Intel 2013 Annual Report Download - page 41

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Operating income decreased by $1.7 billion, or 12%, in 2012 compared to 2011 driven by $644 million of lower
gross margin and $1.1 billion of higher operating expenses. The decrease in gross margin was primarily due to
lower platform revenue. Additionally, $457 million of higher excess capacity charges and approximately $350 million
of higher platform unit costs contributed to the decrease. These decreases were partially offset by $785 million of
lower factory start-up costs as we transition from manufacturing start-up costs related to our 22nm process
technology to R&D of our next-generation 14nm process technology. Additionally, the first half of 2011 included
$422 million of charges recorded to repair and replace materials and systems impacted by the design issue related
to our Intel 6 Series Express Chipset family.
Data Center Group
The revenue and operating income for the DCG operating segment for each period were as follows:
(In Millions) 2013 2012 2011
Net revenue $ 11,238 $ 10,511 $ 9,911
Operating income $ 5,164 $ 5,020 $ 5,053
Net revenue for the DCG operating segment increased by $727 million, or 7%, in 2013 compared to 2012. DCG
platform average selling prices and unit sales were up 4% and 3%, respectively. Our platform unit sales continued
to benefit from growth in the Internet cloud computing and high performance computing market segments.
Operating income increased $144 million, or 3%, in 2013 compared to 2012 with $148 million of higher gross
margin offset by higher operating expenses. Gross margin was positively impacted by higher platform revenue,
partially offset by $274 million of higher factory start-up costs for our next-generation 14nm process technology, and
approximately $190 million of higher DCG platform unit costs.
Net revenue for the DCG operating segment increased by $600 million, or 6%, in 2012 compared to 2011. The
increase in revenue was due to 6% higher platform average selling prices, slightly offset by 1% lower platform unit
sales. Our platform average selling prices benefited from significant growth in the Internet cloud computing and high
performance computing market segments. This was offset by weakness in the enterprise server market segment.
Operating income decreased by $33 million in 2012 compared to 2011 as $356 million of higher gross margin was
more than offset by $389 million of higher operating expenses. The increase in gross margin was primarily due to
higher platform revenue.
Other Intel Architecture Operating Segments
The revenue and operating income (loss) for the other Intel architecture operating segments, including ISG, Multi-
Comm, the Tablet Group, the Phone Group, the Service Provider Group, the Netbook Group, and the New Devices
Group for each period were as follows:
(In Millions) 2013 2012 2011
Net revenue $ 4,092 $ 4,378 $ 5,005
Operating income (loss) $ (2,445) $ (1,377) $ (577)
Net revenue for the Other IA operating segments decreased by $286 million, or 7%, in 2013 compared to 2012. The
decrease was primarily due to lower netbook platform, feature and entry phone components, and Multi-Comm unit
sales. To a lesser extent, lower Multi-Comm average selling prices contributed to the decrease. These decreases
were partially offset by higher ISG revenue on increased platform average selling prices.
Operating results for the Other IA operating segments decreased by $1.1 billion in 2013 compared to 2012. The
decline in operating results was primarily due to approximately $590 million of higher operating expenses in the
Other IA operating segments on R&D investments in our smartphone and tablet products as well as higher cost of
sales as we ramp our tablet business. Additionally, lower netbook platform and Multi-Comm revenue contributed to
the decrease. These decreases were partially offset by higher ISG revenue.
Table of Contents
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)