months to be rated at least
A-1/P-1 by
Standard & Poors/Moodys, our investment policy
specifies a higher minimum rating for investments with longer
maturities. For instance, investments with maturities beyond
three years require a minimum rating of AA-/Aa3. Government
regulations imposed on investment alternatives of our
non-U.S. subsidiaries, or the absence of A rated
counterparties in certain countries, result in some minor
exceptions, which are reviewed annually by the Finance Committee
of our Board of Directors. As of December 29, 2007,
$9.5 billion of our portfolio had a remaining maturity of
less than three months, and a substantial majority of our
investments have remaining maturities of two years or less. In
2007, we did not recognize any other-than-temporary impairments
on our portfolio of available-for-sale investments. During 2007,
$24 million of unrealized losses were recognized related to
debt instruments classified as trading assets, and as of
December 29, 2007, $62 million of losses were
unrealized related to debt instruments classified as
available-for-sale. Substantially all of our unrealized losses
can be attributed to fair value fluctuations in an unstable
credit environment. As of December, 29, 2007, only
$125 million of our investments did not comply with our
credit guidelines, due to rating downgrades after the initial
investment. However, these investments continue to be rated as
investment-grade securities.
Our portfolio includes $1.8 billion of asset-backed
securities collateralized by first-lien mortgages, credit card
debt, student loans, and auto loans. As of December 29,
2007, approximately one-third of our asset-backed securities
were collateralized by first-lien mortgages. The mortgage-backed
securities have an 80% loan-to-value ratio on average, and they
include only first-lien mortgages. The average subordination
level of the securities that we held as of December 29,
2007 was 27% (ranging from 18% to 40%), implying that the
mortgage pool would have to suffer losses beyond those levels
before our securities experience realized losses. In 2007, our
asset-backed securities experienced unrealized fair value
declines totaling $42 million of which $19 million was
recognized in our income statement for those classified under
trading assets. As of December 29, 2007, all of our
investments in asset-backed securities were rated AAA/Aaa, and
the weighted average remaining maturity was less than two years.
We have the intent and ability to hold our debt investments for
a sufficient period of time to allow for recovery of the
principal amounts invested.
We continually monitor the credit risk in our portfolio and
mitigate our credit and interest rate exposures in accordance
with the policies approved by our Board of Directors. We intend
to continue to closely monitor future developments in the credit
markets and make appropriate changes to our investment policy as
deemed necessary. Based on our ability to liquidate our
investment portfolio and our expected operating cash flows, we
do not anticipate any liquidity constraints as a result of the
current credit environment.
Another potential source of liquidity is authorized borrowings,
including commercial paper, of up to $3.0 billion. There
were no borrowings under our commercial paper program during
2007. We also have an automatic shelf registration on file with
the SEC pursuant to which we may offer an indeterminate amount
of debt, equity, and other securities.
We believe that we have the financial resources needed to meet
business requirements for the next 12 months, including
capital expenditures for the expansion or upgrading of worldwide
manufacturing and assembly and test capacity, working capital
requirements, the dividend program, potential stock repurchases,
and potential acquisitions or strategic investments.
40
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
Contractual
Obligations
The following table summarizes our significant contractual
obligations at December 29, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
Less than
|
|
|
|
|
|
More than
|
(In Millions)
|
|
Total
|
|
1 Year
|
|
13 years
|
|
35 years
|
|
5 Years
|
Operating lease obligations
|
|
$
|
320
|
|
$
|
95
|
|
$
|
117
|
|
$
|
56
|
|
$
|
52
|
Capital purchase
obligations1
|
|
|
2,289
|
|
|
2,283
|
|
|
6
|
|
|
|
|
|
|
Other purchase obligations and
commitments2
|
|
|
1,662
|
|
|
600
|
|
|
925
|
|
|
137
|
|
|
|
Long-term debt
obligations3
|
|
|
3,653
|
|
|
73
|
|
|
305
|
|
|
133
|
|
|
3,142
|
Other long-term
liabilities3,
4
|
|
|
1,444
|
|
|
308
|
|
|
345
|
|
|
187
|
|
|
604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total5
|
|
$
|
9,368
|
|
$
|
3,359
|
|
$
|
1,698
|
|
$
|
513
|
|
$
|
3,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Capital purchase obligations represent commitments for the
construction or purchase of property, plant and equipment. They
were not recorded as liabilities on our consolidated balance
sheet as of December 29, 2007, as we had not yet received
the related goods or taken title to the property. Capital
purchase obligations decreased from $3.3 billion at
December 30, 2006 to $2.3 billion at December 29,
2007, primarily due to the timing of the ramp of our latest
silicon process technology. |
|
2 |
|
Other purchase obligations and commitments include payments
due under various types of licenses, agreements to purchase raw
materials or other goods, as well as payments due under
non-contingent funding obligations. Funding obligations include,
for example, agreements to fund various projects with other
companies. |
|
3 |
|
Amounts represent total anticipated cash payments, including
anticipated interest payments that are not recorded on the
consolidated balance sheets and the short-term portion of the
obligation. Any future settlement of convertible debt would
reduce anticipated interest and/or principal payments. Amounts
exclude fair value adjustments such as discounts or premiums
that affect the amount recorded on the consolidated balance
sheets. |
|
4 |
|
Other long-term liabilities includes income taxes payable.
Long-term income taxes payable include uncertain tax positions,
reduced by the associated federal deduction for state taxes and
non-U.S. tax
credits, and may also include other long-term tax liabilities
that are not uncertain but have not yet been paid. We are unable
to reliably estimate the timing of future payments related to
uncertain tax positions; therefore, $785 million of income
taxes payable has been excluded from the table above. |
|
5 |
|
Total excludes contractual obligations already recorded on
the consolidated balance sheet as current liabilities (except
for the
short-term
portion of the long-term debt and other long-term liabilities)
and certain purchase obligations, which are discussed below. |
Contractual obligations for purchases of goods or services
generally include agreements that are enforceable and legally
binding on Intel and that specify all significant terms,
including fixed or minimum quantities to be purchased; fixed,
minimum, or variable price provisions; and the approximate
timing of the transaction. The table above also includes
agreements to purchase raw materials that have cancellation
provisions requiring little or no payment. The amounts under
such contracts are included in the table above because
management believes that cancellation of these contracts is
unlikely and expects to make future cash payments according to
the contract terms or in similar amounts for similar materials.
For other obligations with cancellation provisions, the amounts
included in the table above were limited to the non-cancelable
portion of the agreement terms,
and/or the
minimum cancellation fee.
We have entered into certain agreements for the purchase of raw
materials or other goods that specify minimum prices and
quantities that are based on a percentage of the total available
market or based on a percentage of our future purchasing
requirements. Due to the uncertainty of the future market and
our future purchasing requirements, obligations under these
agreements are not included in the table above. We estimate our
obligation under these agreements as of December 29, 2007
to be approximately as follows: less than one
year$331 million; one to three
years$377 million; three to five
years$2 million; more than five yearszero. Our
purchase orders for other products are based on our current
manufacturing needs and are fulfilled by our vendors within
short time horizons. In addition, some of our purchase orders
represent authorizations to purchase rather than binding
agreements.
41
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
Contractual obligations that are contingent upon the achievement
of certain milestones are not included in the table above. These
obligations include milestone-based co-marketing agreements,
contingent funding/payment obligations, and milestone-based
equity investment funding. These arrangements are not considered
contractual obligations until the milestone is met by the third
party. As of December 29, 2007, assuming that all future
milestones are met, additional required payments would be
approximately $254 million.
For the majority of restricted stock units granted, the number
of shares issued on the date the restricted stock units vest is
net of the statutory withholding requirements that are paid by
Intel on behalf of our employees. The obligation to pay the
relative taxing authority is not included in the table above, as
the amount is contingent upon continued employment. In addition,
the amount of the obligation is unknown, as it is based in part
on the market price of our common stock when the awards vest.
The expected timing of payments of the obligations above are
estimates based on current information. Timing of payments and
actual amounts paid may be different, depending on the time of
receipt of goods or services, or changes to
agreed-upon
amounts for some obligations. Amounts disclosed as contingent or
milestone-based obligations are dependent on the achievement of
the milestones or the occurrence of the contingent events and
can vary significantly.
We have a contractual obligation to purchase the output of IMFT
and IMFS in proportion to our investments, currently 49% in each
of these ventures. However, IMFS is in its construction phase
and has had no production to date. See Note 19:
Ventures in Part II, Item 8 of this
Form 10-K.
Additionally, we have entered into various contractual
commitments in relation to our investments in IMFT and IMFS.
Some of these commitments are with Micron, and some are directly
with IMFT or IMFS. The following are the significant contractual
commitments:
|
|
|
|
|
Subject to certain conditions, Intel and Micron each agreed to
contribute up to approximately $1.4 billion for IMFT and up
to approximately $1.7 billion for IMFS in the three years
following the initial capital contributions. Of these amounts,
as of December 29, 2007, our remaining commitments were
approximately $260 million for IMFT and approximately
$1.5 billion for IMFS.
|
|
|
We also have several agreements with Micron related to
intellectual property rights, and R&D funding related to
NAND flash manufacturing and IMFT. See Note 19:
Ventures in Part II, Item 8 of this
Form 10-K.
|
Off-Balance-Sheet
Arrangements
As of December 29, 2007, we did not have any significant
off-balance-sheet arrangements, as defined in
Item 303(a)(4)(ii) of SEC
Regulation S-K.
42
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
Business
Outlook
Our future results of operations and the topics of other
forward-looking statements contained in this
Form 10-K,
including this MD&A, involve a number of risks and
uncertaintiesin particular, our goals and strategies; new
product introductions; plans to cultivate new businesses;
pending divestitures; future economic conditions; revenue;
pricing; gross margin and costs; capital spending; depreciation;
R&D expenses; marketing, general and administrative
expenses; potential impairment of investments; our effective tax
rate; pending legal proceedings; net gains (losses) from equity
investments; and interest and other, net. Our future results of
operations may also be affected by the amount, type, and
valuation of share-based awards granted as well as the amount of
awards cancelled due to employee turnover and the timing of
award exercises by employees. We are focusing on efforts to
improve operational efficiency and reduce spending that may
result in several actions that could have an impact on expense
levels and gross margin. In addition to the various important
factors discussed above, a number of other important factors
could cause actual results to differ materially from our
expectations. See the risks described in Risk
Factors in Part I, Item 1A of this
Form 10-K.
Our expectations for 2008 are as follows:
|
|
|
|
|
Gross margin: 57% plus or minus a few points. The
57% midpoint is higher than our 2007 gross margin of 51.9%,
primarily due to expected lower unit costs and lower
start-up
costs, and to a lesser extent, the divestiture of lower margin
businesses.
|
|
|
Capital spending: approximately $5.2 billion,
plus or minus $200 million, compared to $5.0 billion
in 2007.
|
|
|
Depreciation: approximately $4.4 billion, plus
or minus $100 million, compared to $4.5 billion in
2007.
|
|
|
Total spending: spending on R&D, plus
marketing, general and administrative expenses in 2008 is
expected to be approximately $11.4 billion. The expectation
for total spending in 2008 is higher than our 2007 spending of
$11.2 billion, as process development engineers transition
from 45nm
start-up
activities to 32nm development, causing a movement of spending
from cost of sales to R&D.
|
|
|
Research and development spending: approximately
$5.9 billion.
|
|
|
Tax rate: approximately 31%. The estimated effective
tax rate is based on tax law in effect at December 29, 2007
and current expected income.
|
Status of
Business Outlook
We expect that our corporate representatives will, from time to
time, meet privately with investors, investment analysts, the
media, and others, and may reiterate the forward-looking
statements contained in the Business Outlook section
and elsewhere in this
Form 10-K,
including any such statements that are incorporated by reference
in this
Form 10-K.
At the same time, we will keep this
Form 10-K
and our most current business outlook publicly available on our
Investor Relations web site at www.intc.com. The public
can continue to rely on the business outlook published on the
web site as representing our current expectations on matters
covered, unless we publish a notice stating otherwise. The
statements in the Business Outlook and other
forward-looking statements in this
Form 10-K
are subject to revision during the course of the year in our
quarterly earnings releases and SEC filings and at other times.
From the close of business on March 7, 2008 until our
quarterly earnings release is published, presently scheduled for
April 15, 2008, we will observe a quiet period.
During the quiet period, the Business Outlook and
other forward-looking statements first published in our
Form 8-K
filed on January 15, 2008, as reiterated or updated as
applicable, in this
Form 10-K,
should be considered historical, speaking as of prior to the
quiet period only and not subject to update. During the quiet
period, our representatives will not comment on our business
outlook or our financial results or expectations. The exact
timing and duration of the routine quiet period, and any others
that we utilize from time to time, may vary at our discretion.
43
ITEM 7A. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to financial market risks, including changes in
currency exchange rates, interest rates, and equity prices. We
use derivative financial instruments primarily to mitigate these
risks. All of the potential changes noted below are based on
sensitivity analyses performed on our financial positions at
December 29, 2007 and December 30, 2006. Actual
results may differ materially.
Currency
Exchange Rates
We generally hedge currency risks of
non-U.S.-dollar-denominated
investments in debt instruments with offsetting currency
borrowings, currency forward contracts, or currency interest
rate swaps. Gains and losses on these
non-U.S.-currency
investments would generally be offset by corresponding losses
and gains on the related hedging instruments, resulting in
negligible net exposure.
A majority of our revenue, expense, and capital purchasing
activities are transacted in U.S. dollars. However, certain
operating expenditures and capital purchases are incurred in or
exposed to other currencies, primarily the euro, the Israeli
shekel, and the Chinese yuan. To protect against reductions in
value and the volatility of future cash flows caused by changes
in currency exchange rates, we have established balance sheet
and anticipated transaction risk management programs. Currency
forward contracts and currency options are generally utilized in
these hedging programs. Our hedging programs reduce, but do not
always entirely eliminate, the impact of currency exchange rate
movements (see Risk Factors in Part II, Item 1A of
this Form 10-K). We considered the historical trends in currency
exchange rates and determined that it was reasonably possible
that a weighted average adverse change of 15% in currency
exchange rates could be experienced in the near term. Such an
adverse change, after taking into account hedges and offsetting
positions, would have resulted in an adverse impact on income
before taxes of less than $35 million at the end of 2007
and 2006.
Interest
Rates
We are exposed to interest rate risk related to our investment
portfolio and debt issuances. The primary objective of our
investments in debt instruments is to preserve principal while
maximizing yields. To achieve this objective, the returns on all
of our investments in debt instruments are generally based on
three-month LIBOR, or, if the maturities are longer than three
months, the returns are generally swapped into U.S. dollar
three-month LIBOR-based returns. We considered the historical
volatility of the interest rates experienced in prior years and
the duration of our investment portfolio and debt issuances, and
determined that it was reasonably possible that an adverse
change of 80 basis points (0.80%), approximately 17% of the
rate at December 29, 2007 (15% of the rate at
December 30, 2006), could be experienced in the near term.
A hypothetical 0.80% decrease in interest rates, after taking
into account hedges and offsetting positions, would have
resulted in a decrease in the fair value of our net investment
position of approximately $65 million as of
December 29, 2007 and $50 million as of
December 30, 2006. The decline reflects only the direct
impact of the change in interest rates. Other economic
variables, such as equity market fluctuations and changes in
relative credit risk, could result in a significantly higher
decline in our net investment portfolio.
Equity
Prices
Our marketable investments include marketable equity securities,
equity derivative instruments such as warrants and options, and
marketable equity method investments. To the extent that our
marketable equity securities have strategic value, we typically
do not attempt to reduce or eliminate our market exposure;
however, for our investments in strategic equity derivative
instruments, including warrants, we may enter into transactions
to reduce or eliminate the market risks. For securities that we
no longer consider strategic, we evaluate legal, market, and
economic factors in our decision on the timing of disposal and
whether it is possible and appropriate to hedge the equity
market risk.
The marketable equity securities included in trading assets are
held to generate returns that offset changes in liabilities
related to the equity market risk of certain deferred
compensation arrangements. The gains and losses from changes in
fair value of these equity securities are generally offset by
the gains and losses on the related liabilities, resulting in a
net exposure of less than $10 million as of
December 29, 2007 and December 30, 2006, assuming a
reasonably possible decline in market prices of approximately
10% in the near term.
As of December 29, 2007, the fair value of our marketable
equity securities and equity derivative instruments, including
hedging positions, was $1.0 billion ($427 million as
of December 30, 2006). Our investments in VMware and Micron
constituted 92% of our marketable equity securities as of
December 29, 2007, and were carried at a fair market value
of $794 million and $123 million, respectively. Our
marketable equity method investment had a carrying value of
$508 million and a fair value of $522 million as of
December 29, 2007.
44
To assess the market price sensitivity of our marketable equity
investments, we analyzed the historical movements over the past
several years of high-technology stock indices that we
considered appropriate. For our investments in companies that
have been publicly traded for only a limited time, we analyzed
the implied volatility of the related company based on freely
traded options. Our marketable equity method investment is
excluded from our analysis, as the carrying value does not
fluctuate based on market price changes. Therefore, the
potential fair value decline would not be indicative of the
impact on our financial statements, unless an
other-than-temporary impairment was deemed necessary. Based on
our sensitivity analysis, we estimated that it was reasonably
possible that the prices of the stocks of our marketable equity
securities could experience a loss of 55% in the near term (30%
as of December 30, 2006). Assuming a loss of 55% in market
prices, and after reflecting the impact of hedges and offsetting
positions, the aggregate value of our marketable equity
investments could decrease by approximately $565 million,
based on the value as of December 29, 2007 (a decrease in
value of $134 million, based on the value as of
December 30, 2006 using an assumed loss of 30%). This
estimate is not necessarily indicative of future performance,
and actual results may differ materially. The increase in
exposure from December 30, 2006 to December 29, 2007
is due to our purchase of VMware during 2007, its stock price
volatility, and the weight of our investment in VMware in
relation to our total marketable equity securities.
Many of the same factors that could result in an adverse
movement of equity market prices affect our non-marketable
equity investments, although we cannot quantify the impact
directly. Such a movement and the underlying economic conditions
would negatively affect the prospects of the companies we invest
in, their ability to raise additional capital, and the
likelihood of our being able to realize value in our investments
through liquidity events such as initial public offerings,
mergers, and private sales. These types of investments involve a
great deal of risk, and there can be no assurance that any
specific company will grow or become successful; consequently,
we could lose all or part of our investment. Our non-marketable
equity investments, excluding investments accounted for under
the equity method, had a carrying amount of $805 million as
of December 29, 2007 ($733 million as of
December 30, 2006). The carrying amount of these
investments approximated fair value as of December 29, 2007
and December 30, 2006. As of December 29, 2007, the
carrying amount of our non-marketable equity method investments
was $2.6 billion ($2.0 billion as of December 30,
2006) and consisted primarily of our investment in IMFT of
$2.2 billion ($1.3 billion as of December 30,
2006).
45
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
Page
|
|
|
|
47
|
|
|
|
|
|
48
|
|
|
|
|
|
49
|
|
|
|
|
|
50
|
|
|
|
|
|
51
|
|
|
|
|
|
92
|
|
|
|
|
|
94
|
46
INTEL
CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Years Ended December 29, 2007
|
|
|
|
|
|
|
|
|
|
(In Millions, Except Per Share Amounts)
|
|
20071
|
|
|
20061
|
|
|
2005
|
|
|
Net revenue
|
|
$
|
38,334
|
|
|
$
|
35,382
|
|
|
$
|
38,826
|
|
Cost of sales
|
|
|
18,430
|
|
|
|
17,164
|
|
|
|
15,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
19,904
|
|
|
|
18,218
|
|
|
|
23,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
5,755
|
|
|
|
5,873
|
|
|
|
5,145
|
|
Marketing, general and administrative
|
|
|
5,401
|
|
|
|
6,096
|
|
|
|
5,688
|
|
Restructuring and asset impairment charges
|
|
|
516
|
|
|
|
555
|
|
|
|
|
|
Amortization of acquisition-related intangibles and costs
|
|
|
16
|
|
|
|
42
|
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
11,688
|
|
|
|
12,566
|
|
|
|
10,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
8,216
|
|
|
|
5,652
|
|
|
|
12,090
|
|
Gains (losses) on equity investments, net
|
|
|
157
|
|
|
|
214
|
|
|
|
(45
|
)
|
Interest and other, net
|
|
|
793
|
|
|
|
1,202
|
|
|
|
565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
9,166
|
|
|
|
7,068
|
|
|
|
12,610
|
|
Provision for taxes
|
|
|
2,190
|
|
|
|
2,024
|
|
|
|
3,946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,976
|
|
|
$
|
5,044
|
|
|
$
|
8,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
1.20
|
|
|
$
|
0.87
|
|
|
$
|
1.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share
|
|
$
|
1.18
|
|
|
$
|
0.86
|
|
|
$
|
1.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
5,816
|
|
|
|
5,797
|
|
|
|
6,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
5,936
|
|
|
|
5,880
|
|
|
|
6,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Cost of sales and operating expenses for the years ended
December 29, 2007 and December 30, 2006 include
share-based compensation. See Note 2: Accounting
Policies and Note 3: Employee Equity Incentive
Plans. |
See accompanying notes.
