Intel 2002 Annual Report Download - page 28

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Net operating income for the Intel Architecture business increased by $310 million, or 5%, in 2002 compared to 2001. The impacts of
significantly higher unit sales of microprocessors and lower start-up costs relating to the 0.13-micron technology manufacturing ramp were
partially offset by lower average selling prices and higher unit costs for microprocessors. Results also improved due to higher unit volumes of
chipsets and motherboards. Net operating income for 2002 was reduced by a $155 million charge related to the Intergraph
32
Corporation litigation settlement agreement (see "Note 20: Contingencies" in the Notes to Consolidated Financial Statements).
For 2001, net revenue decreased by $5.9 billion, or 21%, compared to 2000. The decrease in net revenue was primarily due to significantly
lower unit volumes and significantly lower average selling prices of microprocessors. The lower selling prices reflected the impact of
competitive pricing pressures and our strategy to accelerate the transition from the Pentium III processor to the Pentium 4 processor. For 2001,
sales of microprocessors based on the P6 microarchitecture and related products made up the majority of our consolidated net revenue and a
substantial majority of our gross margin. For the same period, sales of products based on the Intel NetBurst microarchitecture and related
products were a significant and rapidly increasing portion of our consolidated net revenue and gross margin.
Net operating income for the Intel Architecture business decreased by $6.3 billion, or 50%, in 2001 compared to 2000, primarily due to
lower average selling prices, lower unit volumes and higher unit costs for microprocessors. Increased start-up costs related to the 0.13-micron
manufacturing process technology, which ramped in four factories during 2001, and start-up costs on 300-millimeter wafer manufacturing also
contributed to the decline. Lower revenue-dependent expenses and reduced spending due to company-wide cost reduction programs partially
offset the decline in net operating results.
Wireless Communications and Computing Group
The revenue and operating income (loss) for the WCCG operating segment for the three years ended December 28, 2002 were as follows:
Net revenue was flat from 2001 to 2002. Revenue for flash memory products was slightly lower due to a decrease in average selling prices
stemming from competitive pricing pressures, mostly offset by an increase in unit volumes. Revenue on higher volumes of application
processors and baseband chipsets partially offset the lower revenue from flash memory products.
The net operating loss increased by $38 million to a loss of $294 million in 2002 compared to a loss of $256 million in 2001. For flash
memory products, the impact of lower average selling prices in 2002 was partially offset by the impact of reduced charges for under-utilized
factory capacity, lower inventory write-offs and higher volumes compared to 2001. Higher revenue and lower costs for application processors
and baseband chipsets offset a portion of the impact of the flash memory products.
For 2001, net revenue decreased by $437 million compared to 2000. The decline was primarily due to significantly lower unit sales of flash
memory as the cellular market worked through inventories built up in the latter part of 2000 and lower volumes of flash memory units brought
on by the worldwide economic slowdown.
Net operating income decreased by $864 million to a loss of $256 million in 2001 from a profit of $608 million in 2000, primarily due to
lower flash memory volume and the impact of charges for under-utilized factory capacity in 2001, as well as higher inventory writedowns in
2001. Higher research and development spending also contributed to the decline.
Intel Communications Group
The revenue and operating income (loss) for the ICG operating segment for the three years ended December 28, 2002 were as follows:
Net revenue decreased by $500 million, or 19%, in 2002 compared to 2001, primarily due to lower overall unit volumes for
telecommunications-related products, consistent with the decline in industry-wide demand for these products. In addition, net revenue for
Ethernet connection products decreased, even as units increased, due to the shift in product mix from adapter cards to LAN on motherboard
products. Net revenue also decreased for optical products and microcontrollers.
(In Millions)
2002
2001
2000
Revenue
$
2,239
$
2,232
$
2,669
Operating income (loss)
$
(294
)
$
(256
)
$
608
(In Millions)
2002
2001
2000
Revenue
$
2,080
$
2,580
$
3,483
Operating income (loss)
$
(622
)
$
(735
)
$
319