Intel 1998 Annual Report Download - page 54

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Contingencies
In November 1997, Intergraph Corporation ("Intergraph") filed suit in Federal District Court in Alabama generally alleging that Intel attempted
to coerce Intergraph into relinquishing certain patent rights. The suit initially alleged that Intel infringes three Intergraph microprocessor-
related
patents and has been amended to add two other patents. The suit also includes alleged violations of antitrust laws and various state law claims.
The suit seeks injunctive relief and unspecified damages. Intel has counterclaimed that the Intergraph patents are invalid and alleges
infringement of seven Intel patents, breach of contract and misappropriation of trade secrets. In April 1998, the Court ordered Intel to continue
to deal with Intergraph on the same terms as it treats allegedly similarly situated customers with respect to confidential information and product
supply. Intel's appeal of this order was heard in December 1998. In June 1998, Intel filed a motion for summary judgment on Intergraph's
patent claims on the grounds that Intel is licensed to use those patents. In July 1998, the Company received a letter stating that Intergraph
believes that the patent damages will be "several billion dollars by the time of trial." In addition, Intergraph alleges that Intel's infringement is
willful and that any damages awarded should be trebled. The letter also stated that Intergraph believes that antitrust, unfair competition and tort
and contract damages will be "hundreds of millions of dollars by the time of trial." The Company disputes Intergraph's claims and intends to
defend the lawsuit vigorously.
The Company is currently party to various legal proceedings, including that noted above. While management, including internal counsel,
currently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on
the Company's financial position or overall trends in results of operations, litigation is subject to inherent uncertainties. Were an unfavorable
ruling to occur, there exists the possibility of a material adverse impact on the net income of the period in which the ruling occurs.
Intel has been named to the California and U.S. Superfund lists for three of its sites and has completed, along with two other companies, a
Remedial Investigation/Feasibility study with the U.S. Environmental Protection Agency ("EPA") to evaluate the groundwater in areas adjacent
to one of its former sites. The EPA has issued a Record of Decision with respect to a groundwater cleanup plan at that site, including expected
costs to complete. Under the California and U.S. Superfund statutes, liability for cleanup of this site and the adjacent area is joint and several.
The Company, however, has reached agreement with those same two companies which significantly limits the Company's liabilities under the
proposed cleanup plan. Also, the Company has completed extensive studies at its other sites and is engaged in cleanup at several of these sites.
In the opinion of management, including internal counsel, the potential losses to the Company in excess of amounts already accrued arising out
of these matters would not have a material adverse effect on the Company's financial position or overall trends in results of operations, even if
joint and several liability were to be assessed.
The estimate of the potential impact on the Company's financial position or overall results of operations for the above legal proceedings could
change in the future.
Operating segment and geographic information Intel adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," in 1998. SFAS No. 131 establishes standards for reporting information about operating segments and related disclosures about
products, geographic information and major customers. Operating segment information for 1997 and 1996 is also presented in accordance with
SFAS No. 131.
Intel designs, develops, manufactures and markets microcomputer components and related products at various levels of integration. The
Company is organized into four product line operating segments: Intel Architecture Business Group, Computing Enhancement Group, Network
Communications Group and New Business Group. Each of these groups has a vice president who reports directly to the Chief Executive
Officer ("CEO"). The CEO allocates resources to each of these groups using information on their revenues and operating profits before interest
and taxes. The CEO has been identified as the Chief Operating Decision Maker as defined by SFAS No. 131.
The Intel Architecture Business Group's products include the Pentium-Registered Trademark- family of microprocessors, and microprocessors
and related board-level products based on the P6 micro-architecture (including the Pentium-Registered Trademark- II processor, the Intel-
Registered Trademark- Celeron-TM- processor and the Pentium-Registered Trademark- II Xeon-TM- processor). Sales of microprocessors and
related board-level products based on the P6 microarchitecture represented a majority of the Company's 1998 revenues and a substantial
majority of its 1998 gross margin. The Computing Enhancement Group's