Intel 2005 Annual Report Download - page 51

Table of Contents
As of December 31, 2005, the fair value of our portfolio of marketable strategic equity investments and equity derivative instruments, including
hedging positions, was $574 million ($662 million as of December 25, 2004). To assess the market price sensitivity of these equity securities, we
analyzed the historical movements over the past several years of high-technology stock indices that we considered appropriate. However, our
marketable strategic equity portfolio is substantially concentrated in one company as of December 31, 2005, which will affect the portfolio’s price
volatility. We currently have an investment in Micron with a fair value of $451 million, or 79% of the total marketable strategic equity portfolio value
including equity derivative instruments at December 31, 2005. During 2005, we recognized an impairment charge of $105 million related to our
investment in Micron reflecting the difference between the cost basis of the investment and the price of Micron’s stock at the end of the second
quarter. The impairment was principally based on our assessment during the second quarter of 2005 of Micron’s financial results and the fact that the
market price of Micron’s stock had been below our cost basis for an extended period of time, as well as the competitive pricing environment for
DRAM products. The investment in Micron is part of our strategy to support the development and supply of DRAM products. Based on the analysis of
the high-technology stock indices and the historical volatility of Micron’s stock, we estimated that it was reasonably possible that the prices of the
stocks in our marketable strategic equity portfolio could experience a loss of 40% in the near term (45% as of the end of 2004). The assumed loss
percentage used in 2005 was lower than the assumed loss percentage in 2004 due to the differences in the concentrations of investments at the end of
each year. This estimate is not necessarily indicative of future performance, and actual results may differ materially.
Assuming a loss of 40% in market prices, and after reflecting the impact of hedges and offsetting positions, our marketable strategic equity portfolio
could decrease in value by approximately $245 million, based on the value of the portfolio as of December 31, 2005 (a decrease in value of
approximately $300 million, based on the value of the portfolio as of December 25, 2004 using an assumed loss of 45%). At December 25, 2004, our
marketable strategic equity portfolio was substantially concentrated in two companies. The fair value of our investment in Micron was approximately
$400 million, or 60% of the total marketable portfolio value including equity derivative instruments at December 25, 2004. In addition, the fair value
of our investment in Elpida Memory, Inc. was approximately $212 million, or 32% of the portfolio at December 25, 2004. We sold our investment in
Elpida during 2005.
Non-Marketable Equity Securities
Our strategic investments in non-marketable equity securities are affected by many of the same factors that could result in an adverse movement of
equity market prices, although the impact cannot be directly quantified. 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 our investments
through liquidity events such as initial public offerings, mergers or 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. At December 31,
2005, our strategic investments in non-marketable equity securities had a carrying amount of $561 million ($507 million as of December 25, 2004).
The carrying amount of these investments approximated fair value as of December 31, 2005 and December 24, 2004. No investment in our non-
marketable equity securities portfolio was individually significant as of December 31, 2005 or December 25, 2004.
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