47
INTEL
CORPORATION
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
December 29, 2007 and December 30, 2006
|
|
|
|
|
|
|
(In Millions, Except Par Value)
|
|
2007
|
|
|
2006
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,307
|
|
|
$
|
6,598
|
|
Short-term investments
|
|
|
5,490
|
|
|
|
2,270
|
|
Trading assets
|
|
|
2,566
|
|
|
|
1,134
|
|
Accounts receivable, net of allowance for doubtful accounts of
$27 ($32 in 2006)
|
|
|
2,576
|
|
|
|
2,709
|
|
Inventories
|
|
|
3,370
|
|
|
|
4,314
|
|
Deferred tax assets
|
|
|
1,186
|
|
|
|
997
|
|
Other current assets
|
|
|
1,390
|
|
|
|
258
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
23,885
|
|
|
|
18,280
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
16,918
|
|
|
|
17,602
|
|
Marketable equity securities
|
|
|
987
|
|
|
|
398
|
|
Other long-term investments
|
|
|
4,398
|
|
|
|
4,023
|
|
Goodwill
|
|
|
3,916
|
|
|
|
3,861
|
|
Other long-term assets
|
|
|
5,547
|
|
|
|
4,204
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
55,651
|
|
|
$
|
48,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
$
|
142
|
|
|
$
|
180
|
|
Accounts payable
|
|
|
2,361
|
|
|
|
2,256
|
|
Accrued compensation and benefits
|
|
|
2,417
|
|
|
|
1,644
|
|
Accrued advertising
|
|
|
749
|
|
|
|
846
|
|
Deferred income on shipments to distributors
|
|
|
625
|
|
|
|
599
|
|
Other accrued liabilities
|
|
|
1,938
|
|
|
|
1,192
|
|
Income taxes payable
|
|
|
339
|
|
|
|
1,797
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
8,571
|
|
|
|
8,514
|
|
|
|
|
|
|
|
|
|
|
Long-term income taxes payable
|
|
|
785
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
411
|
|
|
|
265
|
|
Long-term debt
|
|
|
1,980
|
|
|
|
1,848
|
|
Other long-term liabilities
|
|
|
1,142
|
|
|
|
989
|
|
Commitments and contingencies (Notes 20 and 21)
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 50 shares
authorized; none issued
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 10,000 shares
authorized; 5,818 issued and outstanding (5,766 in
2006) and capital in excess of par value
|
|
|
11,653
|
|
|
|
7,825
|
|
Accumulated other comprehensive income (loss)
|
|
|
261
|
|
|
|
(57
|
)
|
Retained earnings
|
|
|
30,848
|
|
|
|
28,984
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
42,762
|
|
|
|
36,752
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
55,651
|
|
|
$
|
48,368
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
48
INTEL
CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Years Ended December 29, 2007
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Cash and cash equivalents, beginning of year
|
|
$
|
6,598
|
|
|
$
|
7,324
|
|
|
$
|
8,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used for) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
6,976
|
|
|
|
5,044
|
|
|
|
8,664
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
4,546
|
|
|
|
4,654
|
|
|
|
4,345
|
|
Share-based compensation
|
|
|
952
|
|
|
|
1,375
|
|
|
|
|
|
Restructuring, asset impairment, and net loss on retirement of
assets
|
|
|
564
|
|
|
|
635
|
|
|
|
74
|
|
Excess tax benefit from share-based payment arrangements
|
|
|
(118
|
)
|
|
|
(123
|
)
|
|
|
|
|
Amortization of intangibles and other acquisition-related costs
|
|
|
252
|
|
|
|
258
|
|
|
|
250
|
|
(Gains) losses on equity investments, net
|
|
|
(157
|
)
|
|
|
(214
|
)
|
|
|
45
|
|
(Gains) on divestitures
|
|
|
(21
|
)
|
|
|
(612
|
)
|
|
|
|
|
Deferred taxes
|
|
|
(443
|
)
|
|
|
(325
|
)
|
|
|
(413
|
)
|
Tax benefit from employee equity incentive plans
|
|
|
|
|
|
|
|
|
|
|
351
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading assets
|
|
|
(1,429
|
)
|
|
|
324
|
|
|
|
1,606
|
|
Accounts receivable
|
|
|
316
|
|
|
|
1,229
|
|
|
|
(912
|
)
|
Inventories
|
|
|
700
|
|
|
|
(1,116
|
)
|
|
|
(500
|
)
|
Accounts payable
|
|
|
102
|
|
|
|
7
|
|
|
|
303
|
|
Income taxes payable and receivable
|
|
|
(248
|
)
|
|
|
(60
|
)
|
|
|
797
|
|
Other assets and liabilities
|
|
|
633
|
|
|
|
(444
|
)
|
|
|
241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
5,649
|
|
|
|
5,588
|
|
|
|
6,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
12,625
|
|
|
|
10,632
|
|
|
|
14,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used for) investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
|
(5,000
|
)
|
|
|
(5,860
|
)
|
|
|
(5,871
|
)
|
Acquisitions, net of cash acquired
|
|
|
(76
|
)
|
|
|
|
|
|
|
(191
|
)
|
Purchases of available-for-sale investments
|
|
|
(11,728
|
)
|
|
|
(5,272
|
)
|
|
|
(8,475
|
)
|
Maturities and sales of available-for-sale investments
|
|
|
8,011
|
|
|
|
7,147
|
|
|
|
8,433
|
|
Investments in non-marketable equity instruments
|
|
|
(1,459
|
)
|
|
|
(1,722
|
)
|
|
|
(193
|
)
|
Net proceeds from divestitures
|
|
|
32
|
|
|
|
752
|
|
|
|
|
|
Other investing activities
|
|
|
294
|
|
|
|
(33
|
)
|
|
|
(118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used for investing activities
|
|
|
(9,926
|
)
|
|
|
(4,988
|
)
|
|
|
(6,415
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used for) financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in short-term debt, net
|
|
|
(39
|
)
|
|
|
(114
|
)
|
|
|
126
|
|
Proceeds from government grants
|
|
|
160
|
|
|
|
69
|
|
|
|
25
|
|
Excess tax benefit from share-based payment arrangements
|
|
|
118
|
|
|
|
123
|
|
|
|
|
|
Additions to long-term debt
|
|
|
125
|
|
|
|
|
|
|
|
1,742
|
|
Repayments and retirement of debt
|
|
|
|
|
|
|
|
|
|
|
(19
|
)
|
Repayment of notes payable
|
|
|
|
|
|
|
(581
|
)
|
|
|
|
|
Proceeds from sales of shares through employee equity incentive
plans
|
|
|
3,052
|
|
|
|
1,046
|
|
|
|
1,202
|
|
Repurchase and retirement of common stock
|
|
|
(2,788
|
)
|
|
|
(4,593
|
)
|
|
|
(10,637
|
)
|
Payment of dividends to stockholders
|
|
|
(2,618
|
)
|
|
|
(2,320
|
)
|
|
|
(1,958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used for financing activities
|
|
|
(1,990
|
)
|
|
|
(6,370
|
)
|
|
|
(9,519
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
709
|
|
|
|
(726
|
)
|
|
|
(1,083
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
7,307
|
|
|
$
|
6,598
|
|
|
$
|
7,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net of amounts capitalized of $57 in 2007 and $60 in
2006
|
|
$
|
15
|
|
|
$
|
25
|
|
|
$
|
27
|
|
Income taxes, net of refunds
|
|
$
|
2,762
|
|
|
$
|
2,432
|
|
|
$
|
3,218
|
|
See accompanying notes.
49
INTEL
CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Related
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
and Capital
|
|
|
Unearned
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
in Excess of Par Value
|
|
|
Stock
|
|
|
Compre-
|
|
|
|
|
|
|
|
Three Years Ended December 29, 2007
|
|
Number of
|
|
|
|
|
|
Compen-
|
|
|
hensive
|
|
|
Retained
|
|
|
|
|
(In Millions, Except Per Share Amounts)
|
|
Shares
|
|
|
Amount
|
|
|
sation
|
|
|
Income (Loss)
|
|
|
Earnings
|
|
|
Total
|
|
|
Balance at December 25, 2004
|
|
|
6,253
|
|
|
$
|
6,143
|
|
|
$
|
(4
|
)
|
|
$
|
152
|
|
|
$
|
32,288
|
|
|
$
|
38,579
|
|
Components of comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,664
|
|
|
|
8,664
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of shares through employee equity incentive
plans, tax benefit of $351, and other
|
|
|
84
|
|
|
|
1,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,553
|
|
Assumption of acquisition-related stock options and amortization
of acquisition-related unearned stock compensation, net of
adjustments
|
|
|
|
|
|
|
2
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
Repurchase and retirement of common stock
|
|
|
(418
|
)
|
|
|
(1,453
|
)
|
|
|
|
|
|
|
|
|
|
|
(9,184
|
)
|
|
|
(10,637
|
)
|
Cash dividends declared ($0.32 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,958
|
)
|
|
|
(1,958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
5,919
|
|
|
|
6,245
|
|
|
|
|
|
|
|
127
|
|
|
|
29,810
|
|
|
|
36,182
|
|
Components of comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,044
|
|
|
|
5,044
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment for initially applying SFAS No. 158, net of
tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(210
|
)
|
|
|
|
|
|
|
(210
|
)
|
Proceeds from sales of shares through employee equity incentive
plans, net excess tax benefit, and other
|
|
|
73
|
|
|
|
1,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,248
|
|
Share-based compensation
|
|
|
|
|
|
|
1,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,375
|
|
Repurchase and retirement of common stock
|
|
|
(226
|
)
|
|
|
(1,043
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,550
|
)
|
|
|
(4,593
|
)
|
Cash dividends declared ($0.40 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,320
|
)
|
|
|
(2,320
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 30, 2006
|
|
|
5,766
|
|
|
|
7,825
|
|
|
|
|
|
|
|
(57
|
)
|
|
|
28,984
|
|
|
|
36,752
|
|
Cumulative-effect adjustments, net of
tax1:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adoption of EITF
06-02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(181
|
)
|
|
|
(181
|
)
|
Adoption of FIN 48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
181
|
|
|
|
181
|
|
Components of comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,976
|
|
|
|
6,976
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
318
|
|
|
|
|
|
|
|
318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of shares through employee equity incentive
plans, net excess tax benefit, and other
|
|
|
165
|
|
|
|
3,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,170
|
|
Share-based compensation
|
|
|
|
|
|
|
952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
952
|
|
Repurchase and retirement of common stock
|
|
|
(113
|
)
|
|
|
(294
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,494
|
)
|
|
|
(2,788
|
)
|
Cash dividends declared ($0.45 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,618
|
)
|
|
|
(2,618
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 29, 2007
|
|
|
5,818
|
|
|
$
|
11,653
|
|
|
$
|
|
|
|
$
|
261
|
|
|
$
|
30,848
|
|
|
$
|
42,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
See Accounting Changes in Note 2:
Accounting Policies for further discussion of the
cumulative-effect adjustments recorded at the beginning of
fiscal year 2007. |
See accompanying notes.
50
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1:
Basis of Presentation
We have a
52- or
53-week
fiscal year that ends on the last Saturday in December. Fiscal
year 2007, a
52-week
year, ended on December 29, 2007. Fiscal year 2006, a
52-week
year, ended on December 30, 2006. Fiscal year 2005, a
53-week year, ended on December 31, 2005. The next
53-week year
will end on December 31, 2011.
Our consolidated financial statements include the accounts of
Intel and our wholly owned subsidiaries. Intercompany accounts
and transactions have been eliminated. We use the equity method
to account for equity investments in instances in which we own
common stock or similar interests (as described by the Emerging
Issues Task Force (EITF) Issue
No. 02-14,
Whether an Investor Should Apply the Equity Method of
Accounting to Investments Other Than Common Stock), and
have the ability to exercise significant influence, but not
control, over the investee.
The U.S. dollar is the functional currency for Intel and
our subsidiaries; therefore, there is no translation adjustment
recorded through accumulated other comprehensive income (loss).
Monetary accounts denominated in
non-U.S. currencies,
such as cash or payables to vendors, have been remeasured to the
U.S. dollar.
Note 2:
Accounting Policies
Use of
Estimates
The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires us
to make estimates and judgments that affect the amounts reported
in our consolidated financial statements and the accompanying
notes. The accounting estimates that require our most
significant, difficult, and subjective judgments include:
|
|
|
|
|
the valuation of non-marketable equity investments;
|
|
|
the assessment of recoverability of long-lived assets;
|
|
|
the recognition and measurement of current and deferred income
tax assets and liabilities (including the measurement of
uncertain tax positions);
|
|
|
the valuation of inventory; and
|
|
|
the valuation and recognition of share-based compensation.
|
The actual results that we experience may differ materially from
our estimates.
Cash
and Cash Equivalents
We consider all highly liquid debt instruments with original
maturities from the date of purchase of approximately three
months or less as cash and cash equivalents.
51
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Trading
Assets
Investments that we designate as trading assets are reported at
fair value, with gains or losses resulting from changes in fair
value recognized in earnings. Our trading asset investments
include:
|
|
|
|
|
Marketable debt instruments when the interest rate or
foreign exchange rate risk is hedged at inception by a related
derivative instrument. We record the gains or losses of these
investments arising from changes in fair value due to interest
rate and currency market fluctuations and credit market
volatility, offset by losses or gains on the related derivative
instruments, in interest and other, net. We designate
floating-rate securitized financial instruments, such as
asset-backed securities, purchased after December 30, 2006
as trading assets.
|
|
|
Equity securities offsetting deferred compensation when
the investments seek to offset changes in liabilities related to
equity and other market risks of certain deferred compensation
arrangements. We offset the gains or losses from changes in fair
value of these equity securities against losses or gains on the
related liabilities and include them in interest and other, net.
|
|
|
Marketable equity securities when we deem the investments
not to be strategic in nature at the time of original
classification, and have the ability and intent to mitigate
equity market risk through the sale or the use of derivative
instruments. For these marketable equity securities, we include
gains or losses from changes in fair value, primarily offset by
losses or gains on related derivative instruments, in gains
(losses) on equity investments, net.
|
Debt
Instrument Investments
We classify debt instruments with original maturities at the
date of purchase greater than approximately three months and
remaining maturities less than one year as short-term
investments. We classify debt instruments with remaining
maturities greater than one year as other long-term investments.
We account for cost basis loan participation notes at amortized
cost and classify them as short-term investments and other
long-term investments based on stated maturities.
Available-for-Sale
Investments
Investments that we designate as available-for-sale are reported
at fair value, with unrealized gains and losses, net of tax,
recorded in accumulated other comprehensive income (loss). We
base the cost of the investment sold on the specific
identification method. Our available-for-sale investments
include:
|
|
|
|
|
Marketable debt instruments when the interest rate and
foreign currency risks are not generally hedged at inception of
the investment or when our designation for trading assets is not
met. We hold these debt instruments to generate a return
commensurate with three-month LIBOR. We record the interest
income and realized gains and losses on the sale of these
instruments in interest and other, net.
|
|
|
Marketable equity securities when the investments are
considered strategic in nature at the time of original
classification. We acquire these equity investments for the
promotion of business and strategic objectives. To the extent
that these investments continue to have strategic value, we
typically do not attempt to reduce or eliminate the inherent
equity market risks through hedging activities. We record the
realized gains or losses on the sale or exchange of marketable
equity securities in gains (losses) on equity investments, net.
|
Non-Marketable
and Other Equity Investments
We account for non-marketable and other equity investments under
either the cost or equity method and include them in other
long-term assets. Our non-marketable and other equity
investments include:
|
|
|
|
|
Equity method investments when we have the ability to
exercise significant influence, but not control, over the
investee. We record equity method adjustments in gains (losses)
on equity investments, net and may do so with up to a
one-quarter lag. Equity method adjustments include: our
proportionate share of investee income or loss, gains or losses
resulting from investee capital transactions, amortization of
certain differences between our carrying value and our equity in
the net assets of the investee at the date of investment, and
other adjustments required by the equity method. Equity method
investments include marketable and non-marketable investments.
|
|
|
Non-marketable cost method investments when we do not
have the ability to exercise significant influence over the
investee.
|
52
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other-Than-Temporary
Impairment
All of our available-for-sale investments and non-marketable and
other equity investments are subject to a periodic impairment
review. Investments are considered to be impaired when a decline
in fair value is judged to be other-than-temporary, for the
following investments:
|
|
|
|
|
Marketable equity securities when the resulting fair
value is significantly below cost basis
and/or the
significant decline has lasted for an extended period of time.
The evaluation that we use to determine whether a marketable
equity security is impaired is based on the specific facts and
circumstances present at the time of assessment, which include
the consideration of general market conditions, the duration and
extent to which the fair value is below cost, and our intent and
ability to hold the investment for a sufficient period of time
to allow for recovery in value. We also consider specific
adverse conditions related to the financial health of and
business outlook for the investee, including industry and sector
performance, changes in technology, operational and financing
cash flow factors, and changes in the investees credit
rating.
|
|
|
Non-marketable equity investments when events or
circumstances are identified that would significantly harm the
fair value of the investment. The indicators that we use to
identify those events and circumstances include:
|
|
|
|
|
|
the investees revenue and earning trends relative to
predefined milestones and overall business prospects;
|
|
|
the technological feasibility of the investees products
and technologies;
|
|
|
the general market conditions in the investees industry or
geographic area, including regulatory or economic changes;
|
|
|
factors related to the investees ability to remain in
business, such as the investees liquidity, debt ratios,
and the rate at which the investee is using its cash; and
|
|
|
the investees receipt of additional funding at a lower
valuation. If an investee obtains additional funding at a
valuation lower than our carrying amount or a new round of
equity funding is required for the investee to remain in
business, and the new round of equity does not appear imminent,
it is presumed that the investment is other than temporarily
impaired, unless specific facts and circumstances indicate
otherwise.
|
|
|
|
|
|
Marketable debt instruments when the fair value is
significantly below amortized cost
and/or the
significant decline has lasted for an extended period of time
and we do not have the intent and ability to hold the investment
for a sufficient period of time to allow for recovery. The
evaluation that we use to determine whether a marketable debt
instrument is impaired is based on the specific facts and
circumstances present at the time of assessment, which include
the consideration of the financial condition and near-term
prospects of the issuer, and the duration and extent to which
the fair value is below cost.
|
Investments that we identify as having an indicator of
impairment are subject to further analysis to determine if the
investment is other than temporarily impaired, in which case we
write down the investment to its estimated fair value. For
non-marketable equity investments that we do not consider viable
from a financial or technological point of view, we write the
entire investment down, since we consider the estimated fair
value to be nominal. We record impairment charges in gains
(losses) on equity investments, net for marketable and
non-marketable equity investments or in interest and other, net
for debt instrument investments.
Fair
Values of Financial Instruments
The carrying value of cash equivalents approximates fair value
due to the short period of time to maturity. Fair values of
short-term investments, trading assets, long-term investments,
marketable equity investments, certain non-marketable
investments, short-term debt, long-term debt, swaps, currency
forward contracts, currency options, equity options, and
warrants are based on quoted market prices or pricing models
using current market data when available. Debt instruments are
generally valued using a quoted market price of identical or
similar instruments or discounted cash flows in a yield-curve
model based on LIBOR. Equity options and warrants are priced
using option pricing models. Our financial instruments are
recorded at fair value, except for cost basis loan participation
notes and debt. Estimated fair values are managements
estimates; however, when there is no readily available market
data, the estimated fair values may not necessarily represent
the amounts that could be realized in a current transaction, and
the fair values could change significantly. For a listing of
fair values and carrying values of our trading assets and
available-for-sale investments for 2007 and 2006, see
Note 7: Investments.
For our marketable equity method investment, the fair value
exceeded the aggregate carrying value by $14 million as of
December 29, 2007. We did not have any marketable equity
method investments in 2006. For non-marketable equity
investments, the fair value exceeded the carrying value by
approximately $600 million as of December 29, 2007. We
believe that the fair value of non-marketable equity investments
approximated the carrying value at December 30, 2006. For
our cost basis loan participation notes, the fair value exceeded
the carrying value by approximately $50 million as of
December 29, 2007 (approximately $55 million as of
December 30, 2006). These fair value estimates take into
account the movements of the equity and venture capital markets
as well as changes in the interest rate environment, and other
economic variables.
53
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For our long-term debt, the fair value exceeded the carrying
value by approximately $65 million as of December 29,
2007. As of December 30, 2006, the fair value of our
long-term debt was below its carrying value by approximately
$100 million. These fair value estimates take into
consideration credit rating changes, equity price movements,
interest rate changes, and other economic variables.
Derivative
Financial Instruments
Our primary objective for holding derivative financial
instruments is to manage currency, interest rate, and certain
equity market risks. Our derivative financial instruments are
recorded at fair value and are included in other current assets,
other long-term assets, other accrued liabilities, or other
long-term liabilities. Derivative instruments recorded as assets
totaled $118 million at December 29, 2007
($117 million at December 30, 2006). Derivative
instruments recorded as liabilities totaled $130 million at
December 29, 2007 ($62 million at December 30,
2006).
Our accounting policies for derivative financial instruments are
based on whether they meet the criteria for designation as cash
flow or fair value hedges. A designated hedge of the exposure to
variability in the future cash flows of an asset or a liability,
or of a forecasted transaction, is referred to as a cash flow
hedge. A designated hedge of the exposure to changes in fair
value of an asset or a liability, or of an unrecognized firm
commitment, is referred to as a fair value hedge. The criteria
for designating a derivative as a hedge include the assessment
of the instruments effectiveness in risk reduction,
matching of the derivative instrument to its underlying
transaction, and the probability that the underlying transaction
will occur. We recognize gains and losses from changes in fair
values of derivatives that are not designated as hedges for
accounting purposes within the same income statement line item
as the underlying item, and these gains and losses generally
offset changes in fair values of related assets or liabilities.
Derivatives that we designate as hedges are classified in the
consolidated statements of cash flows in the same section as the
underlying item, primarily within cash flows from operating
activities. Derivatives not designated as hedges are classified
in cash flows from operating activities.
As part of our strategic investment program, we also acquire
equity derivative instruments, such as warrants and equity
conversion rights associated with debt instruments, which are
not designated as hedging instruments. We recognize the gains or
losses from changes in fair values of these equity derivative
instruments in gains (losses) on equity investments, net.
Through the use of derivative financial instruments, we manage
the following risks:
Currency
Risk
We transact business in various currencies other than the
U.S. dollar and have established balance sheet and
forecasted transaction risk management programs to protect
against fluctuations in fair value and the volatility of future
cash flows caused by changes in exchange rates. The forecasted
transaction risk management program includes anticipated
transactions such as operating expenditures and capital
purchases. These programs reduce, but do not always entirely
eliminate, the impact of currency exchange movements.
54
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Our currency risk management programs include:
|
|
|
|
|
Currency derivatives with cash flow hedge accounting
designation that utilize currency forward contracts and
currency options to hedge exposures to the variability in the
U.S.-dollar
equivalent of anticipated
non-U.S.-dollar-denominated
cash flows. The maturity of these instruments generally occurs
within 12 months. For these derivatives, we report the
after-tax gain or loss from the effective portion of the hedge
as a component of accumulated other comprehensive income (loss)
in stockholders equity and reclassify it into earnings in
the same period or periods in which the hedged transaction
affects earnings, and within the same line item on the
consolidated statements of income as the impact of the hedged
transaction.
|
|
|
Currency derivatives with fair value hedge accounting
designation that utilize currency forward contracts and
currency options to hedge the fair value exposure of recognized
foreign-currency-denominated assets or liabilities, or
previously unrecognized firm commitments. For fair value hedges,
we recognize gains or losses in earnings to offset fair value
changes in the hedged transaction. As of December 29, 2007
and December 30, 2006, we did not have any derivatives
designated as foreign currency fair value hedges.
|
|
|
Currency derivatives without hedge accounting designation
that utilize currency forward contracts or currency interest
rate swaps to economically hedge the functional currency
equivalent cash flows of recognized monetary assets and
liabilities and
non-U.S.-dollar-denominated
debt instruments classified as trading assets. The maturity of
these instruments generally occurs within 12 months, except
for derivatives associated with certain long-term equity-related
investments that generally mature within five years. Changes in
the
U.S.-dollar-equivalent
cash flows of the underlying assets and liabilities are
approximately offset by the changes in fair values of the
related derivatives. We record net gains or losses in the income
statement line item most closely associated with the economic
underlying, primarily in interest and other, net, except for
equity-related gains or losses, which we primarily record in
gains (losses) on equity investments, net.
|
Interest
Rate Risk
Our primary objective for holding investments in debt
instruments is to preserve principal while maximizing yields. We
generally swap the returns on our investments in fixed-rate debt
instruments with remaining maturities longer than six months
into U.S. dollar three-month LIBOR-based returns unless
management specifically approves otherwise. Our interest rate
risk management programs include:
|
|
|
|
|
Interest rate derivatives with cash flow hedge accounting
designation that utilize interest rate swap agreements to
modify the interest characteristics of some of our investments.
For these derivatives, we report the after-tax gain or loss from
the effective portion of the hedge as a component of accumulated
other comprehensive income (loss) and reclassify it into
earnings in the same period or periods in which the hedged
transaction affects earnings, and within the same income
statement line item as the impact of the hedged transaction.
|
|
|
Interest rate derivatives with fair value hedge accounting
designation that utilize interest rate swap agreements to
hedge the fair values of debt instruments. We recognize the
gains or losses from the changes in fair value of these
instruments, as well as the offsetting change in the fair value
of the hedged long-term debt, in interest expense. At
December 29, 2007 and December 30, 2006, we did not
have any interest rate derivatives designated as fair value
hedges.
|
|
|
Interest rate derivatives without hedge accounting
designation that utilize interest rate swaps and currency
interest rate swaps in economic hedging transactions, including
hedges of
non-U.S.-dollar-denominated
debt instruments classified as trading assets. We reset the
floating interest rates on the swaps on a monthly, quarterly, or
semiannual basis. Changes in fair value of the debt instruments
classified as trading assets are generally offset by changes in
fair value of the related derivatives, both of which are
recorded in interest and other, net.
|
Equity
Market Risk
We may elect to mitigate equity risk using the following equity
market risk management programs:
|
|
|
|
|
Equity derivatives with hedge accounting designation that
utilize equity options, swaps, or forward contracts to hedge the
equity market risk of marketable equity securities, when these
investments are not considered to have strategic value. These
derivatives are generally designated as fair value hedges. We
recognize the gains or losses from the change in fair value of
these equity derivatives, as well as the offsetting change in
the fair value of the underlying hedged equity securities, in
gains (losses) on equity investments, net. At December 29,
2007 and December 30, 2006, we did not have any equity
derivatives designated as fair value hedges.
|
|
|
Equity derivatives without hedge accounting designation
that utilize equity derivatives, such as warrants, equity
options, or other equity derivatives. We recognize changes in
the fair value of such derivatives in gains (losses) on equity
investments, net.
|
55
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Measurement
of Effectiveness
|
|
|
|
|
Effectiveness for forwards is generally measured by
comparing the cumulative change in the fair value of the hedge
contract with the cumulative change in the present value of the
forecasted cash flows of the hedged item. For currency forward
contracts used in cash flow hedging strategies related to
capital purchases, forward points are excluded, and
effectiveness is measured using spot rates to value both the
hedge contract and the hedged item. For currency forward
contracts used in cash flow hedging strategies related to
operating expenditures, forward points are included and
effectiveness is measured using forward rates to value both the
hedge contract and the hedged item.
|
|
|
Effectiveness for currency options and equity options with
hedge accounting designation is generally measured by
comparing the cumulative change in the fair value of the hedge
contract with the cumulative change in the fair value of an
option instrument representing the hedged risks in the hedged
item for cash flow hedges. For fair value hedges, time value is
excluded and effectiveness is measured based on spot rates to
value both the hedge contract and the hedged item.
|
|
|
Effectiveness for interest rate swaps is generally
measured by comparing the change in fair value of the hedged
item with the change in fair value of the interest rate swap.
|
If a cash flow hedge were discontinued because it was no longer
probable that the original hedged transaction would occur as
anticipated, the unrealized gain or loss on the related
derivative would be reclassified into earnings. Subsequent gains
or losses on the related derivative instrument would be
recognized in income in each period until the instrument
matures, is terminated, is re-designated as a qualified hedge,
or is sold. Any ineffective portion of both cash flow and fair
value hedges, as well as amounts excluded from the assessment of
effectiveness, are recognized in earnings in interest and other,
net.
