Intel 2006 Annual Report Download - page 95

Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Identified intangible assets consisted of the following as of December 31, 2005:
During 2005, the company acquired intellectual property assets for $209 million with a weighted average life of nine years.
The majority of the intellectual property assets acquired represented the value of assets capitalized as a result of a settlement
agreement with MicroUnity, Inc. Pursuant to the agreement, Intel agreed to pay MicroUnity a total of $300 million, of which
$140 million was charged to cost of sales, in exchange for a technology license. The charge to cost of sales related to the
portion of the license attributable to certain product sales through the third quarter of 2005. The remaining $160 million
represented the value of the intellectual property assets capitalized and is being amortized over the assets’ remaining useful
lives.
All of the company’s identified intangible assets are subject to amortization. Amortization of intellectual property assets was
$178 million in 2006 ($123 million in 2005 and $120 million in 2004). The amortization of an intellectual property asset is
generally included in cost of sales on the consolidated statements of income. Amortization of acquisition-related developed
technology was $20 million for 2006 ($86 million for 2005 and $122 million for 2004) and is included in amortization of
acquisition-
related intangibles and costs on the consolidated statements of income. Amortization of other intangible assets was
$59 million in 2006 ($32 million in 2005 and $28 million in 2004). The amortization of other intangible assets is recorded as
either amortization of acquisition-related intangibles and costs or as a reduction of revenue on the consolidated statements of
income.
Based on identified intangible assets recorded at December 30, 2006, and assuming no subsequent impairment of the
underlying assets, the annual amortization expense for each period is expected to be as follows:
Note 17: Venture
During January 2006, Micron and Intel formed IMFT, a company that manufactures NAND flash memory products for
Micron and Intel. Initial production from IMFT began in early 2006.
As part of the initial capital contribution to IMFT, Intel paid $615 million in cash and issued $581 million in non-interest-
bearing notes in exchange for a 49% interest. During 2006, Intel paid the entire balance of $581 million toward the non-
interest-bearing notes, which has been reflected as a financing activity on the consolidated statement of cash flows. At
inception, in exchange for a 51% interest, Micron contributed assets valued at $995 million and $250 million in cash. Intel is
currently committed to purchasing 49% of IMFT’s production output and production-related services. During 2006, the
purchased products and services from IMFT were approximately $300 million and the related payable as of December 30,
2006 was not significant.
IMFT is governed by a Board of Managers, with Intel and Micron initially appointing an equal number of managers to the
Board of Managers. The number of managers appointed by each party adjusts depending on the parties’ ownership interests in
IMFT. IMFT will operate until 2015, but is subject to prior termination under certain terms and conditions.
83
Accumulated
(In Millions)
Gross Assets
Amortization
Net
Intellectual property assets
$
976
$
(382
)
$
594
Acquisition
-
related developed technology
300
(275
)
25
Other intangible assets
112
(77
)
35
Total identified intangible assets
$
1,388
$
(734
)
$
654
(In Millions)
2007 2008 2009 2010
2011
Intellectual property assets
$
152
$
142
$
115
$
103
$
52
Acquisition
-
related developed technology
$
1
$
1
$
—
$
—
$
—
Other intangible assets
$
80
$
85
$
111
$
—
$
—