01—Abstract
Summary
Summary of the 10-K filed February 23, 2009. Cited figures are marked; the original filing is the authoritative source.
Intel Corporation's 2008 Form 10-K filing reveals a challenging year marked by a slight revenue decline and increased operating income, despite a notable downturn in the fourth quarter due to the deteriorating economic climate.
While total net revenue decreased by 2% to $37.6 billiona, the company managed to improve its gross margin to 55.5% and boost operating income by 9% to $9.0 billion, driven by efficiency gains and divestitures. However, net income saw a significant drop of 24% to $5.3 billion, largely impacted by substantial impairment charges on investments, particularly in Clearwire LLC and Numonyx. Despite the economic headwinds, Intel continued its strategic investments in new technologies and process development, including the launch of the Intel Atom processor family and advancements in its 32nm process technology.
The company's strong balance sheet and significant cash flow from operations provided a buffer, allowing for continued capital expenditures and a $7.1 billionb share repurchase program, though stock repurchases were halted in the fourth quarter. The filing also highlights the company's proactive restructuring efforts, including the closure of several manufacturing facilities, to align capacity with current market conditions.
02—Key points
Key Highlights
- Net revenue decreased by 2% to $37.6 billion in 2008, primarily due to divestitures and lower demand in the latter half of the year, especially a sharp 19% sequential decline in Q4.
- Gross margin improved to 55.5% in 2008 from 51.9% in 2007, driven by increased efficiency and favorable product mix.
- Operating income increased by 9% to $9.0 billion, reflecting cost control measures and improved margins, despite a challenging economic environment.
- Net income decreased by 24% to $5.3 billion, significantly impacted by $1.2 billion in impairment charges on non-marketable equity investments, particularly in Clearwire and Numonyx.
- The company generated strong operating cash flow of $10.9 billion but returned $7.1 billion to shareholders through share repurchases and $3.1 billion in dividends.
- Significant restructuring charges of $710 million were incurred, including $215 million related to the NAND plan and $495 million for the 2006 efficiency program, with further restructuring actions announced for 2009.
- Intel continued to invest in R&D and new technologies, such as the Atom processor and 32nm process technology, highlighting a strategy focused on future growth despite current economic challenges.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2008, Intel Corp kept $0.14.
- Revenue$37.59B100.0%
- Cost of revenue−$16.74B44.5%
- Gross profit$20.84B55.5%
- Operating costs−$11.89B31.6%
- Operating income$8.95B23.8%
- Interest, other & tax−$3.66B9.7%
- Net income$5.29B14.1%
Where FY2008 revenue went
$37.59B- Cost of revenue: $16.74B, 45% of revenue
- R&D: $5.72B, 15% of revenue
- SG&A: $5.45B, 15% of revenue
- Net income: $5.29B, 14% of revenue
- Other operating costs: $716.0M, 1.9% of revenue
- Interest, other & tax: $3.66B, 9.7% of revenue
Kept 14% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 23, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Revenue | $37.59B$38.33B | −2.0% |
| Cost of Revenue | $16.74B$18.43B | −9.2% |
| Gross Profit | $20.84B$19.90B | +4.7% |
| R&D Expenses | $5.72B$5.75B | −0.6% |
| SG&A Expenses | $5.45B$5.40B | +0.9% |
| Operating Expenses | $11.89B$11.69B | +1.7% |
| Operating Income | $8.95B$8.22B | +9.0% |
| Interest Expense | $8.00M— | — |
| Net Income | $5.29B$6.98B | −24.1% |
| EPS (Basic) | $0.93$1.20 | −22.5% |
| EPS (Diluted) | $0.92$1.18 | −22.0% |
| Shares Outstanding (Basic) | 5.66B5.82B | −2.6% |
| Shares Outstanding (Diluted) | 5.75B5.94B | −3.2% |
05—Questions
Frequently Asked Questions
How did Intel perform financially in 2008 compared to 2007?
Intel experienced a slight decline in net revenue by 2% to $37.6 billion in 2008. However, the company improved its gross margin to 55.5% and increased operating income by 9% to $9.0 billion, largely due to operational efficiencies and cost management. Net income, however, fell by 24% to $5.3 billion, primarily due to significant impairment charges on investments.
What were the major drivers of the change in net income?
The significant decrease in net income was primarily driven by substantial impairment charges totaling $1.2 billion recognized on non-marketable equity investments, notably in Clearwire LLC ($762 million) and Numonyx ($250 million). These impairments reflect challenges in the value of these investments due to market conditions and specific business outlooks.
How did the company manage its cash and capital allocation in 2008?
Intel generated strong cash flow from operations ($10.9 billion). The company continued its capital expenditure program ($5.2 billion) for technology development and also returned significant capital to shareholders through $7.1 billion in stock repurchases and $3.1 billion in dividends. However, Intel halted stock repurchases in Q4 2008 to conserve cash amidst economic uncertainty.
What is Intel's strategy for navigating the economic downturn?
Intel's strategy involves continued investment in leading-edge technologies and growth initiatives, such as the Intel Atom processor and 32nm process technology, believing that successful technology companies emerge stronger from recessions. The company is also undertaking significant restructuring efforts, including facility closures and headcount reductions, to align its operations with current market conditions and improve efficiency.
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