Intel 2014 Annual Report Download - page 42

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Software and Services Operating Segments
The revenue and operating income (loss) for the SSG operating segments, including McAfee and the Software and Services
Group, for each period were as follows:
(In Millions) 2014 2013 2012
Net revenue ............................................................. $ 2,216 $ 2,190 $ 2,072
Operating income (loss) ................................................... $55$24$12
Net revenue for the SSG operating segments increased by $26 million in 2014 compared to 2013.
The operating results for the SSG operating segments increased by $31 million in 2014 compared to 2013.
Net revenue for the SSG operating segments increased by $118 million in 2013 compared to 2012. The increase was primarily
driven by higher McAfee revenue.
The operating results for the SSG operating segments increased by $12 million in 2013 compared to 2012. The increase was
primarily driven by higher McAfee revenue, partially offset by higher McAfee operating expenses.
Operating Expenses
Operating expenses for each period were as follows:
(Dollars In Millions) 2014 2013 2012
Research and development (R&D) ............................................ $ 11,537 $ 10,611 $ 10,148
Marketing, general and administrative (MG&A) ................................... $ 8,136 $ 8,088 $ 8,057
R&D and MG&A as percentage of net revenue ................................... 35% 35% 34%
Restructuring and asset impairment charges .................................... $ 295 $ 240 $ —
Amortization of acquisition-related intangibles .................................... $ 294 $ 291 $ 308
Research and Development. R&D spending increased by $926 million, or 9%, in 2014 compared to 2013. The increase was due
to higher process development costs for our 10nm process technology, higher compensation expenses for both profit-dependent
compensation and annual salary increases, as well as higher investments in our products, primarily server and new devices. This
increase was partially offset by lower product investments in our smartphone, tablet, and Intel Media businesses.
R&D spending increased by $463 million, or 5%, in 2013 compared to 2012. The increase was driven by higher investments in
our products, primarily smartphones and tablets, as well as higher compensation expenses due to annual salary increases. This
increase was partially offset by lower process development costs as we transitioned from R&D to manufacturing for our 14nm
process technology.
Marketing, General and Administrative. MG&A expenses increased by $48 million, or 1%, in 2014 compared to 2013. MG&A
expenses increased by $31 million in 2013 compared to 2012.
Restructuring and Asset Impairment Charges. Beginning in Q3 2013, management approved several restructuring actions,
including targeted workforce reductions and the exit of certain businesses and facilities. These actions include the wind down of
our 200mm wafer fabrication facility in Massachusetts, which we expect to cease production in Q1 2015, and the closure of our
assembly and test facility in Costa Rica, which ceased production in Q4 2014. These targeted reductions will enable the company
to better align our resources in areas providing the greatest benefit in the current business environment. We expect these actions
to be substantially complete by the end of 2015.
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