Intel 2007 Annual Report Download - page 41

Download and view the complete annual report

Please find page 41 of the 2007 Intel annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 144

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144

Table of Contents
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
For 2006, net revenue for the DEG operating segment decreased by $5.3 billion, or 21%, compared to 2005. The decline in net
revenue was mostly due to a significant decline in microprocessor revenue, and to a lesser extent, a decline in chipset,
motherboard, and other revenue. The decline in microprocessor revenue was due to lower average selling prices and unit sales
of desktop microprocessors. Enterprise microprocessor revenue increased in 2006. The decline in chipset, motherboard, and
other revenue was due equally to lower chipset revenue and motherboard revenue.
Operating income decreased by $5.5 billion, or 61%, in 2006 compared to 2005. Substantially all of the decrease was due to
the revenue decline. Higher microprocessor unit costs, along with $210 million of higher factory under-utilization charges,
were offset by approximately $540 million of lower start-up costs. Unit costs were higher in 2006 compared to 2005 due
primarily to a mix shift to dual-core microprocessors. Results for 2006 included the recognition of share-based compensation.
Results for 2005 did not include share-based compensation. Results for 2005 included a charge related to a settlement
agreement with MicroUnity.
Mobility Group
The revenue and operating income for the Mobility Group (MG) for the three years ended December 29, 2007 were as
follows:
Net revenue for the MG operating segment increased by $2.4 billion, or 19%, in 2007 compared to 2006. Microprocessor
revenue increased by $1.4 billion, or 16%, in 2007 compared to 2006, while chipsets and other revenue increased by
$924 million, or 30%, in 2007 compared to 2006. The increase in microprocessor revenue was due to a significant increase in
unit sales, partially offset by significantly lower average selling prices. The increase in chipset and other revenue was due to
higher unit sales of chipsets, and to a lesser extent, higher revenue from sales of cellular baseband products. In the fourth
quarter of 2006, we sold certain assets of the business line that included application and cellular baseband processors used in
handheld devices; however, in 2007 we continued to manufacture and sell these products as part of a manufacturing and
transition services agreement.
Operating income increased by $1.0 billion, or 22%, in 2007 compared to 2006. The increase in operating income was
primarily due to higher revenue. Lower microprocessor unit costs were more than offset by approximately $330 million of
higher start-up costs, primarily related to our 45nm process technology. Lower unit costs on wireless connectivity and cellular
baseband products were offset by higher chipset unit costs. Operating expenses were higher in 2007 compared to 2006;
however, operating expenses as a percentage of revenue decreased in 2007 compared to 2006.
For 2006, net revenue for the MG operating segment increased by $1.2 billion, or 11%, compared to 2005. Microprocessor
revenue increased by $508 million, or 6%, in 2006 compared to 2005, while chipsets and other revenue increased by
$670 million, or 28%, in 2006 compared to 2005. The increase in microprocessor revenue was due to higher unit sales, largely
offset by lower average selling prices. The majority of the increase in chipset and other revenue was due to higher revenue
from sales of chipsets, and to a lesser extent, higher revenue from sales of wireless connectivity products. Sales of these
products increased primarily due to increased sales of our Intel Centrino processor technologies.
Operating income decreased by $740 million, or 14%, in 2006 compared to 2005. The decline was primarily caused by higher
operating expenses, due in part to the recognition of share-based compensation. Results for 2005 did not include share-based
compensation. The effects of higher revenue were offset by higher unit costs for microprocessors. Start-up costs were
approximately $170 million lower in 2006 compared to 2005.
34
(In Millions)
2007
2006
2005
Microprocessor revenue
$
10,660
$
9,212
$
8,704
Chipset and other revenue
4,021
3,097
2,427
Net revenue
$
14,681
$
12,309
$
11,131
Operating income
$
5,606
$
4,595
$
5,335