Securities
Lending
We may enter into securities lending agreements with financial
institutions, generally to facilitate hedging and certain
investment transactions. Selected securities may be loaned,
secured by collateral in the form of cash or securities. The
loaned securities continue to be carried as investment assets on
our consolidated balance sheets. Cash collateral is recorded as
an asset with a corresponding liability. For lending agreements
collateralized by securities, we do not record the collateral as
an asset or a liability, unless the collateral is repledged.
Inventories
We compute inventory cost on a currently adjusted standard basis
(which approximates actual cost on an average or
first-in,
first-out basis). The valuation of inventory requires us to
estimate obsolete or excess inventory as well as inventory that
is not of saleable quality. The determination of obsolete or
excess inventory requires us to estimate the future demand for
our products. Inventory in excess of saleable amounts is not
valued, and the remaining inventory is valued at the lower of
cost or market. Inventories at fiscal year-ends were as follows:
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
2006
|
Raw materials
|
|
$
|
507
|
|
$
|
608
|
Work in process
|
|
|
1,460
|
|
|
2,044
|
Finished goods
|
|
|
1,403
|
|
|
1,662
|
|
|
|
|
|
|
|
Total inventories
|
|
$
|
3,370
|
|
$
|
4,314
|
|
|
|
|
|
|
|
56
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Property,
Plant and Equipment
Property, plant and equipment, net at fiscal year-ends was as
follows:
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
|
2006
|
|
Land and buildings
|
|
$
|
15,267
|
|
|
$
|
14,544
|
|
Machinery and equipment
|
|
|
27,754
|
|
|
|
29,829
|
|
Construction in progress
|
|
|
3,031
|
|
|
|
2,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,052
|
|
|
|
47,084
|
|
Less: accumulated depreciation
|
|
|
(29,134
|
)
|
|
|
(29,482
|
)
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment, net
|
|
$
|
16,918
|
|
|
$
|
17,602
|
|
|
|
|
|
|
|
|
|
|
We state property, plant and equipment at cost, less accumulated
depreciation. We compute depreciation for financial reporting
purposes principally using the straight-line method over the
following estimated useful lives: machinery and equipment, 2 to
4 years; buildings, 4 to 40 years. Reviews are
regularly performed if facts and circumstances indicate that the
carrying amount of assets may not be recoverable or that the
useful life is shorter than we had originally estimated. We
assess the recoverability of our assets held for use by
comparing the projected undiscounted net cash flows associated
with the related asset or group of assets over their remaining
estimated useful lives against their respective carrying
amounts. Impairment, if any, is based on the excess of the
carrying amount over the fair value of those assets. If we
determine that the useful lives are shorter than we had
originally estimated, we depreciate the net book value of the
assets over the newly determined remaining useful lives. See
Note 16: Restructuring and Asset Impairment
Charges for further discussion of restructuring-related
asset impairment charges that we recorded during 2007 and 2006.
We identify property, plant and equipment as held for sale when
it meets the criteria of Statement of Financial Accounting
Standards (SFAS) No. 144, Accounting for Impairment
or Disposal of Long-Lived Assets. We reclassify held for
sale assets to other current assets and cease recording
depreciation.
We capitalize interest on borrowings related to eligible capital
expenditures. We add capitalized interest to the cost of
qualified assets and amortize it over the estimated useful lives
of the assets. Capital-related government grants earned are
recorded as a reduction to property, plant and equipment.
Goodwill
We record goodwill when the purchase price of an acquisition
exceeds the estimated fair value of the net identified tangible
and intangible assets acquired. We perform an annual impairment
review for each reporting unit using a fair value approach.
Reporting units may be operating segments as a whole or an
operation one level below an operating segment, referred to as a
component. In determining the carrying value of the reporting
unit, we have to make an allocation of our manufacturing and
assembly and test assets because of the interchangeable nature
of our manufacturing and assembly and test capacity. We base
this allocation on each reporting units relative
percentage utilization of the manufacturing and assembly and
test assets. In the event that an individual business within a
reporting unit is divested, we allocate goodwill to that
business based on its fair value relative to its reporting unit.
For further discussion of goodwill, see Note 15:
Goodwill.
Identified
Intangible Assets
Intellectual property assets primarily represent rights acquired
under technology licenses and are generally amortized on a
straight-line basis over the periods of benefit, ranging from
2 to 17 years. We amortize acquisition-related
developed technology on a straight-line basis over approximately
4 years. Other intangible assets include
acquisition-related customer lists and
workforce-in-place,
which we amortize on a straight-line basis over periods ranging
from 2 to 4 years. We classify all identified
intangible assets within other long-term assets. In the quarter
following the period in which identified intangible assets
become fully amortized, the fully amortized balances are removed
from the gross asset and accumulated amortization amounts. For
further discussion of identified intangible assets, see
Note 14: Identified Intangible Assets.
57
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We perform a quarterly review of identified intangible assets to
determine if facts and circumstances indicate that the useful
life is shorter than we had originally estimated or that the
carrying amount of assets may not be recoverable. If such facts
and circumstances do exist, we assess the recoverability of
identified intangible assets by comparing the projected
undiscounted net cash flows associated with the related asset or
group of assets over their remaining lives against their
respective carrying amounts. Impairments, if any, are based on
the excess of the carrying amount over the fair value of those
assets.
Product
Warranty
We generally sell products with a limited warranty on product
quality and a limited indemnification for customers against
intellectual property infringement claims related to our
products. We accrue for known warranty and indemnification
issues if a loss is probable and can be reasonably estimated,
and accrue for estimated incurred but unidentified issues based
on historical activity. The accrual and the related expense for
known issues were not significant during the periods presented.
Due to product testing and the short time typically between
product shipment and the detection and correction of product
failures, and considering the historical rate of payments on
indemnification claims, the accrual and related expense for
estimated incurred but unidentified issues were not significant
during the periods presented.
Revenue
Recognition
We recognize net revenue when the earnings process is complete,
as evidenced by an agreement with the customer, transfer of
title, and acceptance, if applicable, as well as fixed pricing
and probable collectibility. We record pricing allowances,
including discounts based on contractual arrangements with
customers, when revenue is recognized as a reduction to both
accounts receivable and net revenue. Because of frequent sales
price reductions and rapid technology obsolescence in the
industry, we defer sales made to distributors under agreements
allowing price protection
and/or right
of return until the distributors sell the merchandise. We
include shipping charges billed to customers in net revenue, and
include the related shipping costs in cost of sales.
Advertising
Cooperative advertising programs reimburse customers for
marketing activities for certain of our products, subject to
defined criteria. We accrue cooperative advertising obligations
and record the costs at the same time the related revenue is
recognized. We record cooperative advertising costs as
marketing, general and administrative expenses to the extent
that an advertising benefit separate from the revenue
transaction can be identified and the fair value of that
advertising benefit received is determinable. We record any
excess in cash paid over the fair value of the advertising
benefit received as a reduction in revenue. Advertising costs
recorded within marketing, general and administrative expenses
were $1.9 billion in 2007 ($2.3 billion in 2006 and
$2.6 billion in 2005).
Employee
Equity Incentive Plans
We have employee equity incentive plans, which are described
more fully in Note 3: Employee Equity Incentive
Plans. Effective January 1, 2006, we adopted the
provisions of SFAS No. 123 (revised 2004),
Share-Based Payment (SFAS No. 123(R)).
SFAS No. 123(R) requires employee equity awards to be
accounted for under the fair value method. Accordingly, we
measure share-based compensation at the grant date, based on the
fair value of the award. Prior to January 1, 2006, we
accounted for awards granted under our equity incentive plans
using the intrinsic value method prescribed by Accounting
Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees (APB No. 25), and related
interpretations, and provided the required pro forma disclosures
prescribed by SFAS No. 123, Accounting for
Stock-Based Compensation (SFAS No. 123), as
amended. The exercise price of options is equal to the value of
Intel common stock on the date of grant. Additionally, the stock
purchase plan was deemed non-compensatory under APB No. 25.
Accordingly, prior to 2006 we did not recognize any share-based
compensation, other than insignificant amounts of
acquisition-related compensation, on the consolidated financial
statements.
58
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Under the modified prospective method of adoption for
SFAS No. 123(R), the compensation cost that we
recognized beginning in 2006 includes (a) compensation cost
for all equity incentive awards granted prior to but not yet
vested as of January 1, 2006, based on the
grant-date
fair value estimated in accordance with the original provisions
of SFAS No. 123, and (b) compensation cost for
all equity incentive awards granted subsequent to
January 1, 2006, based on the grant-date fair value
estimated in accordance with the provisions of
SFAS No. 123(R). We use the straight-line attribution
method to recognize share-based compensation over the service
period of the award. Upon exercise, cancellation, forfeiture, or
expiration of stock options, or upon vesting or forfeiture of
restricted stock units, we eliminate deferred tax assets for
options and restricted stock units with multiple vesting dates
for each vesting period on a
first-in,
first-out basis as if each vesting period were a separate award.
To calculate the excess tax benefits available as of the date of
adoption for use in offsetting future tax shortfalls, we
followed the alternative transition method discussed in
Financial Accounting Standards Board (FASB) Staff Position
No. 123(R)-3.
Recent
Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements (SFAS No. 157).
SFAS No. 157 defines fair value, establishes a
framework for measuring fair value, and enhances fair value
measurement disclosure. In February 2008, the FASB issued FASB
Staff Position (FSP) 157-1, Application of FASB Statement
No. 157 to FASB Statement No. 13 and Other Accounting
Pronouncements That Address Fair Value Measurements for Purposes
of Lease Classification or Measurement under Statement 13
(FSP 157-1) and FSP
157-2,
Effective Date of FASB Statement No. 157
(FSP 157-2).
FSP 157-1 amends SFAS No. 157 to remove certain leasing
transactions from its scope.
FSP 157-2
delays the effective date of SFAS No. 157 for all
non-financial assets and non-financial liabilities, except for
items that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually),
until the beginning of the first quarter of fiscal 2009. The
measurement and disclosure requirements related to financial
assets and financial liabilities are effective for us beginning
in the first quarter of fiscal 2008. The adoption of
SFAS No. 157 for financial assets and financial
liabilities will not have a significant impact on our
consolidated financial statements. However, the resulting fair
values calculated under SFAS No. 157 after adoption
may be different from the fair values that would have been
calculated under previous guidance. We are currently evaluating
the impact that SFAS No. 157 will have on our
consolidated financial statements when it is applied to
non-financial assets and non-financial liabilities beginning in
the first quarter of 2009.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities (SFAS No. 159).
SFAS No. 159 permits companies to choose to measure
certain financial instruments and other items at fair value. The
standard requires that unrealized gains and losses are reported
in earnings for items measured using the fair value option.
SFAS No. 159 is effective for us beginning in the
first quarter of fiscal year 2008. The adoption of
SFAS No. 159 is not expected to have a significant
impact on our consolidated financial statements.
In June 2007, the FASB ratified EITF Issue
No. 07-3,
Accounting for Nonrefundable Advance Payments for Goods or
Services to Be Used in Future Research and Development
Activities
(EITF 07-3).
EITF 07-3
requires non-refundable advance payments for goods and services
to be used in future research and development (R&D)
activities to be recorded as assets and the payments to be
expensed when the R&D activities are performed.
EITF 07-3
applies prospectively for new contractual arrangements entered
into beginning in the first quarter of fiscal year 2008. Prior
to adoption, we recognized these non-refundable advance payments
as an expense upon payment. The adoption of
EITF 07-3
is not expected to have a significant impact on our consolidated
financial statements.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations
(SFAS No. 141(R)). Under SFAS No. 141(R), an
entity is required to recognize the assets acquired, liabilities
assumed, contractual contingencies, and contingent consideration
at their fair value on the acquisition date. It further requires
that acquisition-related costs be recognized separately from the
acquisition and expensed as incurred, restructuring costs
generally be expensed in periods subsequent to the acquisition
date, and changes in accounting for deferred tax asset valuation
allowances and acquired income tax uncertainties after the
measurement period impact income tax expense. In addition,
acquired in-process research and development (IPR&D) is
capitalized as an intangible asset and amortized over its
estimated useful life. The adoption of SFAS No. 141(R)
will change our accounting treatment for business combinations
on a prospective basis beginning in the first quarter of fiscal
year 2009.
59
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statementsan amendment of ARB No. 51
(SFAS No. 160). SFAS No. 160 changes the
accounting and reporting for minority interests, which will be
recharacterized as non-controlling interests and classified as a
component of equity. SFAS No. 160 is effective for us
on a prospective basis for business combinations with an
acquisition date beginning in the first quarter of fiscal year
2009. As of December 29, 2007, we did not have any minority
interests. The adoption of SFAS No. 160 will not
impact our consolidated financial statements.
In December 2007, the U.S. Securities and Exchange
Commission (SEC) issued Staff Accounting Bulletin 110
(SAB 110) to amend the SECs views discussed in
Staff Accounting Bulletin 107 (SAB 107) regarding
the use of the simplified method in developing an estimate of
expected life of share options in accordance with
SFAS No. 123(R). SAB 110 is effective for us
beginning in the first quarter of fiscal year 2008. We will
continue to use the simplified method until we have the
historical data necessary to provide a reasonable estimate of
expected life in accordance with SAB 107, as amended by
SAB 110.
Accounting
Changes
In fiscal year 2007, we adopted EITF Issue
No. 06-2,
Accounting for Sabbatical Leave and Other Similar Benefits
Pursuant to FASB Statement No. 43
(EITF 06-2).
EITF 06-2
requires companies to accrue the cost of these compensated
absences over the service period. We adopted
EITF 06-2
through a cumulative-effect adjustment, resulting in an
additional liability of $280 million, additional deferred
tax assets of $99 million, and a reduction to retained
earnings of $181 million at the beginning of 2007.
We also adopted FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxesan
interpretation of FASB Statement No. 109
(FIN 48), and related guidance in fiscal year 2007. See
Note 17: Taxes for further discussion.
Note 3:
Employee Equity Incentive Plans
Our equity incentive plans are broad-based, long-term retention
programs intended to attract and retain talented employees and
align stockholder and employee interests.
In May 2007, stockholders approved an extension of the 2006
Equity Incentive Plan (the 2006 Plan). Stockholders approved
119 million additional shares for issuance, increasing the
total shares of common stock available for issuance as equity
awards to employees and
non-employee
directors to 294 million shares. Of this amount, we
increased the maximum number of shares to be awarded as
non-vested shares (restricted stock) or non-vested share units
(restricted stock units) to 168 million shares. The
approval also extended the expiration date of the 2006 Plan to
June 2010. The 2006 Plan allows for time-based,
performance-based, and market-based vesting for equity incentive
awards. As of December 29, 2007, we had not issued any
performance-based or market-based equity incentive awards. As of
December 29, 2007, 226 million shares remained
available for future grant under the 2006 Plan. We may assume
the equity incentive plans and the outstanding equity awards of
certain acquired companies. Once they are assumed, we do not
grant additional shares under these plans.
We began issuing restricted stock units in 2006. We issue shares
on the date that the restricted stock units vest. The majority
of shares issued are net of the statutory withholding
requirements that we pay on behalf of our employees. As a
result, the actual number of shares issued will be less than the
number of restricted stock units granted. Prior to vesting,
restricted stock units do not have dividend equivalent rights,
do not have voting rights, and the shares underlying the
restricted stock units are not considered issued and outstanding.
Equity awards granted to employees in 2007 under our equity
incentive plans generally vest over 4 years from the date
of grant, and options expire 7 years from the date of
grant. Equity awards granted to key officers, senior-level
employees, and key employees in 2007 may have delayed
vesting beginning 2 to 5 years from the date of grant, and
options expire 7 to 10 years from the date of grant.
The 2006 Stock Purchase Plan allows eligible employees to
purchase shares of our common stock at 85% of the value of our
common stock on specific dates. Under the 2006 Stock Purchase
Plan, we made 240 million shares of common stock available
for issuance through August 2011. As of December 29, 2007,
214 million shares were available for issuance under the
2006 Stock Purchase Plan.
60
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Share-Based
Compensation
Effective January 1, 2006, we adopted the provisions of
SFAS No. 123(R), as discussed in Note 2:
Accounting Policies. Share-based compensation recognized
in 2007 was $952 million ($1,375 million in 2006 and
zero in 2005).
In accordance with SFAS No. 123(R), we adjust
share-based compensation on a quarterly basis for changes to our
estimate of expected equity award forfeitures based on our
review of recent forfeiture activity and expected future
employee turnover. We recognize the effect of adjusting the
forfeiture rate for all expense amortization after
January 1, 2006 in the period that we change the forfeiture
estimate. The effect of forfeiture adjustments in 2007 and 2006
was insignificant.
The total share-based compensation cost capitalized as part of
inventory as of December 29, 2007 was $41 million
($72 million as of December 30, 2006). The amount that
we would have capitalized to inventory as of December 31,
2005, if we had applied the provisions of
SFAS No. 123(R) retrospectively, was $66 million.
Under the provisions of SFAS No. 123(R), we recorded
$66 million as a credit to common stock and capital in
excess of par value. During 2007, the tax benefit that we
realized for the tax deduction from option exercises and other
awards totaled $265 million ($139 million in 2006).
Pro forma information required under SFAS No. 123(R)
for 2005, as if we had applied the fair value recognition
provisions of SFAS No. 123 to options granted under
our equity incentive plans and rights to acquire stock granted
under our stock purchase plan, is as follows:
|
|
|
|
(In Millions, Except Per Share Amounts)
|
|
2005
|
Net income, as reported
|
|
$
|
8,664
|
Less: total share-based compensation determined under the
fair value method for all awards, net of tax
|
|
|
1,262
|
|
|
|
|
Pro forma net income
|
|
$
|
7,402
|
|
|
|
|
Reported basic earnings per common share
|
|
$
|
1.42
|
|
|
|
|
Pro forma basic earnings per common share
|
|
$
|
1.21
|
|
|
|
|
Reported diluted earnings per common share
|
|
$
|
1.40
|
|
|
|
|
Pro forma diluted earnings per common share
|
|
$
|
1.20
|
|
|
|
|
For share-based compensation recognized in 2007 and 2006 as a
result of the adoption of SFAS No. 123(R), as well as
pro forma disclosures according to the original provisions of
SFAS No. 123 for periods prior to the adoption of
SFAS No. 123(R), we use the
Black-Scholes
option pricing model to estimate the fair value of options
granted under our equity incentive plans and rights to acquire
stock granted under our stock purchase plan. We based the
weighted average estimated values of employee stock option
grants and rights granted under the stock purchase plan, as well
as the weighted average assumptions used in calculating these
values, on estimates at the date of grant, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
Stock Purchase Plan
|
|
|
|
2007
|
|
|
2006
|
|
|
20051
|
|
|
2007
|
|
|
2006
|
|
|
20051
|
|
Estimated values
|
|
$
|
5.79
|
|
|
$
|
5.21
|
|
|
$
|
6.02
|
|
|
$
|
5.18
|
|
|
$
|
4.56
|
|
|
$
|
5.78
|
|
Expected life (in years)
|
|
|
5.0
|
|
|
|
4.9
|
|
|
|
4.7
|
|
|
|
.5
|
|
|
|
.5
|
|
|
|
.5
|
|
Risk-free interest rate
|
|
|
4.5
|
%
|
|
|
4.9
|
%
|
|
|
3.9
|
%
|
|
|
5.2
|
%
|
|
|
5.0
|
%
|
|
|
3.2
|
%
|
Volatility
|
|
|
26
|
%
|
|
|
27
|
%
|
|
|
26
|
%
|
|
|
28
|
%
|
|
|
29
|
%
|
|
|
23
|
%
|
Dividend yield
|
|
|
2.0
|
%
|
|
|
2.0
|
%
|
|
|
1.4
|
%
|
|
|
2.0
|
%
|
|
|
2.1
|
%
|
|
|
1.3
|
%
|
|
|
|
1 |
|
Estimated values and assumptions used in calculating fair
value prior to the adoption of SFAS No. 123(R). |
61
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We base the expected volatility on implied volatility, because
we have determined that implied volatility is more reflective of
market conditions and a better indicator of expected volatility
than historical volatility. We use the simplified method of
calculating expected life described in SAB 107, due to
significant differences in the vesting terms and contractual
life of current option grants compared to our historical grants.
We estimate the fair value of restricted stock unit awards using
the value of our common stock on the date of grant, reduced by
the present value of dividends expected to be paid on our common
stock prior to vesting. We based the weighted average estimated
values of restricted stock unit grants, as well as the weighted
average assumptions that we used in calculating the fair value,
on estimates at the date of grant, as follows:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
Estimated values
|
|
$
|
21.13
|
|
|
$
|
18.70
|
|
Risk-free interest rate
|
|
|
4.7
|
%
|
|
|
4.9
|
%
|
Dividend yield
|
|
|
2.0
|
%
|
|
|
2.0
|
%
|
Stock
Option Awards
Options outstanding that have vested and are expected to vest as
of December 29, 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Weighted
|
|
Remaining
|
|
Aggregate
|
|
|
Number of
|
|
Average
|
|
Contractual
|
|
Intrinsic
|
|
|
Shares
|
|
Exercise
|
|
Term
|
|
Value1
|
|
|
(In Millions)
|
|
Price
|
|
(In Years)
|
|
(In Millions)
|
Vested
|
|
|
528.2
|
|
$
|
29.04
|
|
|
3.8
|
|
$
|
1,536
|
Expected to
vest2
|
|
|
118.5
|
|
$
|
22.89
|
|
|
5.4
|
|
|
493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
646.7
|
|
$
|
27.91
|
|
|
4.1
|
|
$
|
2,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Amounts represent the difference between the exercise price
and $26.76, the closing price of Intel stock on
December 28, 2007, as reported on The NASDAQ Global Select
Market*, for all in-the-money options outstanding. |
|
2 |
|
Options outstanding that are expected to vest are net of
estimated future option forfeitures in accordance with the
provisions of SFAS No. 123(R). |
Options with a fair value of $1.4 billion completed vesting
during 2007. As of December 29, 2007, there was
$524 million in unrecognized compensation costs related to
stock options granted under our equity incentive plans. We
expect to recognize those costs over a weighted average period
of 1.1 years.
62
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Additional information with respect to stock option activity is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
Aggregate
|
|
|
Number of
|
|
|
Average
|
|
Intrinsic
|
(In Millions, Except Per Share Amounts)
|
|
Shares
|
|
|
Exercise Price
|
|
Value1
|
December 25, 2004
|
|
|
883.9
|
|
|
$
|
26.26
|
|
|
|
Grants
|
|
|
118.9
|
|
|
$
|
23.36
|
|
|
|
Exercises
|
|
|
(64.5
|
)
|
|
$
|
12.65
|
|
|
|
Cancellations and forfeitures
|
|
|
(38.4
|
)
|
|
$
|
29.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
899.9
|
|
|
$
|
26.71
|
|
|
|
Grants
|
|
|
52.3
|
|
|
$
|
20.04
|
|
|
|
Exercises
|
|
|
(47.3
|
)
|
|
$
|
12.83
|
|
$
|
364
|
Cancellations and forfeitures
|
|
|
(65.4
|
)
|
|
$
|
28.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 30, 2006
|
|
|
839.5
|
|
|
$
|
26.98
|
|
|
|
Grants
|
|
|
24.6
|
|
|
$
|
22.63
|
|
|
|
Exercises
|
|
|
(132.8
|
)
|
|
$
|
19.78
|
|
$
|
552
|
Cancellations and forfeitures
|
|
|
(65.4
|
)
|
|
$
|
31.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 29, 2007
|
|
|
665.9
|
|
|
$
|
27.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
469.2
|
|
|
$
|
29.16
|
|
|
|
December 30, 2006
|
|
|
567.6
|
|
|
$
|
28.66
|
|
|
|
December 29, 2007
|
|
|
528.2
|
|
|
$
|
29.04
|
|
|
|
|
|
|
1 |
|
Amounts represent the difference between the exercise price
and the value of Intel stock at the time of exercise. |
The following table summarizes information about options
outstanding at December 29, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Options
|
|
Exercisable Options
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
Weighted
|
|
|
|
Weighted
|
|
|
Number of
|
|
Contractual
|
|
Average
|
|
Number of
|
|
Average
|
|
|
Shares
|
|
Life
|
|
Exercise
|
|
Shares
|
|
Exercise
|
Range of Exercise Prices
|
|
(In Millions)
|
|
(In Years)
|
|
Price
|
|
(In Millions)
|
|
Price
|
$0.05$15.00
|
|
|
0.9
|
|
|
3.3
|
|
$
|
6.64
|
|
|
0.9
|
|
$
|
6.66
|
$15.01$20.00
|
|
|
108.3
|
|
|
4.4
|
|
$
|
18.59
|
|
|
79.8
|
|
$
|
18.52
|
$20.01$25.00
|
|
|
280.4
|
|
|
4.3
|
|
$
|
22.54
|
|
|
202.2
|
|
$
|
22.64
|
$25.01$30.00
|
|
|
133.7
|
|
|
5.0
|
|
$
|
27.23
|
|
|
109.8
|
|
$
|
27.30
|
$30.01$35.00
|
|
|
54.5
|
|
|
2.7
|
|
$
|
31.35
|
|
|
47.4
|
|
$
|
31.31
|
$35.01$40.00
|
|
|
22.2
|
|
|
2.5
|
|
$
|
38.43
|
|
|
22.2
|
|
$
|
38.43
|
$40.01$87.90
|
|
|
65.9
|
|
|
2.3
|
|
$
|
59.80
|
|
|
65.9
|
|
$
|
59.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
665.9
|
|
|
4.1
|
|
$
|
27.76
|
|
|
528.2
|
|
$
|
29.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These options will expire if they are not exercised by specific
dates through January 2017. Option exercise prices for options
exercised during the three-year period ended December 29,
2007 ranged from $0.05 to $28.05.
