Intel 2012 Annual Report Download - page 42

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Gains (Losses) on Equity Investments and Interest and Other
Gains (losses) on equity investments, net and interest and other, net for the three years ended December 29, 2012 were
as follows:
(In Millions)
2012
2011
2010
Gains (losses) on equity investments, net................................................................
$ 141
$ 112
$ 348
Interest and other, net ..............................................................................................
$ 94
$ 192
$ 109
Net gains on equity investments were higher in 2012 compared to 2011 due to lower equity method losses and higher
gains on third-party merger transactions, partially offset by lower gains on sales of equity investments. We recognized
lower net gains on equity investments in 2011 compared to 2010 due to lower gains on sales of equity investments, higher
equity method losses, and lower gains on third-party merger transactions.
Net gains on equity investments for 2011 included a gain of $150 million on the sale of shares in VMware, Inc. During
2010, we recognized a gain of $181 million on the initial public offering of SMART Technologies, Inc. and the subsequent
partial sale of our shares in the secondary offering. We also recognized a gain of $91 million on the sale of our ownership
interest in Numonyx B.V., and a gain of $67 million on the sale of shares in Micron Technology, Inc. in 2010. Our share of
equity method investee losses recognized in 2011 and 2010 was primarily related to Clearwire Communications, LLC
(Clearwire LLC) ($145 million and $116 million, respectively). Our share of equity method investee losses recognized in
2011 reduced our carrying value in Clearwire LLC to zero. We do not expect to recognize additional equity method losses
for Clearwire LLC in the future.
Interest and other, net decreased in 2012 compared to 2011, primarily due to a $164 million gain recognized upon
formation of the Intel-GE Care Innovations, LLC (Care Innovations) joint venture during the first quarter of 2011 and
higher interest expense in 2012. This decrease was partially offset by proceeds received from an insurance claim in the
second quarter of 2012 related to the floods in Thailand.
Interest and other, net increased in 2011 compared to 2010. The $164 million gain recognized upon formation of Care
Innovations during 2011 was partially offset by the recognition of $41 million of interest expense in 2011 compared to zero
in 2010 and lower interest income in 2011 compared to 2010 as a result of lower average investment balances. We
recognized interest expense during 2011 as the amount of interest incurred began to exceed the amount we were able to
capitalize upon the issuance of $5.0 billion aggregate principal of senior unsecured notes in the third quarter of 2011.
Provision for Taxes
Our provision for taxes and effective tax rate were as follows:
(Dollars in Millions)
2012
2011
2010
Income before taxes .................................................
$ 14,873
$ 17,781
$ 16,045
Provision for taxes....................................................
$ 3,868
$ 4,839
$ 4,581
Effective tax rate.......................................................
26.0%
27.2%
28.6%
We generated a higher percentage of our profits from lower tax jurisdictions in 2012 compared to 2011, positively
impacting our effective tax rate for 2012. This impact was partially offset by a U.S. research and development tax credit
that was not reinstated in 2012.
The U.S. research and development tax credit was reenacted in January 2013 retroactive to the beginning of 2012. The
full year 2012 impact of the U.S. federal research and development tax credit will be recognized in the first quarter 2013
financial statements and is expected to have a significant positive impact on the first quarter of 2013 effective tax rate.
We generated a higher percentage of our profits from lower tax jurisdictions in 2011 compared to 2010, positively
impacting our effective tax rate for 2011.