Intel 2004 Annual Report Download - page 33

Table of Contents
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results of Operations
Overview
In 2004, we experienced another year of double-digit growth in annual revenue and gross margin dollars. Our Intel Architecture business
contributed most of this growth, largely from higher unit sales of microprocessors. The Intel Architecture business continues to represent a
large percentage of our business, accounting for 85% of our 2004 consolidated net revenue. Within ICG, we saw 28% growth in revenue,
mostly driven by higher unit sales of our flash memory products. In 2004, we also ramped the production of our 90-nanometer process
technology on 300-millimeter (mm) wafers, and exited the year with the majority of our processor shipments to the computing industry based
on this technology. We continue to see strength in both our emerging and mature markets. For 2004, we increased the operating profit in our
Intel Architecture business by 17% and reduced the losses slightly in our communications business. In addition, our business continued to
generate significant cash, and we were able to use $7.5 billion to buy back our stock and pay $1.0 billion in dividends while maintaining our
strong financial position.
In 2005, we are planning for further growth in both annual revenue and gross margin dollars, with higher unit sales for microprocessors.
However, we are also expecting higher manufacturing start-up costs related to the ramp of our 65-
nanometer process technology, particularly in
the first half of 2005. Growth in sales and profitability depends on our ability to successfully ramp new products, and to obtain continuing
benefits from the productive use of our manufacturing assets. We expect to introduce our first dual-core processors in 2005, as we continue to
focus on enabling more capabilities, performance and flexibility for users beyond processor speed. We also plan to design our products around
entire platforms. In line with this platform focus, in January 2005, we announced a reorganization to align our business groups across our major
platform initiatives. Because the reporting period for this Form 10-K is as of December 25, 2004, the results of operations for all comparative
periods, including the comparison of the 2003 to 2002 results, are presented under the organizational structure that existed as of December 25,
2004.
The following table sets forth certain consolidated statements of income data as a percentage of net revenue for the periods indicated:
The following table sets forth information on our geographic regions for the periods indicated:
30
2004 2003 2002
Net revenue
100.0
%
100.0
%
100.0
%
Cost of sales
42.3
%
43.3
%
50.2
%
Gross margin
57.7
%
56.7
%
49.8
%
Research and development
14.0
%
14.5
%
15.1
%
Marketing, general and administrative
13.6
%
14.2
%
16.2
%
Impairment of goodwill
—
2.0
%
—
Amortization and impairment of acquisition
-
related intangibles and costs
0.5
%
1.0
%
2.0
%
Purchased in
-
process research and development
—
—
0.1
%
Operating income
29.6
%
25.0
%
16.4
%
2004 2003 2002
(Dollars in Millions)
Revenue
% of
Total
Revenue
% of
Total
Revenue
% of
Total
Americas
$
7,965
23
%
$
8,403
28
%
$
8,648
32
%
Asia
-
Pacific
15,380
45
%
12,161
40
%
10,073
38
%
Europe
7,755
23
%
6,868
23
%
6,139
23
%
Japan
3,109
9
%
2,709
9
%
1,904
7
%
Total
$
34,209
100
%
$
30,141
100
%
$
26,764
100
%