Intel 2006 Annual Report Download - page 43

Table of Contents
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Our spending is trending lower going into 2007 as a result of our ongoing program to improve operational efficiency and
reduce ongoing costs across the company. Through ongoing attrition, divestitures, and employee terminations, we ended the
year with our employee headcount at 94,100, down from 102,500 at mid
-
year, and expect our headcount to continue to decline
to 92,000 by the middle of 2007. We recognized $238 million in restructuring charges related to employee severance and
benefit arrangements. In addition, we have taken actions to focus on our core businesses and have completed three
divestitures. We recognized $103 million in tool impairments associated with one of the divestitures. In addition, we have
placed for sale a fabrication facility in Colorado that resulted in an impairment charge of $214 million. Overall, our ongoing
program to improve operational efficiency and results is expected to generate cost savings of $2 billion in 2007, and $3 billion
in 2008, of which an estimated $600 million in gross annual savings is a result of current-year restructuring charges related to
employee severance and benefit arrangements. A portion of the overall cost savings, such as better utilization of assets,
reduced spending, and organizational efficiencies, will not result in restructuring charges.
Outstanding new products, leadership in manufacturing technology, comprehensive cost savings, and disciplined execution
have built a foundation for 2007. We continue to drive technology advancements, and in 2006 we ramped our
65-nanometer process technology, introduced the Intel Core microarchitecture, and ended the year with dual-core
microprocessors accounting for over half of our fourth-quarter shipments. Additionally, in the fourth quarter, we began
shipping quad-core microprocessors. Looking forward to 2007, we expect to launch our next generation of Intel Centrino
mobile technology later in the first half of 2007, and microprocessors using 45-nanometer process technology are scheduled
for production in the second half of 2007.
From a financial condition perspective, we ended the year with $8.9 billion in cash and short-term investments, and returned
$4.6 billion to stockholders through stock repurchases and $2.3 billion as dividends in 2006.
The following table sets forth certain consolidated statements of income data as a percentage of net revenue for the periods
indicated:
33
2006
2005
2004
% of
% of
% of
(Dollars in Millions, Except Per Share Amounts)
Dollars
Revenue
Dollars
Revenue
Dollars
Revenue
Net revenue
$
35,382
100.0
%
$
38,826
100.0
%
$
34,209
100.0
%
Cost of sales
17,164
48.5
%
15,777
40.6
%
14,463
42.3
%
Gross margin
18,218
51.5
%
23,049
59.4
%
19,746
57.7
%
Research and development
5,873
16.6
%
5,145
13.3
%
4,778
14.0
%
Marketing, general and administrative
6,096
17.2
%
5,688
14.7
%
4,659
13.6
%
Restructuring and asset impairment charges
555
1.6
%
—
—
—
—
Amortization of acquisition
-
related intangibles and costs
42
0.1
%
126
0.3
%
179
0.5
%
Operating income
5,652
16.0
%
12,090
31.1
%
10,130
29.6
%
Gains (losses) on equity securities, net
214
0.6
%
(45
)
(0.1
)%
(2
)
—
Interest and other, net
1,202
3.4
%
565
1.5
%
289
0.9
%
Income before taxes
7,068
20.0
%
12,610
32.5
%
10,417
30.5
%
Provision for taxes
2,024
5.7
%
3,946
10.2
%
2,901
8.5
%
Net income
$
5,044
14.3
%
$
8,664
22.3
%
$
7,516
22.0
%
Diluted earnings per common share
$
0.86
$
1.40
$
1.16