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Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Derivatives Not Designated as Hedging Instruments
The effects of derivative instruments not designated as hedging instruments on the consolidated statements of operations for
the years ended December 26, 2009 and December 27, 2008 were as follows:
Note 9: Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist principally of investments in debt
instruments, derivative financial instruments, loans receivable, and trade receivables. We also enter into master netting
arrangements with counterparties when possible to mitigate credit risk in derivative transactions. A master netting arrangement
may allow counterparties to net settle amounts owed to each other as a result of multiple, separate derivative transactions.
We generally place investments with high-credit-quality counterparties and, by policy, limit the amount of credit exposure to
any one counterparty based on our analysis of that counterparty’s relative credit standing. Substantially all of our investments
in debt instruments are with A/A2 or better rated issuers, and a substantial majority of the issuers are rated AA-/Aa3 or better.
Our investment policy requires substantially all investments with original maturities at the time of investment of up to six
months to be rated at least A-1/P-1 by Standard & Poor’s/Moody’s, and specifies a higher minimum rating for investments
with longer maturities. For instance, investments with maturities of greater than three years require a minimum rating of
AA-/Aa3 at the time of investment. Government regulations imposed on investment alternatives of our non-U.S. subsidiaries,
or the absence of A rated counterparties in certain countries, result in some minor exceptions. Credit-rating criteria for
derivative instruments are similar to those for other investments. The amounts subject to credit risk related to derivative
instruments are generally limited to the amounts, if any, by which a counterparty’
s obligations exceed our obligations with that
counterparty. As of December 26, 2009, the total credit exposure to any single counterparty did not exceed $500 million. We
obtain and secure available collateral from counterparties against obligations, including securities lending transactions, when
we deem it appropriate.
A substantial majority of our trade receivables are derived from sales to original equipment manufacturers (OEMs) and
original design manufacturers. We also have accounts receivable derived from sales to industrial and retail distributors. Our
two largest customers accounted for 38% of net revenue for 2009 and 2008, and 35% of net revenue for 2007. Additionally,
these two largest customers accounted for 41% of our accounts receivable as of December 26, 2009 and December 27, 2008.
We believe that the receivable balances from these largest customers do not represent a significant credit risk based on cash
flow forecasts, balance sheet analysis, and past collection experience.
We have adopted credit policies and standards intended to accommodate industry growth and inherent risk. We believe that
credit risks are moderated by the financial stability of our major customers. 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 if necessary.
We continually monitor the credit risk in our portfolio and mitigate our credit and interest rate exposures in accordance with
the policies approved by our Board of Directors. We intend to continue to closely monitor future developments in the credit
markets and make appropriate changes to our investment policies as deemed necessary.
74
Location of Gains (Losses)
(In Millions)
Recognized in Income on Derivatives
2009
2008
Currency forwards
Interest and other, net
$
$
Interest rate swaps
Interest and other, net
(27
)
Currency interest rate swaps
Interest and other, net
(7
)
Total return swaps
Interest and other, net
2
Other
Interest and other, net
2
(11
)
Other
Gains (losses) on other equity investments, net
(7
)
Total
$
115
$