Intel 2008 Annual Report Download - page 46

Table of Contents
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Operating Expenses
Operating expenses for the three years ended December 27, 2008 were as follows:
Research and Development.
R&D spending was flat in 2008 compared to 2007 and decreased $118 million, or 2%,
in 2007 compared to 2006. In 2008 compared to 2007, we had lower product development expenses resulting from
our divested businesses and slightly lower profit-dependent compensation. These decreases were offset by higher
process development costs as we transition from manufacturing start-up
costs related to our 45nm process technology
to research and development of our next-generation 32nm process technology. The decrease in 2007 compared to
2006 was primarily due to lower process development costs as we transitioned from R&D to manufacturing using
our 45nm process technology, partially offset by higher profit-dependent compensation.
Marketing, General and Administrative.
Marketing, general and administrative expenses were flat in 2008 compared
to 2007 and decreased $721 million, or 12%, in 2007 compared to 2006. In 2008 compared to 2007, we had higher
legal expenses that were offset by lower profit-dependent compensation and lower advertising expenses. The
decrease in 2007 compared to 2006 was primarily due to lower headcount, lower share-based compensation, and
lower cooperative advertising expenses, partially offset by higher profit-dependent compensation.
R&D, combined with marketing, general and administrative expenses, were 30% of net revenue in 2008, 29% of net
revenue in 2007, and 34% of net revenue in 2006.
Restructuring and Asset Impairment Charges.
The following table summarizes restructuring and asset impairment
charges by plan for the three years ended December 27, 2008:
We may incur additional restructuring charges in the future for employee severance and benefit arrangements, and
facility-related or other exit activities. Subsequent to the end of 2008, management approved plans to restructure
some of our manufacturing and assembly and test operations, and align our manufacturing and assembly and test
capacity to current market conditions. These actions, which are expected to take place beginning in 2009, include
closing two assembly and test facilities in Malaysia, one facility in the Philippines, and one facility in China;
stopping production at a 200mm wafer fabrication facility in Oregon; and ending production at our 200mm wafer
fabrication facility in California. Our outlook for the first quarter of 2009 is for additional restructuring and asset
impairment charges of $160 million.
2008 NAND Plan
In the fourth quarter of 2008, management approved a plan with Micron to discontinue the supply of NAND flash
memory from the 200mm facility within the IMFT manufacturing network. The agreement resulted in a $215 million
restructuring charge, primarily related to the IMFT 200mm supply agreement. The restructuring charge resulted in a
reduction of our investment in IMFT of $184 million, a cash payment to Micron of $24 million, and other cash
payments of $7 million.
41
(In Millions)
2008 2007 2006
Research and development
$
5,722
$
5,755
$
5,873
Marketing, general and administrative
$
5,458
$
5,417
$
6,138
Restructuring and asset impairment charges
$
710
$
516
$
555
(In Millions)
2008 2007 2006
2008 NAND plan
$
215
$
—
$
—
2006 efficiency program
495
516
555
Total restructuring and asset impairment charges
$
710
$
516
$
555