Intel 2005 Annual Report Download - page 36

Table of Contents
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results of Operations
Overview
2005 was a year of many notable accomplishments for Intel. We experienced our third year of double-digit growth in annual revenue, gross margin
dollars, operating profit and net income. The majority of the growth during 2005 was due to the success of our notebook computing platforms. Our
financial position remains strong, and we generated $14.8 billion in cash flows from operations in 2005. We were able to return a total of $12.6 billion
to stockholders through our highest level of stock repurchases and dividends in our company’
s history. We also underwent the largest reorganization in
our company’s history, which re-aligned
our company around platform solutions, and we embarked on a massive rebranding effort. While the first half
was strong, our results for the second half were lower than seasonal. Our results for the fourth quarter were lower than expected, primarily due to the
strong competitive landscape.
In 2006, we are planning for further growth in revenue and gross margin dollars, although we expect this growth to be tempered somewhat from the
growth rates of recent years due to the expectation of some pricing pressure and a sustained competitive landscape. However, with the introduction of
compelling new platforms and a strong processor roadmap, we believe that we are positioned well for future growth. Our new platforms include the
recently introduced Intel Centrino Duo mobile technology and our new platform brand for the digital home, Intel Viiv technology. We also expect to
launch a new microarchitecture in the second half of 2006 that we believe will deliver performance-per -watt leadership in the desktop, mobile and
server market segments. In addition, we are focusing on new business opportunities, including the introduction of Intel microprocessor-based systems
by Apple Computer, Inc., and our entrance into the NAND flash memory market through IMFT, the venture we formed in January 2006 with Micron.
We anticipate that a fast ramp of our dual-core microprocessor products on our industry-leading 65-nanometer process technology will enable and
enhance these growth opportunities. The ramp of our 65-nanometer microprocessor products will also enable increased chipset capacity as we
transition our chipset production to our 90-nanometer process technology.
The following table sets forth the consolidated statements of income and the related percentages of net revenue for the periods indicated:
32
2005
2004
2003
% of
% of
% of
(Dollars in Millions)
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Net revenue
$
38,826
100.0
%
$
34,209
100.0
%
$
30,141
100.0
%
Cost of sales
15,777
40.6
%
14,463
42.3
%
13,047
43.3
%
Gross margin
23,049
59.4
%
19,746
57.7
%
17,094
56.7
%
Research and development
5,145
13.3
%
4,778
14.0
%
4,360
14.5
%
Marketing, general and administrative
5,688
14.7
%
4,659
13.6
%
4,278
14.2
%
Impairment of goodwill
—
—
—
—
617
2.0
%
Amortization and impairment of acquisition
-
related
intangibles and costs
126
0.3
%
179
0.5
%
301
1.0
%
Purchased in
-
process research and development
—
—
—
—
5
—
Operating income
12,090
31.1
%
10,130
29.6
%
7,533
25.0
%
Losses on equity securities, net
(45
)
(0.1
)%
(2
)
—
(
283
)
(0.9
)%
Interest and other, net
565
1.5
%
289
0.9
%
192
0.6
%
Income before taxes
12,610
32.5
%
10,417
30.5
%
7,442
24.7
%
Provision for taxes
3,946
10.2
%
2,901
8.5
%
1,801
6.0
%
Net income
$
8,664
22.3
%
$
7,516
22.0
%
$
5,641
18.7
%