Intel 2008 Annual Report Download - page 45

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Table of Contents
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
For 2007, net revenue for the DEG operating segment increased by $619 million, or 3%, compared to 2006. The increase in
microprocessor revenue was due to higher microprocessor unit sales and higher enterprise average selling prices. These
increases were partially offset by lower desktop average selling prices in a competitive pricing environment. The decrease in
chipset, motherboard, and other revenue was due to lower motherboard unit sales as well as a decrease in communications
infrastructure revenue, which was primarily due to divestitures of certain communications infrastructure businesses that were
completed in 2006 and 2007. Partially offsetting these decreases was higher chipset revenue.
Operating income increased by $2.0 billion, or 61%, in 2007 compared to 2006. The increase in operating income was
primarily due to lower desktop microprocessor unit costs and lower operating expenses, and to a lesser extent, sales of desktop
microprocessor inventory that had been previously written off. Partially offsetting these increases were higher chipset unit
costs and approximately $500 million of higher start-up costs, primarily related to our 45nm process technology. In 2007, we
began including share-based compensation in the computation of operating income (loss) for each operating segment and
adjusted the 2006 operating segment results to reflect this change.
Mobility Group
The revenue and operating income for the Mobility Group (MG) for the three years ended December 27, 2008 were as
follows:
Net revenue for the MG operating segment increased by $967 million, or 7%, in 2008 compared to 2007. The increase in
microprocessor revenue was due to significantly higher microprocessor unit sales, which were partially offset by significantly
lower microprocessor average selling prices. A portion of the increase in microprocessor unit sales, as well as a portion of the
decrease in average selling prices, was due to the ramp of Intel Atom processors. The increase in chipset and other revenue
was primarily due to significantly higher chipset unit sales, which were partially offset by lower revenue from the sale of
cellular baseband products. We are winding down the sales from the manufacturing agreement entered into as part of the
divestiture of the cellular baseband business.
Operating income decreased by $412 million, or 7%, in 2008 compared to 2007. The decrease in operating income was
primarily due to higher operating expenses, which were partially offset by lower microprocessor unit costs.
For 2007, net revenue for the MG operating segment increased by $2.4 billion, or 19%, 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
those 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.
40
(In Millions)
2008
2007
2006
Microprocessor revenue
$
11,439
$
10,660
$
9,212
Chipset and other revenue
4,209
4,021
3,097
Net revenue
$
15,648
$
14,681
$
12,309
Operating income
$
5,199
$
5,611
$
4,602