Intel 2012 Annual Report Download - page 17
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Most of our sales to distributors are made under agreements allowing for price protection on unsold merchandise and a
right of return on stipulated quantities of unsold merchandise. Under the price protection program, we give distributors
credits for the difference between the original price paid and the current price that we offer. On most products, there is no
contractual limit on the amount of price protection, nor is there a limit on the time horizon under which price protection is
granted. The right of return granted generally consists of a stock rotation program in which distributors are able to
exchange certain products based on the number of qualified purchases made by the distributor. We have the option to
grant credit for, repair, or replace defective products, and there is no contractual limit on the amount of credit that may be
granted to a distributor for defective products.
Distribution
Distributors typically handle a wide variety of products, including those that compete with our products, and fill orders for
many customers. We also utilize third-party sales representatives who generally do not offer directly competitive products
but may carry complementary items manufactured by others. Sales representatives do not maintain a product inventory;
instead, their customers place orders directly with us or through distributors. We have several distribution warehouses that
are located in proximity to key customers.
Backlog
Over time, our larger customers have generally moved to lean-inventory or just-in-time operations rather than maintaining
larger inventories of our products. We have arrangements with these customers to seek to quickly fill orders from regional
warehouses. As a result, our manufacturing production is based on estimates and advance non-binding commitments
from customers as to future purchases. Our order backlog as of any particular date is a mix of these commitments and
specific firm orders that are primarily made pursuant to standard purchase orders for delivery of products. Only a small
portion of our orders is non-cancelable, and the dollar amount associated with the non-cancelable portion is not
significant.
Seasonal Trends
Historically, our platform sales have been higher in the second half of the year than in the first half of the year,
accelerating in the third quarter and peaking in the fourth quarter; however, our sales have not followed this trend over the
past two years.
Marketing
Our corporate marketing objectives are to build a strong, well-known Intel corporate brand that connects with businesses
and consumers, and to offer a limited number of meaningful and valuable brands in our portfolio to aid businesses and
consumers in making informed choices about technology purchases. The Intel® Core™ processor family and the Intel®
Atom™, Intel® Pentium®, Intel® Xeon®, Intel® Xeon Phi™ and Intel® Itanium® trademarks make up our processor brands.
We promote brand awareness and generate demand through our own direct marketing as well as through co-marketing
programs. Our direct marketing activities include television, print, and Internet advertising, as well as press relations and
social media, consumer and trade events, and industry and consumer communications. We market to consumer and
business audiences, and focus on building awareness and generating demand for new form factors such as Ultrabook
systems, and for increased performance, improved energy efficiency, and other capabilities such as Internet connectivity
and security.
Purchases by customers often allow them to participate in cooperative advertising and marketing programs such as the
Intel Inside® Program. This program broadens the reach of our brands beyond the scope of our own direct marketing.
Through the Intel Inside® Program, certain customers are licensed to place Intel logos on computing devices containing
our microprocessors and processor technologies, and to use our brands in their marketing activities. The program
includes a market development component that accrues funds based on purchases and partially reimburses the OEMs for
marketing activities for products featuring Intel brands, subject to the OEMs meeting defined criteria. These marketing
activities primarily include television, print, and Internet marketing. We have also entered into joint marketing
arrangements with certain customers.
Intellectual Property Rights and Licensing
Intellectual property (IP) that applies to our products and services includes patents, copyrights, trade secrets, trademarks,
and maskwork rights. We maintain a program to protect our investment in technology by attempting to ensure respect
for our IP. The extent of the legal protection given to different types of IP varies under different countries’ legal systems.
We intend to license our IP where we can obtain adequate consideration. See “Competition” earlier in this section,
“Risk Factors” in Part I, Item 1A, and “Note 27: Contingencies” in Part II, Item 8 of this Form 10-K.