Intel 2008 Annual Report Download - page 88

Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Clearwire LLC
In the fourth quarter of 2008, we invested $1.0 billion in Clearwire LLC, a wholly owned subsidiary of the new Clearwire
Corporation. For further discussion, see “Note 5: Available-for-Sale Investments.” Our investment in Clearwire LLC is
accounted for under the equity method of accounting, and our proportionate share of the income or loss is recognized on a
one-quarter lag. As such, we did not record equity method adjustments during 2008 related to Clearwire LLC. The cost basis
of this investment was initially $17 per share, based on the transaction agreement entered into in the second quarter of 2008.
During the fourth quarter of 2008, we recorded a $762 million impairment charge on our investment in Clearwire LLC to write
down our investment to its fair value of $238 million. The impairment charge is included in gains (losses) on equity method
investments, net on the consolidated statements of income. For further discussion, see “Note 3: Fair Value.”
Numonyx
In the second quarter of 2008, we divested our NOR flash memory business in exchange for a 45.1% ownership interest in
Numonyx. For further discussion, see
“Note 12: Divestitures.” Our initial ownership interest, comprising common stock and a
note receivable, was recorded at $821 million. Our investment is accounted for under the equity method of accounting, and our
proportionate share of the income or loss is recognized on a one-quarter lag. During 2008, we recorded $87 million of equity
method losses and a $250 million impairment charge on our investment in Numonyx within gains (losses) on equity method
investments, net. For further discussion, see “Note 3: Fair Value.”
As of December 27, 2008, our investment balance in Numonyx was $484 million and is included within other long-term
assets. The carrying amount of our investment in Numonyx is approximately $400 million below our share of the book value
of the net assets of Numonyx. Most of this difference has been assigned to specific Numonyx long-lived assets, and our
proportionate share of Numonyx income or loss will be adjusted to recognize this difference over the estimated remaining
useful lives of those long-lived assets.
Additional terms of our investment in Numonyx include:
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• We are leasing a facility in Israel to Numonyx for a period of up to 24 years under a fully paid, up-front operating
lease. Upon completion of the divestiture, we recorded $82 million of deferred income representing the value of the
prepaid operating lease. The deferred income will generally offset the related depreciation over the lease term.
• We entered into supply and service agreements that involve the manufacture and the assembly and test of NOR flash
memory products for Numonyx through 2008. The fair value of these agreements was $110 million and was recorded
in other accrued liabilities upon completion of the transaction. This amount was recognized during 2008, primarily as a
reduction of cost of sales. In the fourth quarter of 2008, we agreed with Numonyx to extend certain supply and service
agreements through the end of 2009.
• We entered into a transition services agreement that involves providing certain services, such as information
technology, supply chain, and finance support, to Numonyx for up to one year. The reimbursement from Numonyx for
these services offsets the related cost of sales and operating expenses.
•
Numonyx entered into an unsecured, four
-year senior credit facility of up to $550 million, comprising a $450 million
term loan and a $100 million revolving loan. Intel and STMicroelectronics N.V. have each provided the lenders with a
guarantee of 50% of the payment obligations of Numonyx under the senior credit facility. A demand on our guarantee
can be triggered if Numonyx is unable to meet its obligations under the credit facility. Acceleration of the obligations
of Numonyx under the credit facility could be triggered by a monetary default of Numonyx or, in certain
circumstances, by events affecting the creditworthiness of STMicroelectronics. This guarantee is within the scope of
FASB Interpretation No. 45, “Guarantor’
s Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others.” The maximum amount of future undiscounted payments that we could be
required to make under the guarantee is $275 million plus accrued interest, expenses of the lenders, and penalties. As
of December 27, 2008, the carrying amount of the liability associated with the guarantee was $79 million and is
included in other accrued liabilities.
• Our note receivable is subordinated to the senior credit facility and the preferential payout of Francisco Partners L.P.,
and will be deemed extinguished in liquidation events that generate proceeds insufficient to repay the senior credit
facility and Francisco Partners
’
preferential payout.