63
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Restricted
Stock Unit Awards
Information with respect to outstanding restricted stock unit
activity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
Grant-Date
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Fair
|
|
Fair
|
|
(In Millions, Except Per Share Amounts)
|
|
Shares
|
|
|
Value
|
|
Value1
|
|
Outstanding at December 31, 2005
|
|
|
|
|
|
$
|
|
|
|
|
|
Granted
|
|
|
30.0
|
|
|
$
|
18.70
|
|
|
|
|
Vested
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Forfeited
|
|
|
(2.6
|
)
|
|
$
|
18.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 30, 2006
|
|
|
27.4
|
|
|
$
|
18.71
|
|
|
|
|
Granted
|
|
|
32.8
|
|
|
$
|
21.13
|
|
|
|
|
Vested2
|
|
|
(5.9
|
)
|
|
$
|
18.60
|
|
$
|
131
|
3
|
Forfeited
|
|
|
(3.2
|
)
|
|
$
|
19.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 29, 2007
|
|
|
51.1
|
|
|
$
|
20.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Represents the value of Intel stock on the date that the
restricted stock units vest. |
|
2 |
|
The number of restricted stock units vested includes shares
that we withheld on behalf of employees to satisfy the statutory
tax withholding requirements. |
|
3 |
|
On the grant date, the fair value for these vested awards was
$111 million. |
As of December 29, 2007, there was $707 million in
unrecognized compensation costs related to restricted stock
units granted under our equity incentive plans. We expect to
recognize those costs over a weighted average period of
1.6 years.
Stock
Purchase Plan
Approximately 75% of our employees were participating in our
stock purchase plan as of December 29, 2007. Employees
purchased 26.1 million shares in 2007 for $428 million
under the 2006 Stock Purchase Plan. Employees purchased
26.0 million shares in 2006 (19.6 million in
2005) for $436 million ($387 million in
2005) under the now expired 1976 Stock Participation Plan.
As of December 29, 2007, there was $16 million in
unrecognized compensation costs related to rights to acquire
stock under our stock purchase plan. We expect to recognize
those costs over a weighted average period of one month.
Note 4:
Earnings Per Share
We computed our basic and diluted earnings per common share as
follows:
|
|
|
|
|
|
|
|
|
|
(In Millions, Except Per Share Amounts)
|
|
2007
|
|
2006
|
|
2005
|
Net income
|
|
$
|
6,976
|
|
$
|
5,044
|
|
$
|
8,664
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstandingbasic
|
|
|
5,816
|
|
|
5,797
|
|
|
6,106
|
Dilutive effect of employee equity incentive plans
|
|
|
69
|
|
|
32
|
|
|
70
|
Dilutive effect of convertible debt
|
|
|
51
|
|
|
51
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstandingdiluted
|
|
|
5,936
|
|
|
5,880
|
|
|
6,178
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
1.20
|
|
$
|
0.87
|
|
$
|
1.42
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share
|
|
$
|
1.18
|
|
$
|
0.86
|
|
$
|
1.40
|
|
|
|
|
|
|
|
|
|
|
64
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We computed our basic earnings per common share using net income
and the weighted average number of common shares outstanding
during the period. We computed diluted earnings per common share
using net income and the weighted average number of common
shares outstanding plus potentially dilutive common shares
outstanding during the period. Potentially dilutive common
shares include the assumed exercise of outstanding stock
options, assumed vesting of outstanding restricted stock units,
assumed issuance of stock under the stock purchase plan using
the treasury stock method, and the assumed conversion of debt
using the if-converted method.
For 2007, we excluded 417 million outstanding weighted
average stock options (693 million in 2006 and
372 million in 2005) from the calculation of diluted
earnings per common share because the exercise prices of these
stock options were greater than or equal to the average market
value of the common shares. These options could be included in
the calculation in the future if the average market value of the
common shares increases and is greater than the exercise price
of these options.
Note 5:
Common Stock Repurchases
Common
Stock Repurchase Program
We have an ongoing authorization, amended in November 2005, from
our Board of Directors to repurchase up to $25 billion in
shares of our common stock in open market or negotiated
transactions. During 2007, we repurchased 111 million
shares of common stock at a cost of $2.75 billion
(226 million shares at a cost of $4.6 billion during
2006 and 418 million shares at a cost of $10.6 billion
during 2005). We have repurchased and retired 2.9 billion
shares at a cost of approximately $60 billion since the
program began in 1990. As of December 29, 2007,
$14.5 billion remained available for repurchase under the
existing repurchase authorization.
Restricted Stock Unit Withholdings
We issue restricted stock units as part of our equity incentive
plans, which are described more fully in Note 3:
Employee Equity Incentive Plans. For the majority of
restricted stock units granted, the number of shares issued on
the date the restricted stock units vest is net of the statutory
withholding requirements that we pay on behalf of our employees.
During 2007, we withheld 1.7 million shares to satisfy
$38 million of employees tax obligations. We paid
this amount in cash to the appropriate taxing authorities.
Although shares withheld are not issued, they are treated as
common stock repurchases for accounting and disclosure purposes,
as they reduce the number of shares that would have been issued
upon vesting.
Note 6:
Borrowings
Short-Term
Debt
Short-term debt included non-interest-bearing drafts payable of
$140 million and the current portion of long-term debt of
$2 million as of December 29, 2007 (drafts payable of
$178 million and the current portion of long-term debt of
$2 million as of December 30, 2006). We also have the
ability to borrow under our commercial paper program, which has
a pre-authorized limit of up to $3.0 billion. There were no
borrowings under our commercial paper program during 2007 and
2006. Our commercial paper was rated
A-1+ by
Standard & Poors and
P-1 by
Moodys as of December 29, 2007.
65
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Long-Term
Debt
Our long-term debt at fiscal year-ends was as follows:
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
|
2006
|
|
Junior subordinated convertible debentures due 2035 at 2.95%
|
|
$
|
1,586
|
|
|
$
|
1,586
|
|
2005 Arizona bonds due 2035 at 4.375%
|
|
|
159
|
|
|
|
160
|
|
2007 Arizona bonds due 2037 at 5.3%
|
|
|
125
|
|
|
|
|
|
Euro debt due 20082018 at 7%11%
|
|
|
111
|
|
|
|
103
|
|
Other debt
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,982
|
|
|
|
1,850
|
|
Less: current portion of long-term debt
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
1,980
|
|
|
$
|
1,848
|
|
|
|
|
|
|
|
|
|
|
In 2005, we issued $1.6 billion of 2.95% junior
subordinated convertible debentures (the debentures) due 2035.
The debentures are convertible, subject to certain conditions,
into shares of our common stock at an initial conversion rate of
31.7162 shares of common stock per $1,000 principal amount
of debentures, representing an initial effective conversion
price of approximately $31.53 per share of common stock. Holders
can surrender the debentures for conversion at any time. The
conversion rate will be subject to adjustment for certain events
outlined in the indenture governing the debentures, but will not
be adjusted for accrued interest. In addition, the conversion
rate will increase for a holder who elects to convert the
debentures in connection with certain share exchanges, mergers,
or consolidations involving Intel, as described in the indenture
governing the debentures. The debentures, which pay a fixed rate
of interest semiannually, have a contingent interest component
that will require us to pay interest based on certain thresholds
and for certain events commencing on December 15, 2010, as
outlined in the indenture. The maximum amount of contingent
interest that will accrue is 0.40% per year. The fair value of
the related embedded derivative was not significant as of
December 29, 2007 or December 30, 2006.
We can settle any conversion or repurchase of the debentures in
cash or stock at our option. On or after December 15, 2012,
we can redeem, for cash, all or part of the debentures for the
principal amount, plus any accrued and unpaid interest, if the
closing price of Intel common stock has been at least 130% of
the conversion price then in effect for at least 20 trading days
during any 30 consecutive
trading-day
period prior to the date on which we provide notice of
redemption. If certain events occur in the future, the indenture
provides that each holder of the debentures can, for a
pre-defined period of time, require us to repurchase the
holders debentures for the principal amount plus any
accrued and unpaid interest. The debentures are subordinated in
right of payment to our existing and future senior debt and to
the other liabilities of our subsidiaries. We concluded that the
debentures are not conventional convertible debt instruments and
that the embedded stock conversion option qualifies as a
derivative under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities
(SFAS No. 133). In addition, in accordance with
EITF 00-19,
Accounting for Derivative Financial Instruments Indexed
to, and Potentially Settled in, a Companys Own
Stock, we have concluded that the embedded conversion
option would be classified in stockholders equity if it
were a freestanding instrument. As such, the embedded conversion
option is not accounted for separately as a derivative.
In 2005, we guaranteed repayment of principal and interest on
bonds issued by the Industrial Development Authority of the City
of Chandler, Arizona, which constitutes an unsecured general
obligation for Intel. The aggregate principal amount, including
the premium, of the bonds issued in 2005 (2005 Arizona bonds)
was $160 million. The bonds are due in 2035 and bear
interest at a fixed rate of 4.375% until 2010. The 2005 Arizona
bonds are subject to mandatory tender on November 30, 2010,
at which time we can
re-market
the bonds as either fixed-rate bonds for a specified period or
as variable-rate bonds until their final maturity on
December 1, 2035.
66
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In 2007, we guaranteed repayment of principal and interest on
bonds issued by the Industrial Development Authority of the City
of Chandler, Arizona, which constitute an unsecured general
obligation for Intel. The aggregate principal amount of the
bonds issued in December 2007 (2007 Arizona bonds) is
$125 million due in 2037, and the bonds bear interest at a
fixed rate of 5.3%. The 2007 Arizona bonds are subject to
mandatory tender, at our option, on any interest payment date
beginning on or after December 1, 2012 until their final
maturity on December 1, 2037. Upon such tender, we can
re-market the bonds as either fixed-rate bonds for a specified
period or as variable-rate bonds until their final maturity. We
also entered into an interest rate swap agreement, from a fixed
rate to a floating
LIBOR-based
return. At the beginning of the first quarter of 2008, we
elected the provisions of SFAS No. 159, and we will
record the 2007 Arizona bonds at fair value at each
reporting date. As a result, changes in the fair value of this
debt will be primarily offset by changes in the fair value of
the interest rate swap, without the need to apply the hedge
accounting provisions of SFAS No. 133.
We have euro borrowings, which we made in connection with
financing manufacturing facilities and equipment in Ireland. We
have invested the proceeds in euro-denominated loan
participation notes of similar maturity to reduce currency and
interest rate exposures. During 2006, we retired approximately
$300 million in euro borrowings prior to their maturity
dates through the simultaneous settlement of an equivalent
amount of investments in loan participation notes.
At December 29, 2007, our aggregate debt maturities were as
follows (in millions):
|
|
|
|
Year Payable
|
|
|
2008
|
|
$
|
2
|
2009
|
|
|
2
|
2010
|
|
|
160
|
2011
|
|
|
2
|
2012
|
|
|
2
|
2013 and thereafter
|
|
|
1,814
|
|
|
|
|
Total
|
|
$
|
1,982
|
|
|
|
|
Note 7:
Investments
Trading
Assets
Trading assets outstanding at fiscal year-ends were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
Net
|
|
|
|
Net
|
|
|
|
|
Unrealized
|
|
Estimated
|
|
Unrealized
|
|
Estimated
|
(In Millions)
|
|
Gains
|
|
Fair Value
|
|
Gains
|
|
Fair Value
|
Marketable debt instruments
|
|
$
|
51
|
|
$
|
2,074
|
|
$
|
40
|
|
$
|
684
|
Equity securities offsetting deferred compensation
|
|
|
163
|
|
|
492
|
|
|
138
|
|
|
450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading assets
|
|
$
|
214
|
|
$
|
2,566
|
|
$
|
178
|
|
$
|
1,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We designate floating-rate securitized financial instruments,
such as asset-backed securities, that we purchased after
December 30, 2006 as trading assets. As of
December 29, 2007, the estimated fair value of these
securitized financial instruments was $926 million.
Net gains on marketable debt instruments that we classified as
trading assets held at the reporting date were $19 million
in 2007 (gains of $31 million in 2006 and losses of
$47 million in 2005). Net losses on the related derivatives
were $37 million in 2007 (losses of $22 million in
2006 and gains of $52 million in 2005). Certain equity
securities within the trading assets portfolio are maintained to
generate returns that seek to offset changes in liabilities
related to the equity market risk of certain deferred
compensation arrangements. These deferred compensation
liabilities were $483 million in 2007 ($416 million in
2006), and are included in other accrued liabilities. Net gains
on equity securities offsetting deferred compensation
arrangements still held at the reporting date were
$28 million in 2007 ($45 million in 2006 and
$15 million in 2005).
67
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Available-for-Sale
Investments
Available-for-sale investments at December 29, 2007 and
December 30, 2006 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
Gross
|
|
Gross
|
|
|
|
|
|
|
Gross
|
|
Gross
|
|
|
|
|
|
Adjusted
|
|
Unrealized
|
|
Unrealized
|
|
|
Estimated
|
|
Adjusted
|
|
Unrealized
|
|
Unrealized
|
|
|
Estimated
|
(In Millions)
|
|
Cost
|
|
Gains
|
|
Losses
|
|
|
Fair Value
|
|
Cost
|
|
Gains
|
|
Losses
|
|
|
Fair Value
|
Floating rate notes
|
|
$
|
6,254
|
|
$
|
3
|
|
$
|
(31
|
)
|
|
$
|
6,226
|
|
$
|
3,508
|
|
$
|
4
|
|
$
|
|
|
|
$
|
3,512
|
Commercial paper
|
|
|
4,981
|
|
|
|
|
|
|
|
|
|
4,981
|
|
|
4,956
|
|
|
4
|
|
|
|
|
|
|
4,960
|
Bank time
deposits1
|
|
|
1,891
|
|
|
1
|
|
|
|
|
|
|
1,892
|
|
|
1,029
|
|
|
1
|
|
|
|
|
|
|
1,030
|
Money market fund deposits
|
|
|
1,824
|
|
|
1
|
|
|
|
|
|
|
1,825
|
|
|
157
|
|
|
|
|
|
|
|
|
|
157
|
Marketable equity securities
|
|
|
421
|
|
|
616
|
|
|
(50
|
)
|
|
|
987
|
|
|
233
|
|
|
165
|
|
|
|
|
|
|
398
|
Asset-backed securities
|
|
|
937
|
|
|
|
|
|
(23
|
)
|
|
|
914
|
|
|
1,633
|
|
|
3
|
|
|
|
|
|
|
1,636
|
Corporate bonds
|
|
|
610
|
|
|
2
|
|
|
(8
|
)
|
|
|
604
|
|
|
563
|
|
|
1
|
|
|
(1
|
)
|
|
|
563
|
Repurchase agreements
|
|
|
150
|
|
|
|
|
|
|
|
|
|
150
|
|
|
450
|
|
|
|
|
|
|
|
|
|
450
|
Domestic government securities
|
|
|
121
|
|
|
|
|
|
|
|
|
|
121
|
|
|
116
|
|
|
|
|
|
|
|
|
|
116
|
Non-U.S.
government securities
|
|
|
118
|
|
|
|
|
|
|
|
|
|
118
|
|
|
149
|
|
|
|
|
|
|
|
|
|
149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale investments
|
|
$
|
17,307
|
|
$
|
623
|
|
$
|
(112
|
)
|
|
$
|
17,818
|
|
$
|
12,794
|
|
$
|
178
|
|
$
|
(1
|
)
|
|
$
|
12,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
|
|
Carrying
|
(In Millions)
|
|
|
|
|
|
|
|
Amount
|
|
|
|
|
|
|
|
Amount
|
Available-for-sale investments
|
|
$
|
17,818
|
|
|
|
|
|
|
|
|
|
|
$
|
12,971
|
Investments in loan participation notes (cost basis)
|
|
|
111
|
|
|
|
|
|
|
|
|
|
|
|
103
|
Cash on hand
|
|
|
253
|
|
|
|
|
|
|
|
|
|
|
|
215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
18,182
|
|
|
|
|
|
|
|
|
|
|
$
|
13,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported as (In Millions)
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
2006
|
Cash and cash equivalents
|
|
$
|
7,307
|
|
|
|
|
|
|
|
|
|
|
$
|
6,598
|
Short-term investments
|
|
|
5,490
|
|
|
|
|
|
|
|
|
|
|
|
2,270
|
Marketable equity securities
|
|
|
987
|
|
|
|
|
|
|
|
|
|
|
|
398
|
Other long-term investments
|
|
|
4,398
|
|
|
|
|
|
|
|
|
|
|
|
4,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
18,182
|
|
|
|
|
|
|
|
|
|
|
$
|
13,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Bank time deposits were primarily issued by institutions
outside the U.S. in 2007 and 2006. |
In 2007, we invested $218.5 million in VMware, Inc., a
publicly traded company, in exchange for 9.5 million shares
of their common stock. Our investment is recorded in marketable
equity securities at a fair value of $794 million as of
December 29, 2007, based on the quoted closing stock price
on December 28, 2007.
We sold available-for-sale investments for proceeds of
approximately $1.7 billion in 2007. The gross realized
gains on these sales totaled $138 million. The realized
gains on third-party merger transactions were insignificant
during 2007. The recognized impairment losses on
available-for-sale investments as well as gross realized losses
on sales were insignificant during 2007.
68
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We sold available-for sale investments for proceeds of
approximately $2.0 billion in 2006 and $1.7 billion in
2005. The gross realized gains on these sales totaled
$135 million in 2006 and $96 million in 2005. The gain
in 2006 included a gain of $103 million from the sale of a
portion of our investment in Micron Technology, Inc. We
recognized insignificant impairment losses on available-for-sale
investments in 2006 and $105 million in 2005. The
impairment in 2005 represented a charge of $105 million on
our investment in Micron reflecting the difference between the
cost basis of the investment and the price of Microns
stock at the end of the second quarter of 2005. We realized
gains on third-party merger transactions of $79 million
during 2006 and an insignificant amount in 2005. Gross realized
losses on sales were insignificant during 2006 and 2005.
The investments in an unrealized loss position as of
December 29, 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
Less than 12 Months
|
|
|
Gross
|
|
|
|
|
|
Unrealized
|
|
|
Estimated
|
(In Millions)
|
|
Losses
|
|
|
Fair Value
|
Floating rate notes
|
|
$
|
(31
|
)
|
|
$
|
4,626
|
Asset-backed securities
|
|
|
(23
|
)
|
|
|
914
|
Corporate bonds
|
|
|
(8
|
)
|
|
|
157
|
Marketable equity securities
|
|
|
(50
|
)
|
|
|
129
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(112
|
)
|
|
$
|
5,826
|
|
|
|
|
|
|
|
|
As of December 29, 2007, the duration of the unrealized
losses for the majority of the floating rate notes, asset-backed
securities purchased prior to 2007, and corporate bonds was less
than six months. These unrealized losses represented an
insignificant amount in relation to our total available-for-sale
portfolio. Substantially all of our unrealized losses can be
attributed to fair value fluctuations in an unstable credit
environment. As of December 29, 2007, all of our
investments in asset-backed securities were rated AAA/Aaa, and
the substantial majority of the investments in floating rate
notes and corporate bonds in an unrealized loss position were
rated AA/Aa2 or better. Our portfolio includes $1.8 billion
of asset-backed securities collateralized by first-lien
mortgages, credit card debt, student loans, and auto loans. We
have the intent and ability to hold our debt investments for a
sufficient period of time to allow for recovery of the principal
amounts invested.
The $50 million of unrealized loss for marketable equity
securities was attributed to the fair value decline in our
investment in Micron. As of December 29, 2007, Micron had
been trading at levels below our cost basis for less than two
months, as its stock price has been impacted by weakened DRAM
and NAND market segments. An oversupply within the DRAM and NAND
market segments contributed to weakening average selling prices
within these highly competitive market segments. We believe that
the market segments will recover within a reasonable period
given past cyclical patterns, and we have the intent and ability
to hold our investment in Micron for a sufficient period of time
to allow for recovery.
We believe that the unrealized losses in all of the above
investments are temporary and that these losses do not represent
a need for an
other-than-temporary
impairment, based on our evaluation of available evidence as of
December 29, 2007.
The investments that have been in an unrealized loss position
for 12 months or more were not significant as of
December 29, 2007. In 2006, investments in an unrealized
loss position were not significant.
69
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The amortized cost and estimated fair value of
available-for-sale and loan participation investments in debt
instruments at December 29, 2007, by contractual maturity,
were as follows:
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
(In Millions)
|
|
Cost
|
|
Fair Value
|
Due in 1 year or less
|
|
$
|
10,203
|
|
$
|
10,205
|
Due in 12 years
|
|
|
2,838
|
|
|
2,836
|
Due in 25 years
|
|
|
1,092
|
|
|
1,108
|
Due after 5 years
|
|
|
103
|
|
|
105
|
Instruments not due at a single maturity date
|
|
|
2,761
|
|
|
2,739
|
|
|
|
|
|
|
|
Total
|
|
$
|
16,997
|
|
$
|
16,993
|
|
|
|
|
|
|
|
Instruments not due at a single maturity date include
asset-backed securities that we purchased prior to fiscal 2007,
and money market fund deposits.
Non-Marketable
and Other Equity Investments
Non-marketable and other equity investments are included in
other long-term assets. Non-marketable and other equity
investments at December 29, 2007 and December 30, 2006
were as follows:
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
|
2006
|
|
Carrying value:
|
|
|
|
|
|
|
|
|
Non-marketable cost method investments
|
|
$
|
805
|
|
|
$
|
733
|
|
Non-marketable equity method investments
|
|
$
|
2,597
|
|
|
$
|
2,033
|
|
Marketable equity method investment
|
|
$
|
508
|
|
|
$
|
|
|
As of December 29, 2007, our non-marketable equity method
investments primarily consisted of our investment in IM Flash
Technologies, LLC (IMFT). See Note 19: Ventures
for further discussion on IMFT. As of December 30, 2006,
our non-marketable equity method investments primarily consisted
of our investments in IMFT and Clearwire Corporation.
As of December 29, 2007, our marketable equity method
investment consisted of our investment in Clearwire in which we
hold an ownership interest of 22% (27% as of December 30,
2006). In March 2007, Clearwire completed an initial public
offering and is publicly traded on The NASDAQ Global Select
Market*. Based on the quoted closing stock price as of
December 28, 2007, the fair value of our ownership interest
in Clearwire was $522 million; however, since we account
for our investment under the equity method, we do not carry the
investment at fair value. We record our proportionate share of
Clearwires net income (loss) on a one-quarter lag.
As of December 29, 2007, the carrying value of our
investment in Clearwire exceeded our share of the book value of
Clearwires assets by $213 million. Of this amount,
$108 million is considered equity method goodwill and is
not amortized in accordance with SFAS No. 142,
Goodwill and Other Intangible Assets, and APB
Opinion No. 18, The Equity Method of Accounting for
Investments in Common Stock. The remaining
$105 million represents our share of the difference between
fair value and book value for Clearwires net assets, of
which $48 million is being amortized with a weighted
average remaining life of approximately 18 years, and
$57 million is not being amortized as these assets have an
indefinite useful life. There were no impairment charges related
to our investment in Clearwire in 2007 or 2006.
We recognized impairment losses on non-marketable equity
investments of $120 million in 2007 ($79 million in
2006 and $103 million in 2005).
