Intel 2002 Annual Report Download - page 62

arising from these actions is probable and can reasonably be estimated, the company records the amount of the loss, or the minimum estimated
liability when the loss is estimated using a range and no point is more probable than another. As additional information becomes available, any
potential liability related to these actions is assessed and the estimates are revised, if necessary. Based on currently available information,
management believes that the ultimate outcome of these actions, 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. However, litigation is subject to inherent uncertainties and unfavorable
rulings could occur. An unfavorable ruling could include money damages or an injunction prohibiting Intel from selling one or more products. If
an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the results of operations of the period in which
the ruling occurs, or future periods.
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, 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 and
environmental proceedings could change in the future.
Note 21: Operating Segment and Geographic Information
The company designs, develops, manufactures and markets computing and communications products at various levels of integration. The
company reports three product-line operating segments: the Intel Architecture business, which is composed of the Desktop Platforms Group, the
Mobile Platforms Group and the Enterprise Platforms Group; the Wireless Communications and Computing Group; and the Intel
Communications Group.
Beginning in 2002, the company's Executive Office consists of Chief Executive Officer (CEO) Craig R. Barrett and President and Chief
Operating Officer (COO) Paul S. Otellini. The CEO and COO have joint responsibility as the Chief Operating Decision Maker (CODM), as
defined by SFAS No. 131. The CODM allocates resources to and assesses the performance of each operating segment using information about
their revenue and operating profit before interest and taxes.
The Intel Architecture operating segment's products include microprocessors and related chipsets and motherboards based on the Intel®
NetBurst™ microarchitecture (including the Pentium 4 processor), as well as the P6 microarchitecture (including the Pentium
III processor).
Sales of microprocessors and related products based on the Intel NetBurst microarchitecture made up the majority of the company's 2002
consolidated net revenue and gross margin. For the same period, sales of microprocessors and related products based on the P6 microarchitecture
made up a significant but steadily decreasing portion of the company's consolidated net revenue and gross margin. For 2001, sales of products
based on the P6 microarchitecture made up the majority of the company's net revenue and a substantial majority of gross margin. Additionally,
for 2001, sales of products based on the Intel NetBurst microarchitecture were a significant and rapidly increasing portion of the company's
consolidated net revenue and gross margin. The Wireless Communications and Computing Group's products include flash memory, application
processors, and cellular baseband chipsets for cellular handsets and handheld devices. The Intel Communications Group's products include
Ethernet connectivity products, network processing components, embedded control chips (microcontrollers) and optical products. The company's
products in all operating segments are sold directly to original equipment manufacturers, and through retail and industrial distributors, resellers
and e-Business channels throughout the world.
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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 of acquisition-related intangibles and in-process research
and development. Acquisition-related costs also include charges for impairment of goodwill and acquisition-related intangibles, including a
$127 million impairment of identified intangibles recorded in 2002, 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 of the Web hosting business, including the charge of
$106 million recorded in 2002 related to winding down this business. "All other" also includes certain corporate-level operating expenses,
including a portion of profit-dependent bonus and other expenses not allocated to the operating segments. For 2001 and 2000, "all other" also
included goodwill amortization; however, goodwill is no longer amortized, beginning in 2002.
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