Intel 2010 Annual Report Download - page 101

Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
These joint ventures are variable interest entities. All costs of the joint ventures will be passed on to Micron and Intel through
our purchase agreements. IMFT and IMFS are dependent upon Micron and Intel for any additional cash requirements. Our
known maximum exposure to loss approximated our investment balance in IMFT/IMFS as of December 25, 2010. Our
investment in these ventures is classified within other long-term assets. As of December 25, 2010, except for the amount due
to IMFT/IMFS for product purchases and services, we did not incur any additional liabilities in connection with our interests
in these joint ventures. In addition to the potential loss of our existing investment, our actual losses could be higher, as Intel
and Micron are liable for other future operating costs or obligations of IMFT/IMFS. In addition, future cash calls could
increase our investment balance and the related exposure to loss. Finally, as we are currently committed to purchasing 49% of
IMFT’s and 47% of IMFS’s production output and production-related services, we may be required to purchase products at a
cost in excess of realizable value. Our contractual commitment to purchase product output and fund production-related
services adjusts to changes in our ownership percentage on a one-year lag.
Our portion of IMFT costs, primarily related to product purchases and production-related services, was approximately $735
million during 2010 and 2009 (approximately $1.1 billion during 2008). The amount due to IMFT for product purchases and
services provided was approximately $95 million as of December 25, 2010 (approximately $75 million as of December 26,
2009). During 2010, $197 million was returned to Intel by IMFT, which is reflected as a return of equity method investment
within investing activities on the consolidated statements of cash flows ($419 million during 2009 and $298 million during
2008). In 2010, IMFT increased its capital expenditures compared to 2009. The cash used for those capital expenditures
reduced the amount of cash provided by IMFT to us as a return of equity method investment in 2010.
Under the accounting standards for consolidating variable interest entities, the consolidating investor is the entity with the
power to direct the activities of the venture that most significantly impact the venture’s economic performance and with the
obligation to absorb losses or the right to receive benefits from the venture that could potentially be significant to the venture.
We have determined that we do not have both of these characteristics and, therefore, we account for our interests using the
equity method of accounting.
Clearwire Communications, LLC
In 2008, we invested $1.0 billion in Clearwire LLC, a wholly owned subsidiary of Clearwire Corporation. In the fourth quarter
of 2009, we invested an additional $50 million. Our investment in Clearwire LLC is accounted for under the equity method of
accounting, and our proportionate share of the income or loss is recognized on a one-quarter lag. During 2010, we recognized
$116 million of equity method losses. During 2009, we recorded $27 million of equity method losses, which was net of a gain
of $37 million as a result of a dilution of our ownership interest from the additional investment. Due to the one-quarter lag, we
did not record equity method adjustments related to Clearwire LLC during 2008. During 2008, we recorded a $762 million
impairment charge on our investment in Clearwire LLC to write down our investment to its fair value. The impairment charge
was included in gains (losses) on equity method investments, net. For further discussion, see “Note 5: Fair Value.”
As of December 25, 2010, our investment balance in Clearwire LLC was $145 million and is classified within other long-term
assets ($261 million as of December 26, 2009). As of December 25, 2010, the carrying value of our investment in Clearwire
LLC was $297 million below our share of the book value of the net assets of Clearwire Corporation, and a substantial majority
of this difference has been attributed to Clearwire Corporation’s spectrum assets, a majority of which have an indefinite life.
SMART Technologies, Inc.
We hold an equity interest in SMART and account for our interest using the equity method of accounting. As of December 25,
2010, our carrying value in SMART was $31 million and was classified within other long-term assets. In 2010, SMART
completed an initial public offering of shares approved for listing on The NASDAQ Global Select Market*. We sold
approximately 10 million of our 27.5 million shares in the secondary offering. We recognized a gain of $181 million on the
initial public offering and subsequent sale of our shares in the secondary offering, which is included in gains (losses) on equity
method investments, net.
Numonyx B.V.
In 2008, we divested our NOR flash memory business in exchange for a 45.1% ownership interest in Numonyx. For further
discussion, see “Note 16: Divestitures.” Our initial ownership interest, comprising common stock and a note receivable, was
recorded at $821 million. Our investment was accounted for under the equity method of accounting, and our proportionate
share of the income or loss was recognized on a one-quarter lag. During 2010, we recognized $42 million of equity method
gains ($31 million of equity method losses in 2009 and $87 million in 2008) within gains (losses) on equity method
investments, net. In 2008, we also recorded a $250 million impairment charge on our investment in Numonyx within gains
(losses) on equity method investments, net. For further discussion, see “Note 5: Fair Value.”