70
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 8:
Concentrations of Credit Risk
Financial instruments that potentially subject us to
concentrations of credit risk consist principally of investments
in debt instruments, derivative financial instruments, and trade
receivables. We also enter into master netting arrangements with
counterparties when possible to mitigate credit risk. A master
netting arrangement allows amounts owed by each counterparty
from separate transactions to be net settled.
We generally place investments with high-credit-quality
counterparties and, by policy, limit the amount of credit
exposure to any one counterparty based on our periodic analysis
of that counterpartys relative credit standing.
Substantially all of our investments in debt instruments are
with A/A2 or better rated issuers, and the substantial majority
are with AA/Aa2 or better. In addition to requiring all
investments with original maturities of up to six months to be
rated at least
A-1/P-1 by
Standard & Poors/Moodys, our investment policy
specifies a higher minimum rating for investments with longer
maturities. For instance, investments with maturities beyond
three years require a minimum rating of AA-/Aa3. Government
regulations imposed on investment alternatives of our
non-U.S. subsidiaries,
or the absence of A rated counterparties in certain countries,
result in some minor exceptions, which are reviewed annually by
the Finance Committee of our Board of Directors. Credit rating
criteria for derivative instruments are similar to those for
investments. The amounts subject to credit risk related to
derivative instruments are generally limited to the amounts, if
any, by which a counterpartys obligations exceed our
obligations with that counterparty. At December 29, 2007,
the total credit exposure to any single counterparty did not
exceed $500 million. We obtain and secure available
collateral from counterparties against obligations, including
securities lending transactions, when deemed appropriate.
A substantial majority of our trade receivables are derived from
sales to original equipment manufacturers and original design
manufacturers of computer systems, handheld devices, and
networking and communications equipment. We also have accounts
receivable derived from sales to industrial and retail
distributors. Our two largest customers accounted for 35% of net
revenue for 2007, 2006, and 2005. Additionally, these two
largest customers accounted for 35% of our accounts receivable
at December 29, 2007 and December 30, 2006. We believe
that the receivable balances from these largest customers do not
represent a significant credit risk based on cash flow
forecasts, balance sheet analysis, and past collection
experience.
We have adopted credit policies and standards intended to
accommodate industry growth and inherent risk. We believe that
credit risks are moderated by the financial stability of our
customers and diverse geographic sales areas. We assess credit
risk through quantitative and qualitative analysis, and from
this analysis, we establish credit limits and determine whether
we will seek to use one or more credit support devices, such as
obtaining some form of third-party guaranty or standby letter of
credit, or obtaining credit insurance for all or a portion of
the account balance if necessary.
Note 9:
Gains (Losses) on Equity Investments, Net
Gains (losses) on equity investments, net for the three years
ended December 29, 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Impairment charges
|
|
$
|
(120
|
)
|
|
$
|
(79
|
)
|
|
$
|
(208
|
)
|
Gains on sales
|
|
|
214
|
|
|
|
153
|
|
|
|
101
|
|
Other, net
|
|
|
63
|
|
|
|
140
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gains (losses) on equity investments, net
|
|
$
|
157
|
|
|
$
|
214
|
|
|
$
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2007, we received approximately $110 million of
dividend income from one of our investments, included in the
table above under other, net. Also included in this
category are our equity method losses, primarily from our
investment in Clearwire.
During 2006, the gains on sales of equity investments included
the gain of $103 million on the sale of a portion of our
investment in Micron, which was sold for $275 million.
During 2005, the impairment charges of $208 million
included a $105 million impairment charge on our investment
in Micron.
71
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 10:
Interest and Other, Net
The components of interest and other, net were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Interest income
|
|
$
|
804
|
|
|
$
|
636
|
|
|
$
|
577
|
|
Interest expense
|
|
|
(15
|
)
|
|
|
(24
|
)
|
|
|
(19
|
)
|
Other, net
|
|
|
4
|
|
|
|
590
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest and other, net
|
|
$
|
793
|
|
|
$
|
1,202
|
|
|
$
|
565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2006, we realized gains of $612 million for three
completed divestitures, included within other, net
in the table above. See Note 13: Divestitures
for further discussion.
Note 11:
Comprehensive Income
The components of total comprehensive income were as follows:
|
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
2006
|
|
2005
|
|
Net income
|
|
$
|
6,976
|
|
$
|
5,044
|
|
$
|
8,664
|
|
Other comprehensive income (loss)
|
|
|
318
|
|
|
26
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
7,294
|
|
$
|
5,070
|
|
$
|
8,639
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of other comprehensive income (loss) and related
tax effects were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
Before
|
|
|
|
|
|
Net of
|
|
|
Before
|
|
|
|
|
|
Net of
|
|
|
Before
|
|
|
|
|
|
Net of
|
|
(In Millions)
|
|
Tax
|
|
|
Tax
|
|
|
Tax
|
|
|
Tax
|
|
|
Tax
|
|
|
Tax
|
|
|
Tax
|
|
|
Tax
|
|
|
Tax
|
|
Change in unrealized holding gain on investments
|
|
$
|
420
|
|
|
$
|
(155
|
)
|
|
$
|
265
|
|
|
$
|
94
|
|
|
$
|
(33
|
)
|
|
$
|
61
|
|
|
$
|
161
|
|
|
$
|
(60
|
)
|
|
$
|
101
|
|
Less: adjustment for gain on investments included in net
income
|
|
|
(85
|
)
|
|
|
31
|
|
|
|
(54
|
)
|
|
|
(75
|
)
|
|
|
27
|
|
|
|
(48
|
)
|
|
|
(60
|
)
|
|
|
22
|
|
|
|
(38
|
)
|
Change in unrealized holding gain or loss on derivatives
|
|
|
80
|
|
|
|
(21
|
)
|
|
|
59
|
|
|
|
59
|
|
|
|
(22
|
)
|
|
|
37
|
|
|
|
(67
|
)
|
|
|
25
|
|
|
|
(42
|
)
|
Less: adjustment for amortization of gain or loss on
derivatives included in net income
|
|
|
(55
|
)
|
|
|
16
|
|
|
|
(39
|
)
|
|
|
9
|
|
|
|
(3
|
)
|
|
|
6
|
|
|
|
(60
|
)
|
|
|
22
|
|
|
|
(38
|
)
|
Change in prior service costs
|
|
|
4
|
|
|
|
(1
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in actuarial loss
|
|
|
106
|
|
|
|
(22
|
)
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum pension liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36
|
)
|
|
|
6
|
|
|
|
(30
|
)
|
|
|
(13
|
)
|
|
|
5
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss)
|
|
$
|
470
|
|
|
$
|
(152
|
)
|
|
$
|
318
|
|
|
$
|
51
|
|
|
$
|
(25
|
)
|
|
$
|
26
|
|
|
$
|
(39
|
)
|
|
$
|
14
|
|
|
$
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The components of accumulated other comprehensive income (loss),
net of tax, were as follows:
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
|
2006
|
|
Accumulated net unrealized holding gain on available-for-sale
investments
|
|
$
|
324
|
|
|
$
|
113
|
|
Accumulated net unrealized holding gain on derivatives
|
|
|
100
|
|
|
|
80
|
|
Accumulated net prior service costs
|
|
|
(13
|
)
|
|
|
(16
|
)
|
Accumulated net actuarial losses
|
|
|
(148
|
)
|
|
|
(232
|
)
|
Accumulated transition obligation
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive income (loss)
|
|
$
|
261
|
|
|
$
|
(57
|
)
|
|
|
|
|
|
|
|
|
|
In the table above, accumulated net unrealized holding gain on
available-for-sale investments included $364 million as of
December 29, 2007 related to our investment in VMware, net
of tax of $212 million.
For 2007, we reclassified $39 million of net deferred
holding gains on derivatives from accumulated other
comprehensive income (loss) to cost of sales and operating
expenses related to our
non-U.S.-currency
capital purchase and operating cost hedging programs (losses of
$6 million in 2006 and gains of $38 million in 2005).
We estimate that we will reclassify less than $45 million
of net derivative gains included in other accumulated
comprehensive income (loss) into earnings within the next
12 months. For all periods presented, the portion of
hedging instruments gains or losses excluded from the
assessment of effectiveness and the ineffective portions of
hedges had an insignificant impact on earnings for cash flow
hedges. Additionally, for all periods presented, there was no
significant impact on results of operations from discontinued
cash flow hedges as a result of forecasted transactions that did
not occur.
The estimated net prior service cost, actuarial loss, and
transition obligation for the defined benefit plan that will be
amortized from accumulated other comprehensive income (loss)
into net periodic benefit cost during fiscal year 2008 are
$4 million, $9 million, and zero, respectively.
We recorded the adjustment for initially applying
SFAS No. 158, Employers Accounting for
Defined Benefit Pension and Other Postretirement Plansan
amendment of FASB Statements No. 87, 88, 106, and
132(R) (SFAS No. 158) in 2006, net of tax,
to accumulated other comprehensive income (loss) for
$210 million as of December 30, 2006. See
Note 18: Retirement Benefit Plans.
Note 12:
Acquisitions
Consideration for acquisitions that qualify as business
combinations includes the cash paid and the value of any options
assumed, less any cash acquired, and excludes contingent
employee compensation payable in cash and any debt assumed.
During 2007, we completed one acquisition qualifying as a
business combination in exchange for aggregate net cash
consideration of $76 million, plus certain liabilities. We
allocated a substantial majority of this consideration to
goodwill. The acquired business and related goodwill was
recorded within the all other category for segment reporting
purposes. During 2006, we did not complete any acquisitions
qualifying as business combinations. During 2005, we completed
three acquisitions qualifying as business combinations in
exchange for aggregate net cash consideration of
$177 million, plus certain liabilities. We allocated most
of this consideration to goodwill. The acquired businesses and
related goodwill were recorded within the all other category for
segment reporting purposes.
Note 13:
Divestitures
In September 2006, we completed the divestiture of our media and
signaling business and associated assets that were included in
the Digital Enterprise Group operating segment. We received
$75 million in cash consideration. Approximately
375 employees of our media and signaling business became
employees of the acquiring company. As a result of this
divestiture, we recorded a reduction of goodwill for
$4 million. Additionally, we recorded a net gain of
$52 million within interest and other, net.
73
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In September 2006, we completed the divestiture of certain
product lines and associated assets of our optical networking
components business that were included in the Digital Enterprise
Group operating segment. Consideration for the divestiture was
$115 million, including $86 million in cash, and
shares of the acquiring company with an estimated value of
$29 million. Approximately 55 employees of our optical
networking components business became employees of the acquiring
company. As a result of this divestiture, we recorded a
reduction of goodwill of $6 million. Additionally, we
recorded a net gain of $77 million within interest and
other, net.
In November 2006, we completed the divestiture of certain assets
of our communications and application processor business to
Marvell Technology Group, Ltd. for a cash purchase price of
$600 million, plus the assumption of certain liabilities.
We included the operating results associated with the divested
assets of our communications and application processor business
in the Mobility Group operating segment. Intel and Marvell also
entered into an agreement whereby we provided certain
manufacturing and transition services to Marvell. Approximately
1,300 employees of our communications and application
processor business, involved in a variety of functions including
engineering, product testing and validation, operations, and
marketing, became employees of Marvell. As a result of this
divestiture, we recorded a reduction of goodwill of
$2 million. Additionally, we recorded a net gain of
$483 million within interest and other, net.
In May 2007, we announced that we entered into an agreement to
form a private, independent semiconductor company with
STMicroelectronics N.V. and Francisco Partners L.P. The new
company, named Numonyx, is expected to supply flash memory
solutions for wireless communications, consumer devices, and
other applications. We expect to exchange certain NOR flash
memory assets and certain assets associated with our phase
change memory initiatives with Numonyx for a 45.1% ownership
interest. STMicroelectronics is expected to sell certain assets
and obtain a 48.6% ownership interest. Francisco Partners is
expected to contribute $150 million for a 6.3% ownership
interest. We expect to enter into supply and transition service
agreements to provide products, services, and support to Numonyx
following the close of the transaction.
As of December 29, 2007, approximately $690 million of
NOR flash memory assets were classified as held for sale within
other current assets. The disposal group consisted primarily of
property, plant and equipment and inventory. We ceased recording
depreciation on property, plant and equipment that we classified
as held for sale beginning in the second quarter of 2007. In the
fourth quarter of 2007, we recorded asset impairment charges of
$85 million related to assets expected to be exchanged in
this divestiture. See Note 16: Restructuring and
Asset Impairment Charges for additional information.
Subject to satisfaction of the closing conditions, we expect the
transaction to close by the end of the first quarter of 2008.
Should the transaction not close, we could incur additional
costs such as recapture of the suspended depreciation.
Note 14:
Identified Intangible Assets
We classify identified intangible assets within other long-term
assets. Identified intangible assets consisted of the following
as of December 29, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
(In Millions)
|
|
Gross Assets
|
|
Amortization
|
|
|
Net
|
Intellectual property assets
|
|
$
|
1,158
|
|
$
|
(438
|
)
|
|
$
|
720
|
Acquisition-related developed technology
|
|
|
19
|
|
|
(3
|
)
|
|
|
16
|
Other intangible assets
|
|
|
360
|
|
|
(136
|
)
|
|
|
224
|
|
|
|
|
|
|
|
|
|
|
|
Total identified intangible assets
|
|
$
|
1,537
|
|
$
|
(577
|
)
|
|
$
|
960
|
|
|
|
|
|
|
|
|
|
|
|
During 2007, we acquired intellectual property assets for
$170 million with a weighted average life of 11 years.
The majority of the intellectual property assets acquired
represent the fair value of assets capitalized as a result of a
settlement agreement with Transmeta Corporation. Pursuant to the
agreement, we agreed to pay Transmeta a total of
$250 million in exchange for a technology license and other
consideration (see Note 21: Contingencies). The
present value of the settlement was $236 million, of which
$113 million was charged to cost of sales. The charge to
cost of sales related to the portion of the license attributable
to certain product sales through the third quarter of 2007. The
remaining $123 million represented the value of the
intellectual property assets capitalized and is being amortized
to cost of sales over the assets remaining useful lives.
74
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During 2007, we acquired acquisition-related developed
technology for $15 million with a weighted average life of
four years, and recorded other intangible assets of
$40 million with a weighted average life of four years.
Identified intangible assets consisted of the following as of
December 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
(In Millions)
|
|
Gross Assets
|
|
Amortization
|
|
|
Net
|
Intellectual property assets
|
|
$
|
1,143
|
|
$
|
(434
|
)
|
|
$
|
709
|
Acquisition-related developed technology
|
|
|
4
|
|
|
(2
|
)
|
|
|
2
|
Other intangible assets
|
|
|
349
|
|
|
(73
|
)
|
|
|
276
|
|
|
|
|
|
|
|
|
|
|
|
Total identified intangible assets
|
|
$
|
1,496
|
|
$
|
(509
|
)
|
|
$
|
987
|
|
|
|
|
|
|
|
|
|
|
|
During 2006, we acquired intellectual property assets for
$293 million with a weighted average life of seven years.
Additionally, during 2006, there were $300 million in
additions to other intangible assets with a weighted average
life of four years.
All of our identified intangible assets are subject to
amortization. We recorded the amortization of identified
intangible assets on the consolidated statements of income as
follows: intellectual property assets generally in cost of
sales, acquisition-related developed technology in amortization
of acquisition-related intangibles and costs, and other
intangible assets as either a reduction of revenue or
amortization of acquisition-related intangibles and costs. The
amortization expense for the three years ended December 29,
2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Intellectual property assets
|
|
$
|
159
|
|
|
$
|
178
|
|
|
$
|
123
|
|
Acquisition-related developed technology
|
|
$
|
1
|
|
|
$
|
20
|
|
|
$
|
86
|
|
Other intangible assets
|
|
$
|
92
|
|
|
$
|
59
|
|
|
$
|
32
|
|
Based on identified intangible assets recorded at
December 29, 2007, and assuming that the underlying assets
are not impaired in the future, we expect amortization expense
for each period to be as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
Intellectual property assets
|
|
$
|
161
|
|
|
$
|
133
|
|
|
$
|
122
|
|
|
$
|
71
|
|
|
$
|
60
|
|
Acquisition-related developed technology
|
|
$
|
5
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
|
|
Other intangible assets
|
|
$
|
96
|
|
|
$
|
118
|
|
|
$
|
10
|
|
|
$
|
|
|
|
$
|
|
|
Note 15:
Goodwill
Goodwill activity attributed to reportable operating segments
for the years ended December 29, 2007 and December 30,
2006 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise
|
|
|
Mobility
|
|
|
|
|
|
|
(In Millions)
|
|
Group
|
|
|
Group
|
|
|
All Other
|
|
Total
|
|
December 31, 2005
|
|
$
|
3,400
|
|
|
$
|
250
|
|
|
$
|
223
|
|
$
|
3,873
|
|
Divestitures
|
|
|
(10
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 30, 2006
|
|
|
3,390
|
|
|
|
248
|
|
|
|
223
|
|
|
3,861
|
|
Addition
|
|
|
|
|
|
|
|
|
|
|
60
|
|
|
60
|
|
Other
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 29, 2007
|
|
$
|
3,385
|
|
|
$
|
248
|
|
|
$
|
283
|
|
$
|
3,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During 2007, we completed one acquisition that resulted in
goodwill of $60 million. See Note 12:
Acquisitions for further discussion. During 2006, we
completed three divestitures that resulted in a reduction of
$12 million in goodwill. See Note 13:
Divestitures for further discussion.
We concluded that goodwill was not impaired during 2007, 2006,
and 2005.
Note 16:
Restructuring and Asset Impairment Charges
In the third quarter of 2006, management approved several
actions that were recommended by our structure and efficiency
task force as part of a restructuring plan designed to improve
operational efficiency and financial results. Some of these
activities involve cost savings or other actions that do not
result in restructuring charges, such as better utilization of
assets, reduced spending, and organizational efficiencies. The
efficiency program includes headcount targets for various groups
within the company, and these targets are being met through
ongoing employee attrition and terminations. In addition,
business divestitures further reduce our headcount.
Restructuring and asset impairment charges for the three years
ended December 29, 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
2006
|
|
2005
|
Employee severance and benefit arrangements
|
|
$
|
289
|
|
$
|
238
|
|
$
|
|
Asset impairments
|
|
|
227
|
|
|
317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restructuring and asset impairment charges
|
|
$
|
516
|
|
$
|
555
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
During 2006, we completed the divestiture of three businesses
concurrently with the ongoing execution of the efficiency
program. See Note 13: Divestitures for further
discussion. In connection with the divestiture of certain assets
of our communications and application processor business, we
recorded impairment charges of $103 million related to the
write-down of manufacturing tools to their fair value, less the
cost to dispose of the assets. We determined the fair value
using a market-based valuation technique. In addition, as a
result of both this divestiture and a subsequent assessment of
our worldwide manufacturing capacity operations, we placed for
sale the fabrication facility in Colorado Springs, Colorado.
This plan resulted in an impairment charge of $214 million
to write down to fair value the land, building, and equipment
asset grouping that has been principally used to support our
communications and application processor business. We determined
the fair market value of the asset grouping using an average of
the results from using the cost approach and market approach
valuation techniques.
During 2007, we incurred an additional $54 million in asset
impairment charges as a result of softer than anticipated market
conditions related to the Colorado Springs facility. Also, we
recorded land and building write-downs related to certain
facilities in Santa Clara, California. In addition, during the
fourth quarter we incurred $85 million in asset impairment
charges related to the anticipated divestiture of our NOR flash
memory business. The impairment charges were determined using
the revised fair value, less selling costs, that we expected to
receive upon completion of the divestiture. See
Note 13: Divestitures for further information
on this divestiture, which is expected to be completed during
the first quarter of 2008.
76
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the restructuring and asset
impairment activity for 2006 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Severance
|
|
|
|
|
|
|
|
(In Millions)
|
|
and Benefits
|
|
|
Asset Impairments
|
|
|
Total
|
|
Accrued restructuring balance as of December 31, 2005
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Additional accruals
|
|
|
238
|
|
|
|
317
|
|
|
|
555
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments
|
|
|
(190
|
)
|
|
|
|
|
|
|
(190
|
)
|
Non-cash settlements
|
|
|
|
|
|
|
(317
|
)
|
|
|
(317
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued restructuring balance as of December 30, 2006
|
|
$
|
48
|
|
|
$
|
|
|
|
$
|
48
|
|
Additional accruals
|
|
|
299
|
|
|
|
227
|
|
|
|
526
|
|
Adjustments
|
|
|
(10
|
)
|
|
|
|
|
|
|
(10
|
)
|
Cash payments
|
|
|
(210
|
)
|
|
|
|
|
|
|
(210
|
)
|
Non-cash settlements
|
|
|
|
|
|
|
(227
|
)
|
|
|
(227
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued restructuring balance as of December 29, 2007
|
|
$
|
127
|
|
|
$
|
|
|
|
$
|
127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded the additional accruals, net of adjustments, as
restructuring and asset impairment charges on the consolidated
statements of income. The remaining accrual as of
December 29, 2007 was related to severance benefits that we
recorded as a current liability within accrued compensation and
benefits.
From the third quarter of 2006 through the fourth quarter of
2007, we incurred a total of $1.1 billion in restructuring
and asset impairment charges related to this plan. These charges
include a total of $527 million related to employee
severance and benefit arrangements due to the termination of
approximately 9,900 employees, and $544 million in asset
impairment charges. We may incur additional restructuring
charges in the future for employee severance and benefit
arrangements, and facility-related or other exit activities.
Note 17:
Taxes
Income before taxes and the provision for taxes consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Income before taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
6,520
|
|
|
$
|
4,532
|
|
|
$
|
10,397
|
|
Non-U.S.
|
|
|
2,646
|
|
|
|
2,536
|
|
|
|
2,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income before taxes
|
|
$
|
9,166
|
|
|
$
|
7,068
|
|
|
$
|
12,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
1,865
|
|
|
$
|
1,997
|
|
|
$
|
3,546
|
|
State
|
|
|
111
|
|
|
|
15
|
|
|
|
289
|
|
Non-U.S.
|
|
|
445
|
|
|
|
337
|
|
|
|
524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,421
|
|
|
|
2,349
|
|
|
|
4,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(140
|
)
|
|
|
(305
|
)
|
|
|
(360
|
)
|
Other
|
|
|
(91
|
)
|
|
|
(20
|
)
|
|
|
(53
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(231
|
)
|
|
|
(325
|
)
|
|
|
(413
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision for taxes
|
|
$
|
2,190
|
|
|
$
|
2,024
|
|
|
$
|
3,946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
23.9
|
%
|
|
|
28.6
|
%
|
|
|
31.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The difference between the tax provision at the statutory
federal income tax rate and the tax provision as a percentage of
income before income taxes was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Percentages)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Statutory federal income tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Increase (reduction) in rate resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
State taxes, net of federal benefits
|
|
|
0.6
|
|
|
|
0.8
|
|
|
|
1.3
|
|
Non-U.S.
income taxed at different rates
|
|
|
(4.7
|
)
|
|
|
(4.3
|
)
|
|
|
(2.0
|
)
|
Settlements
|
|
|
(5.3
|
)
|
|
|
|
|
|
|
|
|
Research and development tax credits
|
|
|
(1.3
|
)
|
|
|
(0.8
|
)
|
|
|
(0.5
|
)
|
Domestic manufacturing deduction benefit
|
|
|
(1.1
|
)
|
|
|
(0.9
|
)
|
|
|
(0.8
|
)
|
Export sales benefit
|
|
|
|
|
|
|
(2.1
|
)
|
|
|
(2.8
|
)
|
Repatriation of prior years permanently reinvested earnings
|
|
|
|
|
|
|
|
|
|
|
1.8
|
|
Share-based compensation
|
|
|
0.3
|
|
|
|
0.7
|
|
|
|
|
|
Other
|
|
|
0.4
|
|
|
|
0.2
|
|
|
|
(0.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax rate
|
|
|
23.9
|
%
|
|
|
28.6
|
%
|
|
|
31.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2007, the tax benefit that we realized for the tax
deduction from option exercises and other awards totaled
$265 million ($139 million in 2006 and
$351 million in 2005).
The American Jobs Creation Act of 2004 (the Jobs Act) created a
temporary incentive for U.S. corporations to repatriate
accumulated income earned abroad by providing an 85%
dividends-received deduction for certain dividends from
controlled
non-U.S.
corporations. During 2005, our Chief Executive Officer and Board
of Directors approved a domestic reinvestment plan under which
we repatriated $6.2 billion in earnings outside the U.S.
pursuant to the Jobs Act. We recorded additional tax expense in
2005 of approximately $265 million related to this decision
to repatriate
non-U.S.
earnings.
