Intel 2014 Annual Report Download - page 40

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Our overall gross margin percentage decreased to 59.8% in 2013 from 62.1% in 2012. The decrease in the gross margin
percentage was primarily due to the gross margin percentage decrease in PCCG. We derived most of our overall gross margin
dollars in 2013 and 2012 from the sale of platforms in the PCCG and DCG operating segments.
PC Client Group
The revenue and operating income for the PCCG operating segment for each period were as follows:
(In Millions) 2014 2013 2012
Net revenue .............................................................. $ 34,669 $ 33,270 $ 34,688
Operating income .......................................................... $ 14,635 $ 11,751 $ 13,008
Net revenue for the PCCG operating segment increased by $1.4 billion, or 4%, in 2014 compared to 2013. PCCG platform unit
sales were up 8%, primarily on strength in the traditional PC business, while PCCG platform average selling prices were down
4%. The increase in revenue was driven by higher notebook platform unit sales of 11%. To a lesser extent, higher desktop
platform unit sales of 3% and higher desktop platform average selling prices of 2% also contributed to the increase. These
increases were partially offset by lower notebook platform average selling prices of 7%.
Operating income increased by $2.9 billion, or 25%, in 2014 compared to 2013, driven by $2.8 billion of higher gross margin and
$109 million of lower operating expenses. The increase in gross margin was driven by approximately $1.2 billion of lower PCCG
platform unit costs, approximately $930 million of lower factory start-up costs primarily driven by our next-generation 14nm
process technology, and higher PCCG platform revenue.
Net revenue for the PCCG operating segment decreased by $1.4 billion, or 4%, in 2013 compared to 2012. PCCG platform unit
sales were down 3%, primarily on softness in the traditional PC business during the first nine months of the year. The decrease in
revenue was driven by lower notebook and desktop platform unit sales, which were down 4% and 2%, respectively. PCCG
platform average selling prices were flat, with 6% higher desktop platform average selling prices offset by 4% lower notebook
platform average selling prices.
Operating income decreased by $1.3 billion, or 10%, in 2013 compared to 2012, driven by $1.5 billion of lower gross margin,
partially offset by $234 million of lower operating expenses. The decrease in gross margin was driven by $1.5 billion of higher
factory start-up costs, primarily on our next-generation 14nm process technology, as well as lower PCCG platform revenue.
These decreases were partially offset by approximately $520 million of lower PCCG platform unit costs, $260 million of lower
excess capacity charges, and higher sell-through of previously non-qualified units.
Data Center Group
The revenue and operating income for the DCG operating segment for each period were as follows:
(In Millions) 2014 2013 2012
Net revenue ............................................................. $ 14,387 $ 12,161 $ 11,219
Operating income ........................................................ $ 7,279 $ 5,569 $ 5,231
Net revenue for the DCG operating segment increased by $2.2 billion, or 18%, in 2014 compared to 2013. DCG platform average
selling prices and unit sales were up 10% and 8%, respectively. Our server platform revenue continued to benefit from growth in
the Internet cloud computing and high-performance computing market segments with continued strengthening of the enterprise
market segment.
Operating income increased by $1.7 billion, or 31%, in 2014 compared to 2013 with $2.4 billion of higher gross margin partially
offset by $689 million of higher operating expenses. Gross margin was positively impacted by higher DCG platform revenue.
Lower DCG platform unit costs of approximately $220 million also contributed to the increase.
Net revenue for the DCG operating segment increased by $942 million, or 8%, in 2013 compared to 2012. DCG platform average
selling prices and unit sales were up 6% and 3%, respectively. Our platform unit sales continued to benefit from growth in the
Internet cloud computing and high performance computing market segments.
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