Intel 2004 Annual Report Download - page 84

Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In June 2002, various plaintiffs filed a lawsuit in the Third Judicial Circuit Court, Madison County, Illinois, against Intel, Hewlett-
Packard Company, HPDirect, Inc. and Gateway Inc., alleging that the defendants’ advertisements and statements misled the public by
suppressing and concealing the alleged material fact that systems containing Intel Pentium 4 microprocessors are less powerful and slower than
systems containing Intel Pentium III microprocessors and a competitor’s microprocessors. In July 2004, the Court certified against Intel an
Illinois-only class of certain end use purchasers of certain Pentium 4 microprocessors or computers containing such microprocessors. The
Court denied plaintiffs’ motion for reconsideration of this ruling. In January 2005, the Court granted a motion filed jointly by the plaintiffs and
Intel that stayed the proceedings in the trial court pending discretionary appellate review of the Court’s class certification order. The plaintiffs
and Intel thereafter filed a joint application for discretionary appeal of the trial court’s class certification ruling. The plaintiffs seek unspecified
damages, and attorneys’ fees and costs. Intel disputes the plaintiffs’ claims and intends to defend the lawsuit vigorously.
The company is currently a party to various claims and legal proceedings, including those noted above. If management believes that a
loss arising from these matters 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 within the range is more probable than another. As additional
information becomes available, any potential liability related to these matters is assessed and the estimates are revised, if necessary. Based on
currently available information, management believes that the ultimate outcome of these matters, individually and in the aggregate, will not
have a material adverse effect on the company’s financial position, cash flows or overall trends in results of operations. However, litigation is
subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include monetary 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 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, cash flows or overall results of operations for the above tax
matters and legal and environmental proceedings could change in the future.
Note 19: Operating Segment and Geographic Information
Beginning in 2004, the company combined its communications-related businesses into a single organization, the Intel Communications
Group (ICG). Previously, these communications businesses were in two separate product-line operating segments: the former Intel
Communications Group and the Wireless Communications and Computing Group (WCCG). The company now consists of two 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; and ICG. All prior-period amounts have been restated to reflect the new presentation as well as certain minor
reorganizations effected during 2004.
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, “Disclosures about Segments of an Enterprise and Related Information.” 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. Net revenue for the
Intel Architecture operating segment made up approximately 85% of the company’s consolidated net revenue in 2004 (87% in 2003 and 83%
in 2002). Revenue from sales of microprocessors within the Intel Architecture operating segment represented 72% of consolidated net revenue
in 2004 (73% in 2003 and 70% in 2002). ICG’s products include flash memory, wired and wireless
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