8-KMaterial AgreementsFinancial EventsExhibits & Filings

INTEL CORP 8-K Report, Material Agreement (Mar 31, 2008)

Filed March 31, 2008For Securities:INTC

Summary

This Form 8-K filing by Intel Corporation on March 31, 2008, announces the closing of a significant transaction involving the formation of a new, private semiconductor company named Numonyx B.V. This entity is dedicated to the design, development, and manufacturing of NOR and NAND flash memory products. Intel, along with STMicroelectronics and Francisco Partners, have restructured their involvement in the flash memory business, leading to Intel's divestiture of its NOR flash memory assets and certain phase change memory initiatives. For investors, the key takeaway is Intel's reduced ownership and operational involvement in the flash memory sector, now holding a 45.1% stake in Numonyx. This move, while potentially streamlining Intel's focus on core processor technologies, also introduces new financial considerations. These include an equity investment in Numonyx, a receivable note, and a material impairment charge estimated at $300 million, in addition to a previously recognized charge. Investors should also note Intel's guarantee of a portion of Numonyx's debt, which represents a contingent financial obligation for Intel.

Key Highlights

  • 1Intel Corporation, STMicroelectronics, and Francisco Partners have finalized an agreement to form Numonyx B.V., a new independent company focused on NOR and NAND flash memory products.
  • 2Intel contributed its NOR flash memory assets and certain phase change memory initiatives to Numonyx in exchange for a 45.1% equity stake.
  • 3STMicroelectronics contributed its NOR and NAND flash memory assets, receiving a 48.6% ownership interest in Numonyx.
  • 4Francisco Partners acquired a 6.3% ownership in Numonyx through a cash investment and will have a preferential payout right in certain exit scenarios.
  • 5Intel will record an estimated non-cash impairment charge of approximately $300 million related to its NOR flash memory business in Q1 2008, in addition to a prior $85 million charge.
  • 6Intel has provided a several guarantee of 50% of Numonyx's payment obligations under a $550 million credit facility, with Intel's maximum obligation capped at $275 million plus interest and expenses.
  • 7Approximately 2,500 Intel employees involved in the NOR flash memory business will transfer to Numonyx.

Frequently Asked Questions

Numonyx B.V. is a newly formed private semiconductor company created through a joint venture between Intel Corporation, STMicroelectronics, and Francisco Partners. Its primary purpose is to design, develop, and manufacture NOR and NAND flash memory products.

Intel holds a 45.1% ownership interest in Numonyx. Intel's investment in Numonyx will be recorded as other long-term assets on its balance sheet, and Intel's proportionate share of Numonyx's income or loss will be recognized using the equity method of accounting, with a one-quarter lag.

Intel will record an estimated non-cash impairment charge of approximately $300 million in the first quarter of 2008 related to the assets of its NOR flash memory business. Additionally, Intel has guaranteed up to $275 million of Numonyx's senior credit facility, representing a contingent financial obligation.

Francisco Partners acquired a 6.3% ownership stake in Numonyx through a $150 million cash investment and a $20 million note receivable. They also possess a preferential payout right of 1.85x on their cash investment, senior to Intel and STMicroelectronics' investments, in the event of an IPO, change of control, bankruptcy, or liquidation of Numonyx.