Intel 2014 Annual Report Download - page 41

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Operating income increased $338 million, or 6%, in 2013 compared to 2012, with $330 million of higher gross margin and lower
operating expenses. Gross margin was positively impacted by higher DCG platform revenue, partially offset by $275 million of
higher factory start-up costs for our next-generation 14nm process technology, and approximately $205 million of higher DCG
platform unit costs.
Internet of Things Group
The revenue and operating income for the IOTG operating segment for each period were as follows:
(In Millions) 2014 2013 2012
Net revenue ............................................................. $ 2,142 $ 1,801 $ 1,600
Operating income ........................................................ $ 616 $ 550 $ 278
Net revenue for the IOTG operating segment increased by $341 million, or 19%, in 2014 compared to 2013. The increase was
primarily due to higher IOTG platform unit sales based on strength in the retail and industrial market segments.
Operating income for the IOTG operating segment increased by $66 million, or 12%, in 2014 compared to 2013. The increase
was primarily due to higher IOTG platform revenue partially offset by higher IOTG platform operating expenses.
Net revenue for the IOTG operating segment increased by $201 million, or 13%, in 2013 compared to 2012. The increase in
revenue was primarily driven by higher IOTG platform average selling prices based on strength in the retail segment.
Operating income increased by $272 million, or 98%, in 2013 compared to 2012. The increase in gross margin was driven by
higher IOTG platform revenue.
Mobile and Communications Group
The revenue and operating loss for the MCG operating segment for each period were as follows:
(In Millions) 2014 2013 2012
Net revenue ............................................................. $ 202 $ 1,375 $ 1,791
Operating income (loss) ................................................... $ (4,206) $ (3,148) $ (1,776)
Net revenue for the MCG operating segment decreased by $1.2 billion, or 85%, in 2014 compared to 2013. This decrease was
primarily due to higher cash consideration to our customers associated with integrating our tablet and phone platforms and lower
phone component unit sales. These decreases were partially offset by higher tablet platform unit sales.
Operating loss for the MCG operating segment increased by $1.1 billion, or 34%, in 2014 compared to 2013, with $1.2 billion of
lower gross margin and $179 million of lower operating expenses. The operating loss increased primarily due to higher cash
consideration provided to customers, higher cost of sales associated with higher tablet platform unit sales, and lower phone
components revenue. These decreases were partially offset by lower tablet unit costs.
Net revenue for the MCG operating segment decreased by $416 million, or 23%, in 2013 compared to 2012. This decrease was
primarily due to lower phone component unit sales and average selling prices.
Operating loss increased by $1.4 billion, or 77%, in 2013 compared to 2012, driven by $737 million of lower gross margin and
$635 million of higher operating expenses on R&D investments in our smartphone and tablet products as well as higher cost of
sales as we ramp our tablet business. Lower phone components revenue also contributed to the increase in operating loss.
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