Intel 2007 Annual Report Download - page 14

Table of Contents
Sales and Marketing
Customers
We sell our products primarily to original equipment manufacturers (OEMs) and original design manufacturers (ODMs).
ODMs provide design and/or manufacturing services to branded and unbranded private-label resellers. In addition, we sell our
products to other manufacturers, including makers of a wide range of industrial and communications equipment. Our
customers also include PC and network communications products users who buy PC components and our other products
through distributor, reseller, retail, and OEM channels throughout the world. In certain instances, we have entered into supply
agreements to continue to manufacture and sell products of divested business lines to acquiring companies during certain
transition periods.
Our worldwide reseller sales channel consists of thousands of indirect customers who are systems builders that purchase Intel
microprocessors and other products from our distributors. We have a “boxed processor program” that allows distributors to
sell Intel microprocessors in small quantities to these systems-builder customers; boxed processors are also available in direct
retail outlets.
In 2007, Dell Inc. accounted for 18% of our net revenue (19% in 2006), and Hewlett-Packard Company accounted for 17% of
our net revenue (16% in 2006). No other customer accounted for more than 10% of our net revenue. For information about
revenue and operating profit by operating segment, and revenue from unaffiliated customers by geographic region/country, see
“Management’s Discussion and Analysis of Financial Condition and Results of Operation” in Part II, Item 7 and “Note 22:
Operating Segment and Geographic Information” in Part II, Item 8 of this Form 10-K.
Sales Arrangements
Our products are sold or licensed through sales offices throughout the world. Sales of our products are typically made via
purchase orders that contain standard terms and conditions covering matters such as pricing, payment terms, and warranties, as
well as indemnities for issues specific to our products, such as patent and copyright indemnities. From time to time, we may
enter into additional agreements with customers covering, for example, changes from our standard terms and conditions, new
product development and marketing, private-label branding, and other matters. Most of our sales are made using electronic
and web-based processes that allow the customer to review inventory availability and track the progress of specific goods
ordered. Pricing on particular products may vary based on volumes ordered and other factors. We also offer discounts, rebates,
and other incentives to customers to increase acceptance of our products and technology.
Our products are typically shipped under terms that transfer title to the customer, even in arrangements for which the
recognition of revenue on the sale is deferred. Our standard terms and conditions of sale typically provide that payment is due
at a later date, generally 30 days after shipment, delivery, or the customer’s use of the product. Our credit department sets
accounts receivable and shipping limits for individual customers to control credit risk to Intel arising from outstanding account
balances. We assess credit risk through quantitative and qualitative analysis, and from this analysis, we establish credit limits
and determine whether we will seek to use one or more credit support devices, such as obtaining some form of third-party
guaranty or standby letter of credit, or obtaining credit insurance for all or a portion of the account balance if necessary. Credit
losses may still be incurred due to bankruptcy, fraud, or other failure of the customer to pay. See “Schedule II—Valuation and
Qualifying Accounts” in Part IV of this Form 10-K for information about our allowance for doubtful receivables.
Distribution
Typically, distributors handle a wide variety of products, including those that compete with our products, and fill orders for
many customers. 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. 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.
Backlog
We do not believe that backlog as of any particular date is meaningful, as our sales are made primarily 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.
9