Intel 2005 Annual Report Download - page 15

Table of Contents
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 under order. Pricing on particular products may vary based on volumes ordered
and other factors.
We sell our products to OEMs and ODMs. ODMs provide design and/or manufacturing services to branded and unbranded private-label resellers. We
also sell our products to industrial and retail distributors. In 2005, Dell Inc. accounted for approximately 19% of our total sales, and Hewlett-Packard
Company accounted for approximately 16% of our total sales. No other customer accounted for more than 10% of our total revenue. For information
about revenue and operating profit by operating segments, and revenue from unaffiliated customers by geographic region/country, see “Note 19:
Operating Segment and Geographic Information” in Part II, Item 8 of this Form 10-K and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in Part II, Item 7 of this Form 10-K.
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.
Our worldwide reseller sales channel consists of thousands of indirect customers who are systems builders and purchase Intel microprocessors and
other products from our distributors. These systems builders receive various levels of technical and marketing services and support directly from Intel.
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 made available in direct retail outlets.
The Intel corporate and product brand identities were revamped in early 2006 to signal Intel’s new business strategy to deliver customer-focused
platform solutions. The changes include a new Intel logo, tagline (Intel. Leap ahead.
TM
) and signature sound. Our platform solutions brands, which
integrate processors with other innovative hardware and software, include Intel Centrino mobile technology and Intel Viiv technology. The Itanium,
Intel Xeon, Intel Core, Pentium, and Intel 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. Currently, our direct marketing to the
consumer focuses on digital home entertainment and building awareness and demand for new usage models and capabilities. For businesses, our
marketing to large enterprises and small to mid-
size organizations focuses on delivery of products and technologies designed for performance per watt,
reliability, manageability and security.
Purchases by customers often allow them to participate in cooperative advertising and marketing programs such as the Intel Inside
®
program. Through
the Intel Inside program, certain customers are licensed to place Intel logos on computers containing our microprocessors and our other technology,
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. This program
broadens the reach of our brands beyond the scope of our own direct advertising.
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 customer’s use of the product. Our credit department sets accounts receivable and shipping limits for individual customers for the purpose of
controlling 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. Credit losses may still be
incurred due to bankruptcy, fraud or other failure of the customer to pay. See “Schedule II—Valuation and Qualifying Accounts” in Part IV of this
Form 10-K for information about our allowance for doubtful receivables.
11