8-KRegulation FD

INTEL CORP 8-K Report, Regulation FD Disclosure (Mar 21, 2011)

Filed March 21, 2011For Securities:INTC

Summary

Intel Corporation (INTC) filed an 8-K on March 21, 2011, detailing updated financial information and projections for its subsidiary, McAfee, Inc. The report focuses on the impact of purchase accounting adjustments, specifically a $300 million reduction in McAfee's deferred revenue balance for fiscal year 2011. This reduction, along with ongoing amortization of intangibles, is expected to influence McAfee's financial contribution to Intel.

Key Highlights

  • 1McAfee's 2011 revenue is projected to be approximately $1.6 billion after a $300 million purchase accounting reduction to its deferred revenue balance.
  • 2The impact of deferred revenue adjustments for McAfee in 2012 is estimated to be around $100 million.
  • 3Amortization of intangibles related to McAfee is estimated at approximately $450 million in 2011, with 60% impacting cost of sales and 40% impacting operating expenses.
  • 4Charges from the amortization of intangibles are expected to continue for several years.
  • 5McAfee's financial performance is anticipated to be slightly dilutive to Intel's earnings in 2011.
  • 6McAfee's financial performance is expected to become accretive to Intel's earnings in 2012 and beyond.
  • 7Excluding purchase accounting write-downs and intangible amortization, McAfee's performance is projected to be slightly accretive to Intel's earnings in 2011 and ongoing.

Frequently Asked Questions

The reduction is due to purchase accounting adjustments related to Intel's acquisition of McAfee. This is a standard accounting practice that revalues assets and liabilities at the time of acquisition.

In 2011, McAfee's performance is expected to be slightly dilutive to Intel's earnings. However, it is projected to be accretive (contribute positively) to Intel's earnings in 2012 and subsequent years. Excluding certain accounting adjustments, McAfee is expected to be slightly accretive even in 2011.

Intel estimates approximately $450 million in amortization charges related to McAfee's intangibles for 2011. A significant portion (60%) will affect the cost of sales, and the remainder (40%) will impact operating expenses. These charges are expected to continue for multiple years.