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Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
connectivity products, communications infrastructure components such as network and embedded processors and optical components,
microcontrollers, application and cellular processors used in cellular handsets and handheld computing devices, and cellular baseband chipsets.
The company’s products in both operating segments are sold directly to original equipment manufacturers, and through retail and industrial
distributors as well as reseller channels throughout the world.
In addition to these operating segments, the company has sales and marketing, manufacturing, finance and administration groups.
Expenses of these groups are allocated to the operating segments and are included in the operating results reported below.
The “all other” category includes acquisition-related costs, including amortization and any impairments of acquisition-related intangibles
and goodwill and charges for purchased in-process research and development. In 2003, acquisition-related costs included a goodwill
impairment charge of $611 million for the remaining goodwill balance related to the former WCCG, and in 2002 included a $127 million
impairment of acquisition-related identified intangibles related to prior-year acquisitions. “All other” also includes the results of operations of
seed businesses that support the company’s initiatives, and the results for 2002 included a charge of $106 million related to the wind-down of
the Intel Online Services web hosting business. Finally, “all other” includes certain corporate-level operating expenses, including a portion of
profit-dependent bonus and other expenses not allocated to the operating segments.
The company does not identify or allocate assets by operating segment, and does not allocate depreciation as such to the operating
segments, nor does the CODM evaluate operating segments on these criteria. Operating segments do not record intersegment revenue, and,
accordingly, there is none to be reported. The company does not allocate interest and other income, interest expense or taxes to operating
segments. Although the CODM uses operating income to evaluate the segments, operating costs included in one segment may benefit other
segments. Except as discussed above, the accounting policies for segment reporting are the same as for the company as a whole.
In January 2005, the company announced a planned reorganization of its business groups to bring all major product groups in line with
the company’s strategy to drive development of complete technology platforms. These new business units include the Mobility Group, the
Digital Enterprise Group, the Digital Home Group, the Digital Health Group and the Channel Platforms Group. This reorganization is expected
to become effective in 2005. Because this reporting period is as of December 25, 2004, the operating segment information below is presented
under the organizational structure that existed as of December 25, 2004.
Net revenue and operating income or loss for operating segments for the three years ended December 25, 2004 were as follows:
In 2004, one customer accounted for approximately 19% of the company’s net revenue (19% in 2003 and 16% in 2002) while another
customer accounted for approximately 16% in 2004 (15% in both 2003 and 2002). A substantial majority of the sales to these customers were
products from the Intel Architecture business.
Geographic revenue information for the three years ended December 25, 2004 is based on the location of the customer. Property, plant
and equipment information is based on the physical location of the assets at the end of each of the fiscal years.
76
(In Millions)
2004
2003
2002
Intel Architecture Business
Net revenue
$
29,167
$
26,178
$
22,347
Operating income
$
12,067
$
10,354
$
6,498
Intel Communications Group
Net revenue
$
5,027
$
3,928
$
4,288
Operating loss
$
(791
)
$
(824
)
$
(817
)
All Other
Net revenue
$
15
$
35
$
129
Operating loss
$
(1,146
)
$
(1,997
)
$
(1,299
)
Total
Net revenue
$
34,209
$
30,141
$
26,764
Operating income
$
10,130
$
7,533
$
4,382