78
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts for
income tax purposes. Significant components of our deferred tax
assets and liabilities at fiscal
year-ends
were as follows:
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
|
2006
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Accrued compensation and other benefits
|
|
$
|
438
|
|
|
$
|
284
|
|
Accrued advertising
|
|
|
29
|
|
|
|
|
|
Deferred income
|
|
|
222
|
|
|
|
217
|
|
Share-based compensation
|
|
|
542
|
|
|
|
385
|
|
Inventory valuation
|
|
|
315
|
|
|
|
268
|
|
Impairment losses on equity investments
|
|
|
116
|
|
|
|
89
|
|
State credits and net operating losses
|
|
|
133
|
|
|
|
115
|
|
Intercompany profit in inventory
|
|
|
123
|
|
|
|
133
|
|
Unremitted earnings of
non-U.S.
subsidiaries
|
|
|
32
|
|
|
|
54
|
|
Other, net
|
|
|
331
|
|
|
|
272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,281
|
|
|
|
1,817
|
|
Valuation allowance
|
|
|
(133
|
)
|
|
|
(87
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
$
|
2,148
|
|
|
$
|
1,730
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
(759
|
)
|
|
$
|
(530
|
)
|
Accrued advertising
|
|
|
|
|
|
|
(66
|
)
|
Unrealized gains on investments
|
|
|
(227
|
)
|
|
|
(149
|
)
|
Other, net
|
|
|
(106
|
)
|
|
|
(111
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
$
|
(1,092
|
)
|
|
$
|
(856
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
1,056
|
|
|
$
|
874
|
|
|
|
|
|
|
|
|
|
|
Reported as:
|
|
|
|
|
|
|
|
|
Current deferred tax assets
|
|
$
|
1,186
|
|
|
$
|
997
|
|
Current deferred tax
liabilities1
|
|
|
|
|
|
|
(8
|
)
|
Non-current deferred tax
assets2
|
|
|
281
|
|
|
|
150
|
|
Non-current deferred tax liabilities
|
|
|
(411
|
)
|
|
|
(265
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred taxes
|
|
$
|
1,056
|
|
|
$
|
874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Included within other accrued liabilities on the consolidated
balance sheets. |
|
2 |
|
Included within other long-term assets on the consolidated
balance sheets. |
We had state tax credits of $155 million at
December 29, 2007 that will expire between 2009 and 2020.
The net deferred tax asset valuation allowance was
$133 million at December 29, 2007 compared to
$87 million at December 30, 2006. The valuation
allowance is based on our assessment that it is more likely than
not that certain deferred tax assets will not be realized in the
foreseeable future. The valuation allowance is composed of
unrealized state capital loss carry forwards and unrealized
state credit carry forwards of $91 million, and operating
loss of
non-U.S.
subsidiaries of $42 million.
As of December 29, 2007, U.S. income taxes were not
provided for on a cumulative total of approximately
$6.3 billion of undistributed earnings for certain
non-U.S.
subsidiaries. Determination of the amount of unrecognized
deferred tax liability for temporary differences related to
investments in these
non-U.S.
subsidiaries that are essentially permanent in duration is not
practicable. We currently intend to reinvest those earnings in
operations outside the U.S.
79
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Effective at the beginning of the first quarter of 2007, we
adopted the provisions of FIN 48. As a result of the
implementation of FIN 48, we reduced the liability for net
unrecognized tax benefits by $181 million, and accounted
for the reduction as a cumulative effect of a change in
accounting principle that resulted in an increase to retained
earnings of $181 million.
We have historically classified unrecognized tax benefits in
current taxes payable. As a result of adoption of FIN 48,
we reclassified unrecognized tax benefits to long-term income
taxes payable. Long-term income taxes payable include uncertain
tax positions, reduced by the associated federal deduction for
state taxes and
non-U.S. tax
credits, and may also include other long-term tax liabilities
that are not uncertain but have not yet been paid.
The aggregate changes in the balance of gross unrecognized tax
benefits were as follows:
|
|
|
|
|
(In Millions)
|
|
|
|
Beginning balance as of December 31, 2006 (date of
adoption)
|
|
$
|
1,896
|
|
Settlements and effective settlements with tax authorities and
related remeasurements
|
|
|
(1,243
|
)
|
Lapse of statute of limitations
|
|
|
|
|
Increases in balances related to tax positions taken during
prior periods
|
|
|
106
|
|
Decreases in balances related to tax positions taken during
prior periods
|
|
|
(26
|
)
|
Increases in balances related to tax positions taken during
current period
|
|
|
61
|
|
|
|
|
|
|
December 29, 2007
|
|
$
|
794
|
|
|
|
|
|
|
During 2007, the U.S. Internal Revenue Service (IRS) closed its
examination of our tax returns for the years 1999 through 2002,
resolving the issues related to the tax benefits for export
sales as well as a number of other issues. Additionally, we
reached a settlement with the IRS for years 2003 through 2005
with respect to the tax benefits for export sales. In connection
with the $739 million settlement with the IRS, we reversed
long-term income taxes payable, which resulted in a
$276 million tax benefit in 2007.
Also during 2007, we effectively settled with the IRS on several
other matters related to the audit for the 2003 and 2004 tax
years, despite the fact that the IRS audit for these years
remains open. The result of effectively settling these positions
and the process of re-evaluating, based on all available
information and certain required remeasurements, was a reduction
of $389 million in the balance of our gross unrecognized
tax benefits, $155 million of which resulted in a tax
benefit in 2007.
If the remaining balance of $794 million of unrecognized
tax benefits at December 29, 2007 were realized in a future
period, it would result in a tax benefit of $754 million
and a reduction of the effective tax rate.
During all years presented, we recognized interest and penalties
related to unrecognized tax benefits within the provision for
taxes on the consolidated statements of income. Therefore, no
change was necessary upon adoption of FIN 48. In 2007, we
recognized a net benefit of $142 million, primarily due to
the reversal of accrued interest and penalties related to the
settlement activity described above. As of December 29,
2007, we had $115 million, and as of the date of adoption
we had $257 million, of accrued interest and penalties
related to unrecognized tax benefits.
Although the timing of the resolution and/or closure on audits
is highly uncertain, it is reasonably possible that the balance
of gross unrecognized tax benefits could significantly change in
the next 12 months. However, given the number of years
remaining subject to examination and the number of matters being
examined, we are unable to estimate the range of possible
adjustments to the balance of gross unrecognized tax benefits.
We file U.S. federal, U.S. state, and
non-U.S. tax
returns. For U.S. state and
non-U.S. tax
returns, we are generally no longer subject to tax examinations
for years prior to 1996. For U.S. federal tax returns, we are no
longer subject to tax examination for years prior to 2003.
80
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 18:
Retirement Benefit Plans
Profit
Sharing Plans
We provide tax-qualified profit sharing retirement plans for the
benefit of eligible employees, former employees, and retirees in
the U.S. and certain other countries. The plans are designed to
provide employees with an accumulation of funds for retirement
on a tax-deferred basis and provide for annual discretionary
employer contributions. Our Chief Executive Officer determines
the amounts to be contributed to the U.S. Profit Sharing Plan
under delegation of authority from our Board of Directors,
pursuant to the terms of the Profit Sharing Plan. As of
December 29, 2007, 80% of our U.S. Profit Sharing Fund was
invested in equities and 20% was invested in fixed-income
instruments. All assets are managed by external investment
managers.
For the benefit of eligible U.S. employees, we also provide a
non-tax-qualified supplemental deferred compensation plan for
certain highly compensated employees. This plan is designed to
permit certain discretionary employer contributions and to
permit employee deferral of a portion of salaries in excess of
certain tax limits and deferral of bonuses. This plan is
unfunded.
We expensed $302 million for the qualified and
non-qualified U.S. profit sharing retirement plans in 2007
($313 million in 2006 and $355 million in 2005). In
the first quarter of 2008, we funded $296 million for the
2007 contribution to the U.S. qualified Profit Sharing Plan and
$9 million for the supplemental deferred compensation plan
for certain highly compensated employees.
Contributions that we make to the U.S. Profit Sharing Plan on
behalf of our employees vest based on the employees years
of service. As of December 29, 2007, employees vested after
three years of service in 20% annual increments until the
employee was 100% vested after seven years, or earlier if the
employee reached age 60. We amended the U.S. Profit Sharing
Plan vesting schedule to comply with the Pension Protection Act
of 2006 (PPA), which requires employers to fully vest employees
after six years of service. As a result, as of the beginning of
2008, vesting occurs after two years of service in 20% annual
increments until the employee is 100% vested after six years, or
earlier if the employee reaches age 60. We also implemented
this change in the U.S. defined-benefit plan.
Pension
and Postretirement Benefit Plans
Effective at the end of fiscal year 2006, we adopted the
provisions of SFAS No. 158. SFAS No. 158
requires that the funded status of defined-benefit
postretirement plans be recognized on our consolidated balance
sheets, and that changes in the funded status be reflected in
other comprehensive income. SFAS No. 158 also requires
that the measurement date of the plans funded status be
the same as our fiscal year-end. Prior to adopting the
provisions of SFAS No. 158, the measurement date for
all non-U.S.
plans was our fiscal year-end, and the measurement date for the
U.S. plan was November. Therefore, the change in measurement
date had an insignificant impact on the projected benefit
obligation and accumulated other comprehensive income (loss).
Upon adoption of SFAS No. 158 in 2006, we recorded an
adjustment, net of tax, of $210 million to accumulated
other comprehensive income (loss).
U.S. Pension Benefits. We provide a tax-qualified
defined-benefit pension plan for the benefit of eligible
employees and retirees in the U.S. The plan provides for a
minimum pension benefit that is determined by a
participants years of service and final average
compensation (taking into account the participants social
security wage base), reduced by the participants balance
in the U.S. Profit Sharing Plan. If the pension benefit exceeds
the participants balance in the U.S. Profit Sharing
Plan, the participant will receive a combination of pension and
profit sharing amounts equal to the pension benefit. However,
the participant will receive only the benefit from the Profit
Sharing Plan if that benefit is greater than the value of the
pension benefit. If we do not continue to contribute to, or
significantly reduce contributions to, the U.S. Profit
Sharing Plan, the U.S. defined-benefit plan projected benefit
obligation could increase significantly. In 2007, we amended the
U.S. Defined Benefit Plan lump sum conversion rates, mortality
tables, and minimum funding targets to comply with the PPA.
Non-U.S.
Pension Benefits. We also provide defined-benefit
pension plans in certain other countries. Consistent with the
requirements of local law, we deposit funds for certain plans
with insurance companies, third-party trustees, or into
government-managed accounts, and/or accrue for the unfunded
portion of the obligation. The assumptions used in calculating
the obligation for the
non-U.S.
plans depend on the local economic environment.
81
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Postretirement Medical Benefits. Upon retirement,
eligible U.S. employees are credited with a defined dollar
amount based on years of service. These credits can be used to
pay all or a portion of the cost to purchase coverage in an
Intel-sponsored medical plan. If the available credits are not
sufficient to pay the entire cost of the coverage, the remaining
cost is the responsibility of the retiree.
Funding Policy. Our practice is to fund the various
pension plans in amounts sufficient to meet the minimum
requirements of U.S. federal laws and regulations or applicable
local laws and regulations. Additional funding may be provided
as deemed appropriate. The assets of the various plans are
invested in corporate equities, corporate debt instruments,
government securities, and other institutional arrangements. The
portfolio of each plan depends on plan design and applicable
local laws. Depending on the design of the plan, local customs,
and market circumstances, the liabilities of a plan may exceed
qualified plan assets. We accrue for all such liabilities.
Benefit
Obligation and Plan Assets
The changes in the benefit obligations and plan assets for the
plans described above were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension
|
|
|
Non-U.S. Pension
|
|
|
Postretirement
|
|
|
|
Benefits
|
|
|
Benefits
|
|
|
Medical Benefits
|
|
(In Millions)
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Change in projected benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning benefit obligation
|
|
$
|
345
|
|
|
$
|
317
|
|
|
$
|
686
|
|
|
$
|
473
|
|
|
$
|
204
|
|
|
$
|
193
|
|
Service cost
|
|
|
18
|
|
|
|
4
|
|
|
|
70
|
|
|
|
50
|
|
|
|
12
|
|
|
|
12
|
|
Interest cost
|
|
|
17
|
|
|
|
13
|
|
|
|
37
|
|
|
|
27
|
|
|
|
11
|
|
|
|
10
|
|
Plan participants contributions
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
9
|
|
|
|
3
|
|
|
|
3
|
|
Actuarial (gain) loss
|
|
|
(31
|
)
|
|
|
13
|
|
|
|
(59
|
)
|
|
|
115
|
|
|
|
(11
|
)
|
|
|
(8
|
)
|
Currency exchange rate changes
|
|
|
|
|
|
|
|
|
|
|
77
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
Plan amendments
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits paid to plan participants
|
|
|
(33
|
)
|
|
|
(2
|
)
|
|
|
(27
|
)
|
|
|
(31
|
)
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending projected benefit obligation
|
|
$
|
291
|
|
|
$
|
345
|
|
|
$
|
794
|
|
|
$
|
686
|
|
|
$
|
213
|
|
|
$
|
204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension
|
|
|
Non-U.S. Pension
|
|
|
Postretirement
|
|
|
|
Benefits
|
|
|
Benefits
|
|
|
Medical Benefits
|
|
(In Millions)
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning fair value of plan assets
|
|
$
|
245
|
|
|
$
|
226
|
|
|
$
|
447
|
|
|
$
|
340
|
|
|
$
|
1
|
|
|
$
|
2
|
|
Actual return on plan assets
|
|
|
15
|
|
|
|
12
|
|
|
|
20
|
|
|
|
41
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Employer contributions
|
|
|
|
|
|
|
9
|
|
|
|
52
|
|
|
|
60
|
|
|
|
4
|
|
|
|
3
|
|
Plan participants contributions
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
9
|
|
|
|
3
|
|
|
|
3
|
|
Currency exchange rate changes
|
|
|
|
|
|
|
|
|
|
|
49
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
Benefits paid to participants
|
|
|
(33
|
)
|
|
|
(2
|
)
|
|
|
(30
|
)
|
|
|
(31
|
)
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending fair value of plan assets
|
|
$
|
227
|
|
|
$
|
245
|
|
|
$
|
548
|
|
|
$
|
447
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the amounts recognized on the
consolidated balance sheet as of December 29, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension
|
|
|
Non-U.S. Pension
|
|
|
Postretirement
|
|
(In Millions)
|
|
Benefits
|
|
|
Benefits
|
|
|
Medical Benefits
|
|
Other long-term assets
|
|
$
|
|
|
|
$
|
53
|
|
|
$
|
|
|
Accrued compensation and benefits
|
|
|
|
|
|
|
(6
|
)
|
|
|
(10
|
)
|
Other long-term liabilities
|
|
|
(64
|
)
|
|
|
(293
|
)
|
|
|
(202
|
)
|
Accumulated other comprehensive loss
|
|
|
49
|
|
|
|
146
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
(15
|
)
|
|
$
|
(100
|
)
|
|
$
|
(197
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the amounts recorded to
accumulated other comprehensive income (loss) before taxes, as
of December 29, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension
|
|
|
Non-U.S. Pension
|
|
|
Postretirement
|
|
(In Millions)
|
|
Benefits
|
|
|
Benefits
|
|
|
Medical Benefits
|
|
Net prior service cost
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(21
|
)
|
Net actuarial gain (loss)
|
|
|
(49
|
)
|
|
|
(144
|
)
|
|
|
6
|
|
Reclassification adjustment of transition obligation
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit plans, net
|
|
$
|
(49
|
)
|
|
$
|
(146
|
)
|
|
$
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the amounts recognized on the
consolidated balance sheet as of December 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension
|
|
|
Non-U.S. Pension
|
|
|
Postretirement
|
|
(In Millions)
|
|
Benefits
|
|
|
Benefits
|
|
|
Medical Benefits
|
|
Other long-term assets
|
|
$
|
|
|
|
$
|
44
|
|
|
$
|
|
|
Accrued compensation and benefits
|
|
|
|
|
|
|
(6
|
)
|
|
|
(9
|
)
|
Other long-term liabilities
|
|
|
(100
|
)
|
|
|
(277
|
)
|
|
|
(194
|
)
|
Accumulated other comprehensive loss
|
|
|
91
|
|
|
|
208
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
(9
|
)
|
|
$
|
(31
|
)
|
|
$
|
(182
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the aggregate data in the tables below are the
amounts applicable to our pension plans with accumulated benefit
obligations in excess of plan assets, as well as plans with
projected benefit obligations in excess of plan assets. Amounts
related to such plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension
|
|
Non-U.S. Pension
|
|
|
Benefits
|
|
Benefits
|
(In Millions)
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
Plans with accumulated benefit obligations in excess of plan
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligations
|
|
$
|
|
|
$
|
|
|
$
|
155
|
|
$
|
330
|
Plan assets
|
|
$
|
|
|
$
|
|
|
$
|
31
|
|
$
|
211
|
Plans with projected benefit obligations in excess of plan
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligations
|
|
$
|
291
|
|
$
|
345
|
|
$
|
573
|
|
$
|
494
|
Plan assets
|
|
$
|
227
|
|
$
|
245
|
|
$
|
274
|
|
$
|
211
|
Assumptions
Weighted-average actuarial assumptions used to determine benefit
obligations for the plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension
|
|
|
Non-U.S. Pension
|
|
|
Postretirement
|
|
|
|
Benefits
|
|
|
Benefits
|
|
|
Medical Benefits
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Discount rate
|
|
|
5.6
|
%
|
|
|
5.5
|
%
|
|
|
5.5
|
%
|
|
|
5.3
|
%
|
|
|
5.6
|
%
|
|
|
5.5
|
%
|
Rate of compensation increase
|
|
|
5.0
|
%
|
|
|
5.0
|
%
|
|
|
4.5
|
%
|
|
|
4.6
|
%
|
|
|
|
|
|
|
|
|
For the postretirement medical benefit plan, an increase in the
assumed healthcare cost trend rate of one percentage point each
year would not have a significant impact on the benefit
obligation because the plan provides defined credits that the
retiree can use to pay all or a portion of the cost to purchase
medical coverage.
83
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Weighted-average actuarial assumptions used to determine costs
for the plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension
|
|
|
Non-U.S. Pension
|
|
|
Postretirement
|
|
|
|
Benefits
|
|
|
Benefits
|
|
|
Medical Benefits
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Discount rate
|
|
|
5.5
|
%
|
|
|
5.4
|
%
|
|
|
5.2
|
%
|
|
|
5.4
|
%
|
|
|
5.5
|
%
|
|
|
5.6
|
%
|
Expected return on plan assets
|
|
|
5.6
|
%
|
|
|
5.6
|
%
|
|
|
6.2
|
%
|
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
Rate of compensation increase
|
|
|
5.0
|
%
|
|
|
5.0
|
%
|
|
|
4.5
|
%
|
|
|
4.2
|
%
|
|
|
|
|
|
|
|
|
For the U.S. plan, we developed the discount rate by calculating
the benefit payment streams by year to determine when benefit
payments will be due. We then matched the benefit payment
streams by year to U.S. Treasury zero coupon strips to match the
timing and amount of the expected benefit payments. We adjusted
the zero coupon rate by a historical credit risk spread, and
discounted it back to the measurement date to determine the
appropriate discount rate. For the
non-U.S.
plans, we developed the discount rate by analyzing long-term
bond rates and matching the bond maturity with the average
duration of the pension liabilities. We consider several factors
in developing the asset return assumptions for the U.S. and
non-U.S.
plans. We analyzed rates of return relevant to the country where
each plan is in effect and the investments applicable to the
plan, expectations of future returns, local actuarial
projections, and the projected rates of return from investment
managers. The expected long-term rate of return shown for the
non-U.S.
plan assets is weighted to reflect each countrys relative
portion of the
non-U.S.
plan assets.
Net
Periodic Benefit Cost
The net periodic benefit cost for the plans included the
following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. Pension
|
|
|
Postretirement
|
|
|
U.S. Pension Benefits
|
|
|
Benefits
|
|
|
Medical Benefits
|
(In Millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
2006
|
|
2005
|
Service cost
|
|
$
|
18
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
70
|
|
|
$
|
51
|
|
|
$
|
31
|
|
|
$
|
6
|
|
$
|
12
|
|
$
|
11
|
Interest cost
|
|
|
17
|
|
|
|
13
|
|
|
|
2
|
|
|
|
37
|
|
|
|
27
|
|
|
|
18
|
|
|
|
11
|
|
|
10
|
|
|
10
|
Expected return on plan assets
|
|
|
(10
|
)
|
|
|
(12
|
)
|
|
|
(3
|
)
|
|
|
(29
|
)
|
|
|
(15
|
)
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
4
|
|
|
4
|
Recognized net actuarial loss
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
7
|
|
|
$
|
5
|
|
|
$
|
3
|
|
|
$
|
90
|
|
|
$
|
63
|
|
|
$
|
31
|
|
|
$
|
21
|
|
$
|
26
|
|
$
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Plan Assets
In general, we design the investment strategy for U.S. plan
assets to assure that the pension assets are available to pay
benefits as they come due and to minimize market risk. When
deemed appropriate, we may invest a portion of the fund in
futures contracts for the purpose of acting as a temporary
substitute for an investment in a particular equity security.
The fund does not engage in speculative futures transactions.
The expected long-term rate of return for the U.S. plan assets
is 5.1%.
The asset allocation for our U.S. Pension Plan at the end of
fiscal years 2007 and 2006, and the target allocation rate for
2008, by asset category, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Plan Assets
|
Asset Category
|
|
Target Allocation
|
|
2007
|
|
2006
|
Equity securities
|
|
|
10%20%
|
|
|
|
15.0%
|
|
|
14.0%
|
Debt instruments
|
|
|
80%90%
|
|
|
|
85.0%
|
|
|
86.0%
|
84
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Non-U.S.
Plan Assets
The non-U.S.
plans investments are managed by insurance companies,
third-party trustees, or pension funds consistent with
regulations or market practice of the country where the assets
are invested. The investment manager makes investment decisions
within the guidelines set by us or local regulations.
Performance is evaluated by comparing the actual rate of return
to the return on other similar assets. Investments managed by
qualified insurance companies or pension funds under standard
contracts follow local regulations, and we are not actively
involved in their investment strategies. In general, the
investment strategy followed is designed to accumulate a
diversified portfolio among markets, asset classes, or
individual securities in order to reduce market risk and assure
that the pension assets are available to pay benefits as they
come due. The average expected long-term rate of return for the
non-U.S.
plan assets is 6.7%.
The asset allocation for our
non-U.S.
plans, excluding assets managed by qualified insurance
companies, at the end of fiscal years 2007 and 2006, and the
target allocation rate for 2008, by asset category, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Plan Assets
|
Asset Category
|
|
Target Allocation
|
|
2007
|
|
2006
|
Equity securities
|
|
|
67.0%
|
|
|
|
67.0%
|
|
|
|
68.0%
|
|
Debt instruments
|
|
|
8.0%
|
|
|
|
8.0%
|
|
|
|
8.0%
|
|
Other
|
|
|
25.0%
|
|
|
|
25.0%
|
|
|
|
24.0%
|
|
Investment assets managed by qualified insurance companies are
invested as part of the insurance companies general fund.
We do not have control over the target allocation of those
investments. Those investments made up 31% of total
non-U.S.
plan assets in 2007 and 2006.
Funding
Expectations
Under applicable law for the U.S. Pension Plan, we are not
required to make any contributions during 2008. We intend to
make voluntary contributions if the plan assets are less than
the accumulated benefit obligation at the end of the year. Our
expected funding for the
non-U.S.
plans during 2008 is approximately $64 million. We expect
employer contributions to the postretirement medical benefits
plan to be approximately $12 million during 2008.
Estimated
Future Benefit Payments
We expect the benefits to be paid through 2017 from the U.S. and
non-U.S.
pension plans and other postretirement benefit plans to be
approximately $100 million annually.
Note 19:
Ventures
In January 2006, Micron and Intel formed IM Flash Technologies,
LLC (IMFT) and in February 2007 formed IM Flash Singapore, LLP
(IMFS). We established these joint ventures to manufacture NAND
flash memory products for Micron and Intel. We own a 49%
interest in each of these ventures. Initial production from IMFT
began in early 2006; IMFS is in its construction phase and has
had no production to date. Our investments were
$2.2 billion in IMFT and $146 million in IMFS as of
December 29, 2007 ($1.3 billion in IMFT as of
December 30, 2006), which represents our maximum exposure
to loss. Our investments in these ventures are classified within
other
long-term
assets.
As part of the initial capital contribution to IMFT, we paid
$615 million in cash and issued $581 million in
non-interest-bearing notes. During 2006, we paid the entire
balance of $581 million to settle the non-interest-bearing
notes, which has been reflected as a financing activity on the
consolidated statements of cash flows. At inception, in exchange
for a 51% interest, Micron contributed assets valued at
$995 million and $250 million in cash.
