Intel 2008 Annual Report Download - page 39

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Table of Contents
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Clearwire LLC
We determine the fair value of our investment in Clearwire LLC primarily using the quoted prices of its parent company, the
new Clearwire Corporation. The effects of adjusting the quoted price for premiums that we believe market participants would
consider for Clearwire LLC, such as tax benefits and voting rights associated with our investment, were mostly offset by the
effects of discounts to the fair value, such as those due to transfer restrictions, lack of liquidity, and differences in dividend
rights that are included in the value of the new Clearwire Corporation stock. During the fourth quarter of 2008, we recorded a
$762 million impairment charge on our investment in Clearwire LLC to write down our investment to its fair value, primarily
due to the fair value being significantly lower than the cost basis of our investment.
In addition, during the fourth quarter of 2008, we recorded a $176 million impairment charge on our available-for-sale
marketable investment in the new Clearwire Corporation due to the fair value being significantly lower than the cost basis of
our investment.
Other Non-Marketable Equity Investments
We determine the fair value of our other non-marketable equity investments using the market approach and/or the income
approach. The market approach includes the use of financial metrics and ratios of comparable public companies. The selection
of comparable companies requires management judgment and is based on a number of factors, including comparable
companies’ sizes, growth rates, products and services lines, development stage, and other relevant factors. The income
approach includes the use of a discounted cash flow model, which requires the following significant estimates for the investee:
revenue, based on assumed market segment size and assumed market segment share; estimated costs; and appropriate discount
rates based on the risk profile of comparable companies. Estimates of market segment size, market segment share, and costs
are developed by the investee and/or Intel using historical data and available market data. The valuation of our other non-
marketable investments also takes into account movements of the equity and venture capital markets, recent financing
activities by the investees, changes in the interest rate environment, the investee’s capital structure, liquidation preferences for
the investee’s capital, and other economic variables. The valuation of some of our investments in the wireless connectivity
market segment was based on the income approach to determine the value of the investee’s spectrum licenses, transmission
towers, and customer lists.
We recorded a total of $200 million of impairment charges in 2008 on our other non-marketable equity investments. Over the
past 12 quarters, including the fourth quarter of 2008, impairments of our other non-marketable equity investments have
ranged from $10 million to $134 million per quarter.
Investments in Debt Instruments
Fair Value
In the current market environment, the assessment of the fair value of debt instruments can be difficult and subjective. The
volume of trading activity of certain debt instruments has declined, and the rapid changes occurring in today’s financial
markets can lead to changes in the fair value of financial instruments in relatively short periods of time. SFAS No. 157
establishes three levels of inputs that may be used to measure fair value (see “Note 3: Fair Value” in Part II, Item 8 of this
Form 10-K). Each level of input has different levels of subjectivity and difficulty involved in determining fair value.
Level 1 instruments represent quoted prices in active markets. Therefore, determining fair value for Level 1 instruments does
not require significant management judgment, and the estimation is not difficult.
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