8-KMaterial AgreementsRegulation FDExhibits & Filings

INTEL CORP 8-K Report, Material Agreement (Jan 10, 2011)

Filed January 10, 2011For Securities:INTC

Summary

Intel Corporation (INTC) announced a significant patent cross-license agreement with NVIDIA Corporation on January 10, 2011. This agreement resolves ongoing litigation between the two companies and provides Intel with a license to all of NVIDIA's patents, with certain exclusions. In return, Intel will make a total of $1.5 billion in payments over six years, starting in January 2011. This settlement marks a strategic move to de-risk future operations and potentially foster innovation by clearing intellectual property hurdles. The financial impact includes an initial $100 million expense recognized in Q4 2010 and the capitalization of approximately $1.3 billion as an intangible asset to be amortized. Investors should view this as a material development aimed at resolving a long-standing legal dispute and securing broader patent access, which could have positive long-term implications for Intel's product development and market position, despite the substantial upfront and ongoing payments.

Key Highlights

  • 1Intel and NVIDIA entered into a patent cross-license agreement effective January 10, 2011, with a capture period until March 31, 2017.
  • 2The agreement resolves existing litigation between Intel and NVIDIA.
  • 3Intel gains a license to all of NVIDIA's patents, while NVIDIA receives a license to Intel's patents with specific exclusions (x86 products, certain chipsets, flash memory).
  • 4Intel will pay a total of $1.5 billion in installments over six years (2011-2016).
  • 5Approximately $1.4 billion of the payment will be recognized as a liability on a discounted basis.
  • 6An expense of $100 million was recognized in Q4 2010 as marketing, general, and administrative costs.
  • 7Approximately $1.3 billion will be recorded as an intangible asset in Q1 2011 and amortized over future periods.

Frequently Asked Questions

The primary purpose of the agreement is to resolve ongoing patent litigation between Intel and NVIDIA and to establish a cross-licensing framework for their respective patents, allowing each company to utilize certain patents of the other.

Intel will make total payments of $1.5 billion to NVIDIA. These payments are structured as $300 million annually from 2011 to 2013, and $200 million annually from 2014 to 2016.

Intel recognized a $100 million expense in Q4 2010. The remaining amount, approximately $1.3 billion, will be capitalized as an intangible asset in Q1 2011 and amortized into cost of sales over future periods. The total liability recognized on a discounted basis is approximately $1.4 billion.

Yes, while Intel receives a license to all of NVIDIA's patents, there are exclusions. NVIDIA products are licensed to Intel's patents subject to certain exclusions, including those for x86 products, certain chipsets, and certain flash memory technology products.