85
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Concurrent with the formation of IMFT, we paid Micron
$270 million for product designs that Micron developed as
well as certain other intellectual property. We own the rights
to all product designs and have licensed the designs to Micron.
Micron paid Intel $40 million to license these initial
product designs and will pay additional royalties on new product
designs. We recorded our net investment in this technology of
$230 million as an identified intangible asset, which we
included in the intellectual property asset classification. The
identified intangible asset is being amortized into cost of
sales over its expected five-year life. Costs that Intel and
Micron have incurred for product and process development related
to IMFT are generally split evenly between Intel and Micron and
are classified in R&D.
Subject to certain conditions, we agreed to contribute up to
approximately $1.4 billion for IMFT and up to approximately
$1.7 billion for IMFS in the three years following the
initial capital contributions. Of these amounts, as of
December 29, 2007, our remaining commitment was
approximately $260 million for IMFT and approximately
$1.5 billion for IMFS. Additionally, our portion of IMFT
costs, primarily related to product purchases and
start-up,
was approximately $790 million during 2007 (approximately
$300 million during 2006). The amount due to IMFT for
product purchases and services provided was approximately
$130 million as of December 29, 2007 and was not
significant as of December 30, 2006.
IMFT and IMFS are each governed by a Board of Managers, with
Micron and Intel initially appointing an equal number of
managers to each of the boards. The number of managers appointed
by each party adjusts depending on the parties ownership
interests. These ventures will operate until 2016, but are
subject to prior termination under certain terms and conditions.
These joint ventures are variable interest entities as defined
by FASB Interpretation No. 46(R), Consolidation of
Variable Interest Entities (FIN 46(R)), because all
positive and negative variances in cost structure will be passed
on to Micron and Intel through our purchase agreements. However,
we have determined that we are not the primary beneficiary of
these joint ventures, and as such, we account for our interests
using the equity method of accounting and do not consolidate
these joint ventures. Micron and Intel are also considered
related parties under the provisions of FIN 46(R).
We have entered into a long-term agreement with Apple, Inc. to
supply a portion of the NAND flash memory output that we will
purchase from IMFT through December 31, 2010. In January
2006, Apple pre-paid Intel a refundable $250 million that
will be applied to Apples purchases of NAND flash memory
beginning in 2008.
Note 20:
Commitments
A portion of our capital equipment and certain facilities are
under operating leases that expire at various dates through
2021. Additionally, portions of our land are under leases that
expire at various dates through 2062. Rental expense was
$154 million in 2007 ($160 million in 2006 and
$150 million in 2005).
Minimum rental commitments under all non-cancelable leases with
an initial term in excess of one year are payable as follows (in
millions):
|
|
|
|
Year Payable
|
|
|
2008
|
|
$
|
95
|
2009
|
|
|
73
|
2010
|
|
|
44
|
2011
|
|
|
30
|
2012
|
|
|
26
|
2013 and thereafter
|
|
|
52
|
|
|
|
|
Total
|
|
$
|
320
|
|
|
|
|
86
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Commitments for construction or purchase of property, plant and
equipment decreased from $3.3 billion at December 30,
2006 to $2.3 billion at December 29, 2007. Other
purchase obligations and commitments as of December 29,
2007 totaled $1.7 billion. Other purchase obligations and
commitments include payments due under various types of
licenses, agreements to purchase raw material or other goods, as
well as payments due under non-contingent funding obligations.
Funding obligations include, for example, agreements to fund
various projects with other companies. In addition, we have
various contractual commitments with Micron, IMFT, and IMFS (see
Note 19: Ventures).
Note 21:
Contingencies
Tax
Matters
In connection with the regular examination of our tax returns
for the years 1999 through 2005, the IRS had formally assessed
adjustments to the amounts that we had recorded on those returns
as a tax benefit for export sales. In 2007, we resolved these
matters with the IRS. See Note 17: Taxes for
further discussion.
Legal
Proceedings
We are currently a party to various legal proceedings, including
those noted in this section. While management presently believes
that the ultimate outcome of these proceedings, individually and
in the aggregate, will not materially harm the companys
financial position, cash flows, or overall trends in results of
operations, litigation is subject to inherent uncertainties, and
unfavorable rulings could occur. An unfavorable ruling could
include money damages or, in cases for which injunctive relief
is sought, an injunction prohibiting us from selling one or more
products at all or in particular ways. Were an unfavorable
ruling to occur, our business or results of operations could be
materially harmed.
Advanced
Micro Devices, Inc. (AMD) and AMD International
Sales & Service, Ltd. v. Intel Corporation and Intel
Kabushiki Kaisha, and Related Consumer Class Actions and
Government Investigations
In June 2005, AMD filed a complaint in the United States
District Court for the District of Delaware alleging that we and
our Japanese subsidiary engaged in various actions in violation
of the Sherman Act and the California Business and Professions
Code, including providing secret and discriminatory discounts
and rebates and intentionally interfering with prospective
business advantages of AMD. AMDs complaint seeks
unspecified treble damages, punitive damages, an injunction, and
attorneys fees and costs. Subsequently, AMDs
Japanese subsidiary also filed suits in the Tokyo High Court and
the Tokyo District Court against our Japanese subsidiary,
asserting violations of Japans Antimonopoly Law and
alleging damages in each suit of approximately $55 million,
plus various other costs and fees. At least 83 separate class
actions have been filed in the U.S. District Courts for the
Northern District of California, Southern District of
California, District of Idaho, District of Nebraska, District of
New Mexico, District of Maine, and the District of Delaware, as
well as in various California, Kansas, and Tennessee state
courts. These actions generally repeat AMDs allegations
and assert various consumer injuries, including that consumers
in various states have been injured by paying higher prices for
computers containing our microprocessors. All of the federal
class actions and the Kansas and Tennessee state court class
actions have been or will be consolidated by the Multidistrict
Litigation Panel to the District of Delaware. All California
class actions have been consolidated to the Superior Court of
California in Santa Clara County. We dispute AMDs claims
and the
class-action
claims, and intend to defend the lawsuits vigorously.
We are also subject to certain antitrust regulatory inquiries.
In 2001, the European Commission commenced an investigation
regarding claims by AMD that we used unfair business practices
to persuade clients to buy our microprocessors. The European
Commission sent us a Statement of Objections in July 2007
alleging that certain Intel marketing and pricing practices
amounted to an abuse of a dominant position that infringed
European law. The Statement recognized that such allegations
were preliminary, not final, conclusions. We responded to those
allegations in January 2008. We intend to contest this matter
vigorously in the administrative procedure, which has now begun
and, if necessary, in European courts. On February 12,
2008, the European Commission initiated an inspection of
documents at our Feldkirchen, Germany offices, and we are
cooperating with the investigation.
87
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In June 2005, we received an inquiry from the Korea Fair Trade
Commission (KFTC) requesting documents from our Korean
subsidiary related to marketing and rebate programs that we
entered into with Korean PC manufacturers. In September 2007,
the KFTC served us an Examination Report alleging that sales to
two customers during parts of 20022005 violated
Koreas Monopoly Regulation and Fair Trade Act. In December
2007, we submitted our written response to the KFTC. We intend
to contest this matter vigorously in the administrative
procedure and, if necessary, in Korean courts.
In January 2008, we received a subpoena from the Attorney
General of the State of New York requesting documents and
information to assist in its investigation of whether there have
been any agreements or arrangements establishing or maintaining
a monopoly in the sale of microprocessors in violation of
federal or New York antitrust laws.
We intend to cooperate with and respond to these investigations
as appropriate and we expect that these matters will be
acceptably resolved.
Barbaras
Sales, et al. v. Intel Corporation, Gateway Inc.,
Hewlett-Packard Company and HPDirect, Inc.
In June 2002, various plaintiffs filed a lawsuit in the Third
Judicial Circuit Court, Madison County, Illinois, against Intel,
Gateway Inc., Hewlett-Packard Company, and HPDirect, Inc.
alleging that the defendants advertisements and statements
misled the public by suppressing and concealing the alleged
material fact that systems containing
Intel®
Pentium®
4 processors are less powerful and slower than systems
containing
Intel®
Pentium®
III
processors and a competitors microprocessors. In July
2004, the court certified against us an Illinois-only class of
certain end-use purchasers of certain Pentium 4 processors or
computers containing these microprocessors. In January 2005, the
court granted a motion filed jointly by the plaintiffs and Intel
that stayed the proceedings in the trial court pending
discretionary appellate review of the courts class
certification order. In July 2006, the Illinois Appellate Court,
Fifth District, vacated the trial courts class
certification order. The Appellate Court instructed the trial
court to reconsider whether California law should apply.
However, in August 2006, the Illinois Supreme Court agreed to
review the Appellate Courts decision. In November 2007,
the Illinois Supreme Court issued its opinion finding in favor
of Intel on two issues. First, on the issue of whether Illinois
or California law applies to the claims of Illinois residents
for goods purchased in Illinois, the Court found that Illinois
law applies, rejecting the Appellate Courts finding of a
nationwide class based on the application of California law.
Second, on the issue of whether any class should be certified in
this case at all, the Court held that no class should be
certified, reversing the trial courts finding of an
Illinois-only class based on Illinois law. The case has been
remanded to the trial court.
Transmeta
Corporation v. Intel Corporation
In October 2006, Transmeta Corporation filed a patent
infringement lawsuit against us in the United States District
Court for the District of Delaware alleging that our P6, Pentium
4,
Pentium®
M,
Intel®
Coretm,
and
Intel®
Coretm2
processors infringed ten Transmeta patents, and subsequently
filed an amended complaint alleging that our processors
infringed an eleventh Transmeta patent, alleged to cover
computer architecture and power-efficiency technologies. We
filed counterclaims against Transmeta alleging that
Transmetas Crusoe*, Efficeon*, and Efficeon 2* families of
microprocessors infringed seven of our patents. Both parties
sought damages, treble damages, an injunction, and
attorneys fees.
In October 2007, Intel and Transmeta agreed to settle the patent
infringement cases between them. The agreement, which was
finalized in January 2008, provides us and our customers with a
broad license to all Transmeta patents and patent applications
now existing or as may be filed during the next ten years,
including any patent rights acquired by Transmeta. Transmeta
also agreed to transfer certain technology to us and granted us
a non-exclusive license to Transmetas LongRun* and
LongRun2* technologies and future improvements. In addition, we
will receive a general release from all claims of any type. In
exchange, we made an initial payment of $150 million to
Transmeta in the first quarter of 2008 and will make five annual
payments of $20 million beginning one year from the date of
the settlement, for total payments of $250 million. The
agreement also includes a covenant by us not to sue Transmeta
for certain licensing to third parties. The court dismissed all
litigation pending between us and Transmeta.
88
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
BIAX
Corporation v. Intel Corporation and Analog Devices,
Inc.
In May 2005, BIAX Corporation filed a lawsuit against us and
Analog Devices, Inc. in the United States District Court for the
Eastern District of Texas. The complaint alleged that certain
Hyper-Threading-enabled processors, including the
Intel®
Pentium®
and
Intel®
Xeon®
processors supporting Hyper-Threading Technology, and
Itanium®
and
Itanium®
2 processors, infringed four BIAX patents. The complaint sought
unspecified damages, injunctive, and other relief, including
enhanced damages for alleged willful infringement. In June 2007,
the parties finalized a settlement agreement pursuant to which,
among other terms, we made a payment to BIAX, and, in exchange,
we received a license to BIAXs patent portfolio. In July
2007, the lawsuit was dismissed with prejudice.
Martin
Smilow v. Craig R. Barrett et al. & Intel
Corporation
On February 13, 2008, Martin Smilow, an Intel stockholder,
filed a putative derivative action in the United States District
Court for the District of Delaware against members of our Board
of Directors. The complaint alleges generally that the Board
allowed the company to violate antitrust and other laws, as
described in AMDs antitrust lawsuits against us, and that
those Board-sanctioned activities have harmed the company. The
complaint repeats many of AMDs allegations and references
various investigations by the European Community, Korean Fair
Trade Commission, and others. We deny the allegations and intend
to defend the lawsuit vigorously.
Note 22:
Operating Segment and Geographic Information
As of December 29, 2007, our operating segments included
the Digital Enterprise Group, Mobility Group, NAND Products
Group, Flash Memory Group, Digital Home Group, Digital Health
Group, and Software and Solutions Group. In the fourth quarter
of 2007, we made organizational changes that resulted in the
formation of the NAND Products Group operating segment, which
includes the NAND flash memory business that was previously
included in the Flash Memory Group operating segment. The Flash
Memory Group operating segment includes sales of NOR flash
memory products. During the first quarter of 2008, we expect to
complete the divestiture of our NOR flash memory assets to
Numonyx. We expect to enter into supply and transition service
agreements to provide products, services, and support to Numonyx
following the close of the transaction. See Note 13:
Divestitures for more information on Numonyx. Prior-period
amounts have been adjusted retrospectively to reflect other
minor reorganizations.
The Chief Operating Decision Maker (CODM), as defined by
SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information
(SFAS No. 131), is our President and Chief Executive
Officer (CEO). The CODM allocates resources to and assesses the
performance of each operating segment using information about
its revenue and operating income (loss) before interest and
taxes.
We report the financial results of the following operating
segments:
|
|
|
|
|
Digital Enterprise Group. Includes microprocessors
and related chipsets and motherboards designed for the desktop
and enterprise computing market segments; communications
infrastructure components such as network processors,
communications boards, and embedded processors; wired
connectivity devices; and products for network and server
storage.
|
|
|
Mobility Group. Includes microprocessors and related
chipsets designed for the notebook market segment, wireless
connectivity products, and products designed for the
ultra-mobile market segment. In the fourth quarter of 2006, we
completed the sale of certain assets of our communications and
application processor business lines to Marvell. Related to the
sale, we entered into a manufacturing and transition services
agreement with Marvell. As a result, our sales of application
and cellular baseband processors in 2007 were only to Marvell.
|
The NAND Products Group, Flash Memory Group, Digital Home Group,
Digital Health Group, and Software and Solutions Group operating
segments do not meet the quantitative thresholds for reportable
segments as defined by SFAS No. 131 and are included
within the all other category.
89
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We have sales and marketing, manufacturing, finance, and
administration groups. Expenses for these groups are generally
allocated to the operating segments, and the expenses are
included in the operating results reported below. Additionally,
in the first quarter of 2007, we started including share-based
compensation in the computation of operating income (loss) for
each operating segment and adjusted prior results to reflect
this change. Revenue for the all other category is primarily
related to the sale of NOR flash memory products, NAND flash
memory products, and microprocessors and related chipsets by the
Digital Home Group. The all other category includes certain
corporate-level
operating expenses and charges. These expenses and charges
include:
|
|
|
|
|
a portion of profit-dependent bonuses and other expenses not
allocated to the operating segments;
|
|
|
results of operations of seed businesses that support our
initiatives;
|
|
|
acquisition-related costs, including amortization and any
impairment of acquisition-related intangibles and goodwill;
|
|
|
charges for purchased IPR&D; and
|
|
|
amounts included within restructuring and asset impairment
charges.
|
With the exception of goodwill, we do not identify or allocate
assets by operating segment, nor does the CODM evaluate
operating segments using discrete asset information. Operating
segments do not record inter-segment revenue, and, accordingly,
there is none to be reported. We do not allocate interest and
other income, interest expense, or taxes to operating segments.
Although the CODM uses operating income to evaluate the
segments, operating costs included in one segment may benefit
other segments. Except as discussed above, the accounting
policies for segment reporting are the same as for Intel as a
whole.
Operating segment net revenue and operating income (loss) for
the three years ended December 29, 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Net revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital Enterprise Group
|
|
|
|
|
|
|
|
|
|
|
|
|
Microprocessor revenue
|
|
$
|
15,234
|
|
|
$
|
14,606
|
|
|
$
|
19,412
|
|
Chipset, motherboard, and other revenue
|
|
|
5,106
|
|
|
|
5,270
|
|
|
|
5,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,340
|
|
|
|
19,876
|
|
|
|
25,137
|
|
Mobility Group
|
|
|
|
|
|
|
|
|
|
|
|
|
Microprocessor revenue
|
|
|
10,660
|
|
|
|
9,212
|
|
|
|
8,704
|
|
Chipset and other revenue
|
|
|
4,021
|
|
|
|
3,097
|
|
|
|
2,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,681
|
|
|
|
12,309
|
|
|
|
11,131
|
|
All other
|
|
|
3,313
|
|
|
|
3,197
|
|
|
|
2,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
$
|
38,334
|
|
|
$
|
35,382
|
|
|
$
|
38,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital Enterprise Group
|
|
$
|
5,169
|
|
|
$
|
3,510
|
|
|
$
|
9,020
|
|
Mobility Group
|
|
|
5,606
|
|
|
|
4,595
|
|
|
|
5,335
|
|
All other
|
|
|
(2,559
|
)
|
|
|
(2,453
|
)
|
|
|
(2,265
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income
|
|
$
|
8,216
|
|
|
$
|
5,652
|
|
|
$
|
12,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2007, one customer accounted for 18% of our net revenue (19%
in 2006 and 2005) while another customer accounted for 17%
of our net revenue (16% in 2006 and 2005). The majority of the
revenue from these customers was from the sale of
microprocessors, chipsets, and other components by the Digital
Enterprise Group and Mobility Group operating segments.
90
INTEL
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Geographic revenue information for the three years ended
December 29, 2007 is based on the location of the customer.
Revenue from unaffiliated customers by geographic region/country
was as follows:
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
2006
|
|
2005
|
Asia-Pacific
|
|
|
|
|
|
|
|
|
|
Taiwan
|
|
$
|
8,606
|
|
$
|
7,200
|
|
$
|
7,225
|
China
|
|
|
5,295
|
|
|
4,969
|
|
|
5,347
|
Other Asia-Pacific
|
|
|
5,531
|
|
|
5,308
|
|
|
6,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,432
|
|
|
17,477
|
|
|
19,330
|
Americas
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
6,015
|
|
|
5,486
|
|
|
5,662
|
Other Americas
|
|
|
1,700
|
|
|
2,026
|
|
|
1,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,715
|
|
|
7,512
|
|
|
7,574
|
Europe
|
|
|
7,262
|
|
|
6,587
|
|
|
8,210
|
Japan
|
|
|
3,925
|
|
|
3,806
|
|
|
3,712
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
$
|
38,334
|
|
$
|
35,382
|
|
$
|
38,826
|
|
|
|
|
|
|
|
|
|
|
Revenue from unaffiliated customers outside the U.S. totaled
$32,319 million in 2007 ($29,896 million in 2006 and
$33,164 million in 2005).
Net property, plant and equipment by country was as follows:
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
2007
|
|
2006
|
|
2005
|
United States
|
|
$
|
10,647
|
|
$
|
11,558
|
|
$
|
11,211
|
Israel
|
|
|
2,473
|
|
|
1,183
|
|
|
736
|
Ireland
|
|
|
2,076
|
|
|
2,860
|
|
|
3,192
|
Other countries
|
|
|
1,722
|
|
|
2,001
|
|
|
1,972
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment, net
|
|
$
|
16,918
|
|
$
|
17,602
|
|
$
|
17,111
|
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment outside the U.S. totaled
$6,271 million in 2007 ($6,044 million in 2006 and
$5,900 million in 2005).
91
REPORT OF
ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Board of Directors and Stockholders, Intel
Corporation
We have audited the accompanying consolidated balance sheets of
Intel Corporation as of December 29, 2007 and
December 30, 2006, and the related consolidated statements
of income, stockholders equity, and cash flows for each of
the three years in the period ended December 29, 2007. Our
audits also included the financial statement schedule listed in
the Index at Part IV, Item 15. These financial
statements and schedule are the responsibility of the
companys management. Our responsibility is to express an
opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Intel Corporation at December 29,
2007 and December 30, 2006, and the consolidated results of
its operations and its cash flows for each of the three years in
the period ended December 29, 2007, in conformity with
U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Notes 2, 17 and 18 to the consolidated
financial statements, Intel Corporation changed its method of
accounting for sabbatical leave as of December 31, 2006,
its method of accounting for uncertain tax positions as of
December 31, 2006, its method of accounting for its defined
benefit pension and other postretirement plans during 2006, and
its method of accounting for stock-based compensation as of
January 1, 2006.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of Intel Corporations internal control over
financial reporting as of December 29, 2007, based on
criteria established in Internal ControlIntegrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission and our report dated February 19,
2008 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
San Jose, California
February 19, 2008
92
REPORT OF
ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Board of Directors and Stockholders, Intel
Corporation
We have audited Intel Corporations internal control over
financial reporting as of December 29, 2007, based on
criteria established in Internal ControlIntegrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). Intel
Corporations management is responsible for maintaining
effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over
financial reporting included in the accompanying Management
Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the companys
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Intel Corporation maintained, in all material
respects, effective internal control over financial reporting as
of December 29, 2007, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
2007 consolidated financial statements of Intel Corporation and
our report dated February 19, 2008 expressed an unqualified
opinion thereon.
/s/ Ernst & Young LLP
San Jose, California
February 19, 2008
93
INTEL
CORPORATION
FINANCIAL INFORMATION BY QUARTER (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 For Quarter Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions, Except Per Share Amounts)
|
|
December 29
|
|
|
September 29
|
|
|
June 30
|
|
|
March 31
|
|
|
Net revenue
|
|
$
|
10,712
|
|
|
$
|
10,090
|
|
|
$
|
8,680
|
|
|
$
|
8,852
|
|
Gross margin
|
|
$
|
6,226
|
|
|
$
|
5,171
|
|
|
$
|
4,075
|
|
|
$
|
4,432
|
|
Net
income1
|
|
$
|
2,271
|
|
|
$
|
1,791
|
|
|
$
|
1,278
|
|
|
$
|
1,636
|
|
Basic earnings per common
share1
|
|
$
|
0.39
|
|
|
$
|
0.31
|
|
|
$
|
0.22
|
|
|
$
|
0.28
|
|
Diluted earnings per common
share1
|
|
$
|
0.38
|
|
|
$
|
0.30
|
|
|
$
|
0.22
|
|
|
$
|
0.28
|
|
Dividends per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Declared
|
|
$
|
|
|
|
$
|
0.225
|
|
|
$
|
|
|
|
$
|
0.225
|
|
Paid
|
|
$
|
0.1125
|
|
|
$
|
0.1125
|
|
|
$
|
0.1125
|
|
|
$
|
0.1125
|
|
Market price range common
stock2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
27.98
|
|
|
$
|
26.33
|
|
|
$
|
24.29
|
|
|
$
|
22.30
|
|
Low
|
|
$
|
24.37
|
|
|
$
|
23.10
|
|
|
$
|
19.13
|
|
|
$
|
18.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 For Quarter Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions, Except Per Share Amounts)
|
|
December 30
|
|
|
September 30
|
|
|
July 1
|
|
|
April 1
|
|
|
Net revenue
|
|
$
|
9,694
|
|
|
$
|
8,739
|
|
|
$
|
8,009
|
|
|
$
|
8,940
|
|
Gross margin
|
|
$
|
4,810
|
|
|
$
|
4,294
|
|
|
$
|
4,171
|
|
|
$
|
4,943
|
|
Net income
|
|
$
|
1,501
|
|
|
$
|
1,301
|
|
|
$
|
885
|
|
|
$
|
1,357
|
|
Basic earnings per common share
|
|
$
|
0.26
|
|
|
$
|
0.23
|
|
|
$
|
0.15
|
|
|
$
|
0.23
|
|
Diluted earnings per common share
|
|
$
|
0.26
|
|
|
$
|
0.22
|
|
|
$
|
0.15
|
|
|
$
|
0.23
|
|
Dividends per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Declared
|
|
$
|
|
|
|
$
|
0.20
|
|
|
$
|
|
|
|
$
|
0.20
|
|
Paid
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
Market price range common
stock2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
22.33
|
|
|
$
|
20.77
|
|
|
$
|
20.11
|
|
|
$
|
26.47
|
|
Low
|
|
$
|
20.08
|
|
|
$
|
17.10
|
|
|
$
|
16.86
|
|
|
$
|
19.46
|
|
|
|
|
1 |
|
In connection with IRS settlements reached in 2007, we
recorded a $326 million tax benefit (including
$50 million of accrued interest) in the first quarter of
2007 and a $155 million tax benefit in the second quarter
of 2007. For further information, see Note 17:
Taxes in the Notes to Consolidated Financial Statements.
We did not have any significant settlements and related tax
benefits in the third and fourth quarters of 2007. |
|
2 |
|
Intels common stock (symbol INTC) trades on The NASDAQ
Global Select Market* and is quoted in the Wall Street
Journal and other newspapers. Intels common stock also
trades on The Swiss Exchange. At December 29, 2007, there
were approximately 185,000 registered holders of common stock.
