01—Abstract
Summary
Summary of the 10-K filed February 17, 2017. Cited figures are marked; the original filing is the authoritative source.
Intel Corporation's 2016 10-K report highlights a significant year of transformation, marked by record revenue of $59.4 billiona, an increase driven by the acquisition of Altera Corporation and growth in its Data Center Group (DCG) and Client Computing Group (CCG).
The company is strategically shifting its focus from a PC-centric model to powering the cloud and a growing ecosystem of smart, connected devices. Key financial highlights include a gross margin of 60.9%, though down from the previous year due to acquisition-related amortization and factory start-up costs. Intel significantly increased its R&D spending to $12.7 billionb, underscoring its commitment to technological innovation, particularly in areas like artificial intelligence, 5G, and autonomous driving.
The company also initiated a substantial restructuring program aimed at reallocating resources to growth segments, impacting approximately 15,000 employees and expected to generate significant savings. Intel returned $7.5 billionc to stockholders through dividends and share repurchases, demonstrating a commitment to shareholder returns while investing heavily in future growth.
02—Key points
Key Highlights
- Record revenue of $59.4 billion in 2016, up 7% year-over-year, driven by Altera acquisition and growth in Data Center Group (DCG) and Client Computing Group (CCG).
- Significant R&D investment of $12.7 billion, focusing on future growth areas like AI, 5G, and autonomous driving.
- Initiated a 2016 Restructuring Program affecting ~15,000 employees to reallocate savings towards growth segments and improve efficiency.
- Completed the strategic acquisition of Altera Corporation in Q1 2016, forming the Programmable Solutions Group (PSG) to enhance its offerings in data centers and IoT.
- Announced plans to divest the Intel Security Group (ISecG) to focus on core strategic areas.
- Returned approximately $7.5 billion to shareholders through dividends ($4.9 billion) and share repurchases ($2.6 billion).
- Gross margin of 60.9% was impacted by acquisition-related charges and factory start-up costs, despite revenue growth.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Intel Corp kept $0.17.
- Revenue$59.39B100.0%
- Cost of revenue−$23.15B39.0%
- Gross profit$36.23B61.0%
- Operating costs−$23.10B38.9%
- Operating income$13.13B22.1%
- Interest, other & tax−$2.82B4.7%
- Net income$10.32B17.4%
Where FY2016 revenue went
$59.39B- Cost of revenue: $23.15B, 39% of revenue
- R&D: $12.69B, 21% of revenue
- Net income: $10.32B, 17% of revenue
- SG&A: $8.38B, 14% of revenue
- Other operating costs: $2.04B, 3.4% of revenue
- Interest, other & tax: $2.82B, 4.7% of revenue
Kept 17% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 17, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $59.39B$55.35B | +7.3% |
| Cost of Revenue | $23.15B$20.68B | +12.0% |
| Gross Profit | $36.23B$34.68B | +4.5% |
| R&D Expenses | $12.69B$12.13B | +4.6% |
| SG&A Expenses | $8.38B$7.93B | +5.6% |
| Operating Expenses | $23.10B$20.68B | +11.7% |
| Operating Income | $13.13B$14.00B | −6.2% |
| Interest Expense | $733.00M$337.00M | +117.5% |
| Net Income | $10.32B$11.42B | −9.7% |
| EPS (Basic) | $2.18$2.41 | −9.5% |
| EPS (Diluted) | $2.12$2.33 | −9.0% |
| Shares Outstanding (Basic) | 4.73B4.74B | −0.3% |
| Shares Outstanding (Diluted) | 4.88B4.89B | −0.4% |
05—Questions
Frequently Asked Questions
What was Intel's primary strategic focus in 2016?
Intel's primary strategic focus in 2016 was to transform from a PC-centric company to one that powers the cloud and billions of smart, connected devices. This involved significant investments in its Data Center Group (DCG), Internet of Things Group (IOTG), and memory technologies, alongside continued innovation in client computing.
How did the acquisition of Altera impact Intel's financial performance?
The acquisition of Altera Corporation in Q1 2016 contributed to record revenue and the formation of the Programmable Solutions Group (PSG). However, it also led to increased R&D and MG&A expenses, as well as amortization of acquisition-related charges, which impacted the overall gross margin percentage.
What are the key areas of investment for Intel's future growth?
Intel is investing heavily in areas that extend its leadership in Moore's Law and expand market opportunities. Key growth areas include the Data Center, Internet of Things, memory technology (like 3D XPoint), artificial intelligence, 5G, and autonomous driving.
What financial initiatives did Intel undertake to return value to shareholders?
In 2016, Intel returned significant value to shareholders through $4.9 billion in dividend payments and $2.6 billion in common stock repurchases, reflecting its commitment to shareholder returns while managing its capital resources.
06—Continue