Intel 2012 Annual Report Download - page 78

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are licensed to our patents, subject to exclusions for x86 products, certain chipsets, and certain flash memory technology
products. The agreement also included settlement of the existing litigation between the companies, as well as broad
mutual general releases. We agreed to make payments totaling $1.5 billion to NVIDIA over six years ($300 million in each
of January 2011, 2012, and 2013; and $200 million in each of January 2014, 2015, and 2016), which resulted in a liability
totaling approximately $1.4 billion, on a discounted basis. In the fourth quarter of 2010, we recognized an expense of
$100 million related to the litigation settlement. In the first quarter of 2011, we recognized the remaining amount of $1.3
billion as licensed technology, which will be amortized into cost of sales over its estimated useful life of 17 years. The
initial recognition of the intangible asset and associated liability for future payments to NVIDIA is treated as a non-cash
transaction and, therefore, has no impact on our consolidated statements of cash flows. Future payments will be treated
as cash used for financing activities. As of December 29, 2012, the remaining liability of $875 million is classified within
other accrued liabilities and other long-term liabilities, based on the expected timing of the underlying payments.
We recorded amortization expense on the consolidated statements of income as follows: amortization of acquisition-
related developed technology and licensed technology and patents is included in cost of sales, amortization of acquisition-
related customer relationships and trade names is included in amortization of acquisition-related intangibles, and
amortization of other intangible assets is recorded as a reduction of revenue.
Amortization expenses for the three years ended December 29, 2012 were as follows:
(In Millions)
2012
2011
2010
Acquisition-related developed technology.....................................................................
$ 557
$ 482
$ 65
Acquisition-related customer relationships ....................................................................
$ 296
$ 250
$ 10
Acquisition-related trade names ....................................................................................
$ 12
$ 10
$ 8
Licensed technology and patents..................................................................................
$ 214
$ 181
$ 157
Other intangible assets..................................................................................................
$ 86
$ —
$ —
Based on identified intangible assets that are subject to amortization as of December 29, 2012, we expect future
amortization expense to be as follows:
(In Millions)
2013
2014
2015
2016
2017
Acquisition-related developed technology..............................
$ 552
$ 530
$ 254
$ 167
$ 47
Acquisition-related customer relationships .............................
$ 275
$ 261
$ 244
$ 226
$ 134
Acquisition-related trade names .............................................
$ 11
$ 10
$ 9
$ 4
$ 1
Licensed technology and patents...........................................
$ 274
$ 264
$ 248
$ 234
$ 196
Other intangible assets...........................................................
$ 104
$ 9
$ 39
$ —
$ —
Note 17: Deferred Income
Deferred income at the end of each period was as follows:
(In Millions)
Dec. 29,
2012
Dec. 31,
2011
Deferred income on shipments of components to distributors ...............................
$ 694
$ 751
Deferred income from software and services operating segments ........................
1,238
1,178
Current deferred income......................................................................................
$ 1,932
$ 1,929
Non-current deferred income from software and services operating segments.....
473
460
Total deferred income ..........................................................................................
$ 2,405
$ 2,389
We classify non-current deferred income from the software and services operating segments in other long-term liabilities.
Note 18: Chipset Design Issue
In January 2011, as part of our ongoing quality assurance procedures, we identified a design issue with the Intel® 6 Series
Express Chipset family (formerly code-named Cougar Point). The issue affected chipsets sold in the fourth quarter of
2010 and January 2011. We subsequently implemented a silicon fix and began shipping the updated version of the
affected chipset in February 2011. The total cost to repair and replace affected materials and systems, located with
customers and in the market, was $733 million. We recorded a charge of $311 million in the fourth quarter of 2010, which
comprised $67 million in product costs for the affected chipsets and $244 million to establish a product accrual for this
issue. We recognized a charge of $343 million in the first quarter of 2011, primarily related to an additional product accrual