All stock prices are closing prices per The NASDAQ Global Select
Market. |
94
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
Not applicable.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES
|
Evaluation
of Disclosure Controls and Procedures
Based on managements evaluation (with the participation of
our CEO and Chief Financial Officer (CFO)), as of the end of the
period covered by this report, our CEO and CFO have concluded
that our disclosure controls and procedures (as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934, as amended (the
Exchange Act)), are effective to provide reasonable assurance
that information required to be disclosed by us in reports that
we file or submit under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in
SEC rules and forms, and is accumulated and communicated to
management, including our principal executive officer and
principal financial officer, as appropriate to allow timely
decisions regarding required disclosure.
Changes
in Internal Control Over Financial Reporting
There were no changes to our internal control over financial
reporting (as defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act) that occurred during the period covered
by this report that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
Management
Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined
in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act) to provide reasonable assurance
regarding the reliability of our financial reporting and the
preparation of financial statements for external purposes in
accordance with U.S. generally accepted accounting
principles.
Management assessed our internal control over financial
reporting as of December 29, 2007, the end of our fiscal
year. Management based its assessment on criteria established in
Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. Managements assessment included evaluation of
elements such as the design and operating effectiveness of key
financial reporting controls, process documentation, accounting
policies, and our overall control environment.
Based on our assessment, management has concluded that our
internal control over financial reporting was effective as of
the end of the fiscal year to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external reporting
purposes in accordance with U.S. generally accepted
accounting principles. We reviewed the results of
managements assessment with the Audit Committee of our
Board of Directors.
Our independent registered public accounting firm,
Ernst & Young LLP, independently assessed the
effectiveness of the companys internal control over
financial reporting. Ernst & Young has issued an
attestation report concurring with managements assessment,
which is included at the end of Part II, Item 8 of
this
Form 10-K.
Inherent
Limitations on Effectiveness of Controls
Our management, including the CEO and CFO, does not expect that
our disclosure controls or our internal control over financial
reporting will prevent or detect all error and all fraud. A
control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the
control systems objectives will be met. The design of a
control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered
relative to their costs. Further, because of the inherent
limitations in all control systems, no evaluation of controls
can provide absolute assurance that misstatements due to error
or fraud will not occur or that all control issues and instances
of fraud, if any, have been detected. These inherent limitations
include the realities that judgments in
decision-making
can be faulty and that breakdowns can occur because of simple
error or mistake. Controls can also be circumvented by the
individual acts of some persons, by collusion of two or more
people, or by management override of the controls. The design of
any system of controls is based in part on certain assumptions
about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated
goals under all potential future conditions. Projections of any
evaluation of controls effectiveness to future periods are
subject to risks. Over time, controls may become inadequate
because of changes in conditions or deterioration in the degree
of compliance with policies or procedures.
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
None.
95
PART III
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
The information in our 2008 Proxy Statement regarding Directors
and Executive Officers appearing under the headings
Proposal 1: Election of Directors and
Other MattersSection 16(a) Beneficial Ownership
Reporting Compliance is incorporated by reference in this
section. The information under the heading Executive
Officers of the Registrant in Part I, Item 1 of
this
Form 10-K
is also incorporated by reference in this section. In addition,
the information under the heading Corporate
Governance in our 2008 Proxy Statement is incorporated by
reference in this section.
The Intel Code of Conduct (Code) is our code of ethics document
applicable to all employees, including all officers, and
including our independent directors, who are not employees of
the company, with regard to their Intel-related activities. The
Code incorporates our guidelines designed to deter wrongdoing
and to promote honest and ethical conduct and compliance with
applicable laws and regulations. The Code also incorporates our
expectations of our employees that enable us to provide accurate
and timely disclosure in our filings with the SEC and other
public communications. In addition, the Code incorporates
guidelines pertaining to topics such as complying with
applicable laws, rules, and regulations; reporting Code
violations; and maintaining accountability for adherence to the
Code.
The full text of our Code is published on our Investor Relations
web site at www.intc.com. We intend to disclose future
amendments to certain provisions of our Code, or waivers of such
provisions granted to executive officers and directors, on this
web site within four business days following the date of such
amendment or waiver.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
The information appearing in our 2008 Proxy Statement under the
headings Director Compensation, Report of the
Compensation Committee, Compensation Discussion and
Analysis, and Executive Compensation is
incorporated by reference in this section.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
The information appearing in our 2008 Proxy Statement under the
heading Security Ownership of Certain Beneficial Owners
and Management is incorporated by reference in this
section.
96
Equity
Compensation Plan Information
Information as of December 29, 2007 regarding equity
compensation plans approved and not approved by stockholders is
summarized in the following table (shares in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(C)
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
|
|
Remaining Available
|
|
|
|
(A)
|
|
|
|
|
for Future Issuance
|
|
|
|
Number of Shares to
|
|
|
(B)
|
|
Under Equity
|
|
|
|
Be Issued Upon
|
|
|
Weighted Average
|
|
Incentive Plans
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
(Excluding Shares
|
|
|
|
Outstanding Options
|
|
|
Outstanding
|
|
Reflected in
|
|
Plan Category
|
|
and
Rights1
|
|
|
Options2
|
|
Column A)
|
|
Equity incentive plans approved by stockholders
|
|
|
262.2
|
|
|
$
|
23.62
|
|
|
439.9
|
3
|
Equity incentive plans not approved by
stockholders4
|
|
|
453.4
|
|
|
$
|
29.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
715.6
|
5
|
|
$
|
27.78
|
|
|
439.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Includes 51.1 million shares issuable upon vesting of
restricted stock units (RSUs) that we granted under the 2006
Equity Incentive Plan. The remaining balance consists of
outstanding stock option grants. |
|
2 |
|
The weighted average exercise price does not take into
account the shares issuable upon vesting of outstanding RSUs,
which have no exercise price. |
|
3 |
|
Amount includes a maximum of 168 million shares that can
be awarded as restricted stock or RSUs under the 2006 Equity
Incentive Plan. Amount also includes 214 million shares
available under our 2006 Stock Purchase Plan. |
|
4 |
|
Consists of shares available upon exercise of options granted
under our 1997 Stock Option Plan, which was not required to be
approved by stockholders. The 1997 Stock Option Plan was
terminated as to future grants in May 2004. |
|
5 |
|
Total excludes 1.4 million shares issuable under
outstanding options, with a weighted average exercise price of
$15.98, originally granted under plans that we assumed in
connection with acquisitions. |
The 1997 Stock Option Plan (1997 Plan) provided for the granting
of stock options to employees other than officers and directors.
The 1997 Plan, which was not approved by stockholders, was
terminated as to future grants when the 2004 Equity Incentive
Plan was approved by stockholders in May 2004. The 1997 Plan is
administered by the Compensation Committee, which has the power
to determine matters related to outstanding option awards under
the 1997 Plan, including conditions of vesting and
exercisability. Options granted under the 1997 Plan expire no
later than 10 years from the grant date. Options granted
before 2003 under the 1997 Plan generally vest in 5 years,
and options granted under the 1997 Plan in 2003 and 2004
generally vest in increments over 4 or 5 years from the
date of grant. Grants to key employees may have delayed vesting,
generally beginning 6 years from the date of grant.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
The information appearing in our 2008 Proxy Statement under the
heading Certain Relationships and Related
Transactions and Corporate Governance is
incorporated by reference in this section.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
The information appearing in our 2008 Proxy Statement under the
headings Report of the Audit Committee and
Proposal 2: Ratification of Selection of Independent
Registered Public Accounting Firm is incorporated by
reference in this section.
97
PART IV
|
|
ITEM 15.
|
EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
|
1. Financial Statements: See Index to Consolidated
Financial Statements in Part II, Item 8 of this
Form 10-K.
2. Financial Statement Schedule: See
Schedule IIValuation and Qualifying
Accounts in this section of this
Form 10-K.
3. Exhibits: The exhibits listed in the accompanying index
to exhibits are filed or incorporated by reference as part of
this
Form 10-K.
Intel, the Intel logo, Intel Inside, Celeron, Intel Centrino,
Intel Core, Intel Core Duo, Intel Core 2 Duo, Intel Core 2 Quad,
Intel Viiv, Intel vPro, Intel Xeon, Intel XScale, Itanium,
and Pentium are trademarks of Intel Corporation in the U.S. and
other countries.
|
|
|
* |
|
Other names and brands may be claimed as the property of
others. |
98
INTEL
CORPORATION
SCHEDULE IIVALUATION AND QUALIFYING
ACCOUNTS
December 29, 2007, December 30, 2006, and
December 31, 2005
(In Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Charged
|
|
|
Net
|
|
|
|
|
|
|
Beginning of
|
|
|
(Credited)
|
|
|
Deductions
|
|
|
Balance at
|
|
|
|
Year
|
|
|
to Expenses
|
|
|
(Recoveries)
|
|
|
End of Year
|
|
Allowance for doubtful
receivables1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
$
|
32
|
|
|
$
|
(6
|
)
|
|
$
|
(1
|
)
|
|
$
|
27
|
|
2006
|
|
$
|
64
|
|
|
$
|
(19
|
)
|
|
$
|
13
|
|
|
$
|
32
|
|
2005
|
|
$
|
43
|
|
|
$
|
35
|
|
|
$
|
14
|
|
|
$
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance for deferred tax assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
$
|
87
|
|
|
$
|
46
|
|
|
$
|
|
|
|
$
|
133
|
|
2006
|
|
$
|
86
|
|
|
$
|
6
|
|
|
$
|
5
|
|
|
$
|
87
|
|
2005
|
|
$
|
75
|
|
|
$
|
11
|
|
|
$
|
|
|
|
$
|
86
|
|
|
|
|
1 |
|
Deductions represent uncollectible accounts written off, net
of recoveries. |
99
INDEX TO
EXHIBITS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
|
|
Exhibit
|
|
|
|
|
|
|
|
|
|
Filing
|
|
Filed
|
Number
|
|
Exhibit Description
|
|
Form
|
|
File Number
|
|
Exhibit
|
|
Date
|
|
Herewith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
.1
|
|
Intel Corporation Third Restated Certificate of Incorporation of
Intel Corporation dated May 17, 2006
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
3.1
|
|
|
|
5/22/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
.2
|
|
Intel Corporation Bylaws, as amended on January 16, 2008
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
3.1
|
|
|
|
1/17/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
.1
|
|
Registration Rights Agreement
|
|
|
10-K
|
|
|
|
000-06217
|
|
|
|
4.1
|
|
|
|
2/27/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
.2.1
|
|
Indenture for the Registrants 2.95% Junior Subordinated
Convertible Debentures due 2035 issued by Intel Corporation to
Citibank N.A., dated as of December 16, 2005 (the
Convertible Note Indenture)
|
|
|
10-K
|
|
|
|
000-06217
|
|
|
|
4.2
|
|
|
|
2/27/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
.2.2
|
|
Indenture dated as of March 29, 2006 between Intel
Corporation and Citibank, N.A. (the Open-Ended
Indenture)
|
|
|
S-3ASR
|
|
|
|
333-132865
|
|
|
|
4.4
|
|
|
|
3/30/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
.2.3
|
|
First Supplemental Indenture to Convertible Debentures due 2035,
dated as of July 25, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
.2.4
|
|
First Supplemental Indenture to Open-Ended Indenture, dated as
of December 3, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.1**
|
|
Intel Corporation 1988 Executive Long Term Stock Option Plan, as
amended and restated effective July 16, 1997
|
|
|
10-Q
|
|
|
|
333-45395
|
|
|
|
10.2
|
|
|
|
8/11/98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.2**
|
|
Intel Corporation 1984 Stock Option Plan, as amended and
restated effective July 16, 1997
|
|
|
10-Q
|
|
|
|
333-45395
|
|
|
|
10.1
|
|
|
|
8/11/98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.3
|
|
Intel Corporation 1997 Stock Option Plan, as amended and
restated effective July 16, 1997
|
|
|
10-K
|
|
|
|
000-06217
|
|
|
|
10.7
|
|
|
|
3/11/03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.4**
|
|
Intel Corporation 2004 Equity Incentive Plan, effective
May 19, 2004
|
|
|
10-Q
|
|
|
|
000-06217
|
|
|
|
10.3
|
|
|
|
8/2/04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.5**
|
|
Notice of Grant of Non-Qualified Stock Option under the Intel
Corporation 2004 Equity Incentive Plan
|
|
|
10-Q
|
|
|
|
000-06217
|
|
|
|
10.7
|
|
|
|
8/2/04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.6**
|
|
Standard Terms and Conditions Relating to Non-Qualified Stock
Options granted to U.S. employees on and after May 19, 2004
under the Intel Corporation 2004 Equity Incentive Plan
|
|
|
10-Q
|
|
|
|
000-06217
|
|
|
|
10.5
|
|
|
|
8/2/04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.7**
|
|
Standard International Non-Qualified Stock Option Agreement
under the Intel Corporation 2004 Equity Incentive Plan
|
|
|
10-Q
|
|
|
|
000-06217
|
|
|
|
10.6
|
|
|
|
8/2/04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.8**
|
|
Intel Corporation Non-Employee Director Non-Qualified Stock
Option Agreement under the Intel Corporation 2004 Equity
Incentive Plan
|
|
|
10-Q
|
|
|
|
000-06217
|
|
|
|
10.4
|
|
|
|
8/2/04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.9**
|
|
Form of ELTSOP Non-Qualified Stock Option Agreement under the
Intel Corporation 2004 Equity Incentive Plan
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
10.1
|
|
|
|
10/12/04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.10**
|
|
Intel Corporation 2004 Equity Incentive Plan, as amended and
restated, effective May 18, 2005
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
10.1
|
|
|
|
5/20/05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.11**
|
|
Form of Notice of Grant of Restricted Stock Units
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
10.5
|
|
|
|
2/9/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.12**
|
|
Form of Intel Corporation Nonqualified Stock Option Agreement
under the 2004 Equity Incentive Plan
|
|
|
10-K
|
|
|
|
000-06217
|
|
|
|
10.16
|
|
|
|
2/27/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.13**
|
|
Standard Terms and Conditions relating to Restricted Stock Units
granted to U.S. employees under the Intel Corporation 2004
Equity Incentive Plan
|
|
|
10-Q
|
|
|
|
000-06217
|
|
|
|
10.2
|
|
|
|
5/8/06
|
|
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
|
|
Exhibit
|
|
|
|
|
|
|
|
|
|
Filing
|
|
Filed
|
Number
|
|
Exhibit Description
|
|
Form
|
|
File Number
|
|
Exhibit
|
|
Date
|
|
Herewith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.14**
|
|
Standard International Restricted Stock Unit Agreement under the
2004 Equity Incentive Plan
|
|
|
10-Q
|
|
|
|
000-06217
|
|
|
|
10.4
|
|
|
|
5/8/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.15**
|
|
Standard Terms and Conditions relating to Non-Qualified Stock
Options granted to U.S. employees on and after February 1,
2006 under the Intel Corporation 2004 Equity Incentive Plan
(other than grants made under the SOP Plus or ELTSOP
programs)
|
|
|
10-Q
|
|
|
|
000-06217
|
|
|
|
10.6
|
|
|
|
5/8/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.16**
|
|
Standard Terms and Conditions relating to Restricted Stock Units
granted to U.S. employees under the Intel Corporation 2004
Equity Incentive Plan (for grants under the ELTSOP Program)
|
|
|
10-Q
|
|
|
|
000-06217
|
|
|
|
10.9
|
|
|
|
5/8/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.17**
|
|
Standard International Restricted Stock Unit Agreement under the
2004 Equity Incentive Plan (for grants under the ELTSOP Program)
|
|
|
10-Q
|
|
|
|
000-06217
|
|
|
|
10.11
|
|
|
|
5/8/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.18**
|
|
Terms and Conditions relating to Nonqualified Stock Options
granted to U.S. employees on and after February 1, 2006
under the Intel Corporation 2004 Equity Incentive Plan for
grants formerly known as ELTSOP Grants
|
|
|
10-Q
|
|
|
|
000-06217
|
|
|
|
10.13
|
|
|
|
5/8/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.19**
|
|
Standard International Nonqualified Stock Option Agreement under
the 2004 Equity Incentive Plan (for grants after
February 1, 2006 under the ELTSOP Program)
|
|
|
10-Q
|
|
|
|
000-06217
|
|
|
|
10.15
|
|
|
|
5/8/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.20**
|
|
Intel Corporation 2006 Equity Incentive Plan, as amended and
restated, effective May 17, 2006
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
10.1
|
|
|
|
5/22/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.21**
|
|
Form of Notice of GrantRestricted Stock Units
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
10.13
|
|
|
|
7/6/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.22**
|
|
Form of Notice of GrantNonqualified Stock Options
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
10.24
|
|
|
|
7/6/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.23**
|
|
Standard Terms and Conditions relating to Restricted Stock Units
granted to U.S. employees on and after May 17, 2006 under
the Intel Corporation 2006 Equity Incentive Plan (for grants
under the standard program)
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
10.1
|
|
|
|
7/6/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.24**
|
|
Standard International Restricted Stock Unit Agreement under the
2006 Equity Incentive Plan (for grants under the standard
program after May 17, 2006)
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
10.2
|
|
|
|
7/6/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.25**
|
|
Terms and Conditions relating to Restricted Stock Units granted
on and after May 17, 2006 to U.S. employees under the Intel
Corporation 2006 Equity Incentive Plan (for grants under the
ELTSOP Program)
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
10.7
|
|
|
|
7/6/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.26**
|
|
International Restricted Stock Unit Agreement under the 2006
Equity Incentive Plan (for grants under the ELTSOP program after
May 17, 2006)
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
10.8
|
|
|
|
7/6/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.27**
|
|
Standard Terms and Conditions relating to Non-Qualified Stock
Options granted to U.S. employees on and after May 17, 2006
under the Intel Corporation 2006 Equity Incentive Plan (for
grants under the standard program)
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
10.14
|
|
|
|
7/6/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.28**
|
|
Standard International Nonqualified Stock Option Agreement under
the 2006 Equity Incentive Plan (for grants under the standard
program after May 17, 2006)
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
10.15
|
|
|
|
7/6/06
|
|
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
|
|
Exhibit
|
|
|
|
|
|
|
|
|
|
Filing
|
|
Filed
|
Number
|
|
Exhibit Description
|
|
Form
|
|
File Number
|
|
Exhibit
|
|
Date
|
|
Herewith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.29**
|
|
Terms and Conditions relating to Nonqualified Stock Options
granted to U.S. employees on and after May 17, 2006 under
the Intel Corporation 2006 Equity Incentive Plan (for grants
under the ELTSOP Program)
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
10.19
|
|
|
|
7/6/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.30**
|
|
International Nonqualified Stock Option Agreement under the 2006
Equity Incentive Plan (for grants after May 17, 2006 under
the ELTSOP Program)
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
10.20
|
|
|
|
7/6/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.31**
|
|
Form of Non-Employee Director Restricted Stock Unit Agreement
under the 2006 Equity Incentive Plan (for RSUs granted after
May 17, 2006)
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
10.2
|
|
|
|
7/14/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.32**
|
|
Terms and Conditions Relating to Nonqualified Options Granted to
Paul Otellini on January 18, 2007 under the Intel
Corporation 2006 Equity Incentive Plan
|
|
|
10-K
|
|
|
|
000-06217
|
|
|
|
10.42
|
|
|
|
2/26/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.33**
|
|
Intel Corporation 2006 Equity Incentive Plan As Amended and
Restated Effective May 16, 2007
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
10.1
|
|
|
|
5/16/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.34**
|
|
Intel Corporation 2007 Executive Officer Incentive Plan,
Effective as of January 1, 2007
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
10.2
|
|
|
|
5/16/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.35**
|
|
Intel Corporation Deferral Plan for Outside Directors, effective
July 1, 1998
|
|
|
10-K
|
|
|
|
333-45395
|
|
|
|
10.6
|
|
|
|
3/26/99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.36**
|
|
Intel Corporation Sheltered Employee Retirement Plan Plus, as
amended and restated effective January 1, 2006
|
|
|
S-8
|
|
|
|
333-141905
|
|
|
|
99.1
|
|
|
|
4/5/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.37**
|
|
First Amendment to the Intel Corporation Sheltered Employee
Retirement Plan Plus, executed November 6, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.38**
|
|
Second Amendment to the Intel Corporation Sheltered Employee
Retirement Plan Plus, executed November 6, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.39**
|
|
Form of Indemnification Agreement with Directors and Executive
Officers
|
|
|
10-K
|
|
|
|
000-06217
|
|
|
|
10.15
|
|
|
|
2/22/05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.40**
|
|
Listed Officer Compensation
|
|
|
10-Q
|
|
|
|
000-06217
|
|
|
|
10.1
|
|
|
|
5/3/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.41**
|
|
Intel Corporation 2006 Stock Purchase Plan, Effective
May 17, 2006
|
|
|
S-8
|
|
|
|
333-135178
|
|
|
|
99.1
|
|
|
|
6/21/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.42**
|
|
Summary of Intel Corporation Non-Employee Director Compensation
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
10.1
|
|
|
|
7/14/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.43**
|
|
Intel Corporation 2006 Deferral Plan for Outside Directors,
Effective November 15, 2006
|
|
|
10-K
|
|
|
|
000-06217
|
|
|
|
10.41
|
|
|
|
2/26/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.44
|
|
Form of Asset Transfer Agreement By and Between Newco and Intel
Corporation
|
|
|
10-Q
|
|
|
|
000-06217
|
|
|
|
10.3
|
|
|
|
8/6/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.45
|
|
Master Agreement By and Between STMicroelectronics N.V., Intel
Corporation, Redwood Blocker S.A.R.L., and Francisco
Partners II (Cayman) L.P., Dated May 22, 2007
|
|
|
10-Q
|
|
|
|
000-06217
|
|
|
|
10.4
|
|
|
|
8/6/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.46
|
|
Letter Agreement dated December 22, 2007 extending
termination date of the Master Agreement
|
|
|
8-K
|
|
|
|
000-06217
|
|
|
|
99.1
|
|
|
|
12/26/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
.1
|
|
Statement Setting Forth the Computation of Ratios of Earnings to
Fixed Charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
.1
|
|
Intel Corporation subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
|
|
Exhibit
|
|
|
|
|
|
|
|
|
|
Filing
|
|
Filed
|
Number
|
|
Exhibit Description
|
|
Form
|
|
File Number
|
|
Exhibit
|
|
Date
|
|
Herewith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
.1
|
|
Consent of Ernst & Young LLP, Independent Registered
Public Accounting Firm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a)
of the Securities Exchange Act of 1934, as amended (the Exchange
Act)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
.2
|
|
Certification of Chief Financial Officer and Principal
Accounting Officer pursuant to
Rule 13a-14(a)
of the Exchange Act
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
|
.1
|
|
Certification of the Chief Executive Officer and the Chief
Financial Officer and Principal Accounting Officer pursuant to
Rule 13a-14(b)
of the Exchange Act and 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
** |
|
Management contracts or compensation plans or arrangements in
which directors or executive officers are eligible to
participate. |
103
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
INTEL CORPORATION
Registrant
Stacy J. Smith
Vice President, Chief Financial Officer and
Principal Accounting Officer
February 19, 2008
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
/s/ Craig
R. Barrett
Craig
R. Barrett
Chairman of the Board and Director
February 19, 2008
|
|
/s/ James
D. Plummer
James
D. Plummer
Director
February 19, 2008
|
|
|
|
/s/ Charlene
Barshefsky
Charlene
Barshefsky
Director
February 19, 2008
|
|
/s/ David
S. Pottruck
David
S. Pottruck
Director
February 19, 2008
|
|
|
|
/s/ Carol
A. Bartz
Carol
A. Bartz
Director
February 19, 2008
|
|
/s/ Jane
E. Shaw
Jane
E. Shaw
Director
February 19, 2008
|
|
|
|
/s/ Susan
L. Decker
Susan
L. Decker
Director
February 19, 2008
|
|
/s/ Stacy
J. Smith
Stacy
J. Smith
Vice President, Chief Financial Officer and
Principal Accounting Officer
February 19, 2008
|
|
|
|
/s/ D.
James Guzy
D.
James Guzy
Director
February 19, 2008
|
|
/s/ John
L. Thornton
John
L. Thornton
Director
February 19, 2008
|
|
|
|
/s/ Reed
E. Hundt
Reed
E. Hundt
Director
February 19, 2008
|
|
/s/ David
B. Yoffie
David
B. Yoffie
Director
February 19, 2008
|
|
|
|
/s/ Paul
S. Otellini
Paul
S. Otellini
President, Chief Executive Officer, Director and
Principal Executive Officer
February 19, 2008
|
|
|
104