Intel 2008 Annual Report Download - page 50

Table of Contents
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Gains (Losses) on Other Equity Investments, Net
Gains (losses) on other equity investments, net were as follows:
Net losses on other equity investments were $376 million in 2008 compared to a net gain of $154 million in 2007. We
recognized higher impairment charges and lower gains on sales in 2008 compared to 2007. Impairment charges in 2008
included a $176 million impairment charge recognized on our investment in the new Clearwire Corporation and $97 million of
impairment charges on our investment in Micron. The impairment charge on our investment in the new Clearwire Corporation
was due to the fair value being significantly lower than the cost basis of our investment. The impairment charges on our
investment in Micron reflect the difference between our cost basis and the fair value of our investment in Micron at the end of
the second and third quarters of 2008, and were principally based on our assessment of Micron’s financial results and the
competitive environment.
Net gains on other equity investments were $154 million in 2007 compared to $212 million in 2006. During 2007, we
recognized lower gains on third-party merger transactions and higher impairment charges, partially offset by higher gains on
sales of equity investments. Net gains on equity investments in 2006 included a gain of $103 million on the sale of a portion of
our investment in Micron, which was sold for $275 million.
Interest and Other, Net
The components of interest and other, net were as follows:
Interest and other, net decreased to $488 million in 2008 compared to $793 million in 2007. The decrease was due to lower
interest income and fair value losses that we experienced in 2008 on our trading assets. Interest income was lower in 2008
compared to 2007 as a result of lower interest rates, partially offset by higher average investment balances.
Interest and other, net decreased to $793 million in 2007 compared to $1.2 billion in 2006, primarily due to lower divestiture
gains, partially offset by higher interest income resulting primarily from higher average investment balances, and to a lesser
extent higher interest rates. Results for 2006 included net gains of $612 million for three divestitures. See “Note 12:
Divestitures” in Part II, Item 8 of this Form 10-K.
Provision for Taxes
Our effective income tax rate was 31.1% in 2008 (23.9% in 2007 and 28.6% in 2006). The rate increased in 2008 compared to
2007, primarily due to the recognition of a valuation allowance on our deferred tax assets due to the uncertainty of realizing
tax benefits related to impairments of our equity investments. In addition, the rate increased in 2008 compared to 2007, due to
the reversal of previously accrued taxes of $481 million (including $50 million of accrued interest) related to settlements with
the U.S. Internal Revenue Service (IRS) in the first and second quarters of 2007. Our effective income tax rate was lower in
2007 compared to 2006, primarily due to the settlements with the IRS.
44
(In Millions)
2008 2007 2006
Impairment charges
$
(455
)
$
(92
)
$
(72
)
Gains on sales
60
204
151
Other, net
19
42
133
Total gains (losses) on other equity investments, net
$
(376
)
$
154
$
212
(In Millions)
2008
2007
2006
Interest income
$
592
$
804
$
636
Interest expense
(8
)
(15
)
(24
)
Other, net
(96
)
4
590
Total interest and other, net
$
488
$
793
$
1,202