Intel 2008 Annual Report Download - page 32

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Table of Contents
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (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:
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 18, 2009.
Overview
Our goal is to be the preeminent provider of semiconductor chips and platforms for the worldwide digital economy. Our
primary component-level products include microprocessors, chipsets, and flash memory.
Net revenue, gross margin, operating income, and net income for 2008 and 2007 were as follows:
The slowing of the worldwide economy resulted in a weak fourth quarter. The pace of the revenue decline in the fourth quarter
was dramatic and resulted from reduced demand and inventory contraction across the supply chain. The 19% sequential
decline from the third quarter of 2008 to the fourth quarter of 2008 was only the second time in the last 20 years that our
fourth-quarter revenue fell below our third-quarter revenue. It is unclear when a turnaround may occur, and there remains a
high degree of uncertainty around demand, which may continue to decline. However, we believe that our competitive position,
manufacturing process technologies, cash flow from operations, and balance sheet remain strong, and that we are well
positioned to manage through this economic downturn.
We continue to invest in our leading-edge technologies and growth initiatives in order to strengthen our competitive position
and enter new market segments. We have a strong belief that technology companies successfully emerge from recessions with
tomorrow’s products, not today’s products. In 2008, we introduced the Intel Atom processor family, which is designed to
enable new mobile Internet form factors at attractive system price points. Our product offerings continue to strengthen, with
the launch of our new microarchitecture, code-named “Nehalem,” in the fourth quarter of 2008. Additionally, we expect to
begin manufacturing products using our next-generation 32nm process technology in the second half of 2009, which we
believe will increase performance and energy efficiency, and lower product costs.
27
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
• 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.
Analysis of our financial results comparing 2008 to 2007 and comparing 2007 to 2006.
•
Liquidity and Capital Resources.
An analysis of changes in our balance sheets and cash flows, and discussion of our
financial condition including the credit quality of our investment portfolio and potential sources of liquidity.
•
Fair value.
Discussion of the methodologies used in the valuation of our financial instruments.
• Contractual Obligations and Off-Balance-Sheet Arrangements. Overview of contractual obligations and contingent
liabilities and commitments outstanding as of December 27, 2008, including expected payment schedule, and
explanation of off
-
balance
-
sheet arrangements.
•
Business Outlook.
Our expectations for selected financial items for the 2009 fiscal year.
(In Millions)
2008
2007
Net revenue
$
37,586
$
38,334
Gross margin
$
20,844
$
19,904
Operating income
$
8,954
$
8,216
Net income
$
5,292
$
6,976