2012 Q4 Form 10-Q Financial Statement

#000119312512444095 Filed on October 31, 2012

View on sec.gov

Income Statement

Concept 2012 Q4 2012 Q3 2011 Q4
Revenue $13.48B $13.46B $14.23B
YoY Change -5.31% 3.26% 24.23%
Cost Of Revenue $5.660B $4.942B $5.215B
YoY Change 8.53% -3.66% 28.73%
Gross Profit $7.817B $8.515B $9.018B
YoY Change -13.32% 7.76% 21.77%
Gross Profit Margin 58.0% 63.28% 63.36%
Selling, General & Admin $1.958B $1.995B $2.017B
YoY Change -2.93% 4.72% 18.3%
% of Gross Profit 25.05% 23.43% 22.37%
Research & Development $2.629B $2.605B $2.140B
YoY Change 22.85% 31.17% 28.07%
% of Gross Profit 33.63% 30.59% 23.73%
Depreciation & Amortization $2.005B $1.893B $1.529B
YoY Change 31.13% 25.86% 26.78%
% of Gross Profit 25.65% 22.23% 16.95%
Operating Expenses $4.662B $4.674B $4.233B
YoY Change 10.13% 17.82% 25.13%
Operating Profit $3.155B $3.841B $4.785B
YoY Change -34.06% -2.39% 18.94%
Interest Expense $203.0M $14.00M $0.00
YoY Change -100.0%
% of Operating Profit 6.43% 0.36% 0.0%
Other Income/Expense, Net -$154.0M $57.00M $15.00M
YoY Change -1126.67% 533.33% -60.53%
Pretax Income $3.204B $3.921B $4.892B
YoY Change -34.51% -0.25% 17.51%
Income Tax $736.0M $949.0M $1.424B
% Of Pretax Income 22.97% 24.2% 29.11%
Net Earnings $2.468B $2.972B $3.468B
YoY Change -28.84% 0.61% 9.06%
Net Earnings / Revenue 18.31% 22.09% 24.37%
Basic Earnings Per Share $0.59 $0.67
Diluted Earnings Per Share $484.3K $0.58 $0.65
COMMON SHARES
Basic Shares Outstanding 4.976B shares 4.996B shares 5.194B shares
Diluted Shares Outstanding 5.153B shares 5.340B shares

Balance Sheet

Concept 2012 Q4 2012 Q3 2011 Q4
SHORT-TERM ASSETS
Cash & Short-Term Investments $12.48B $6.003B $10.25B
YoY Change 21.77% -22.45% -38.98%
Cash & Equivalents $8.478B $3.520B $5.065B
Short-Term Investments $3.999B $2.483B $5.181B
Other Short-Term Assets $2.512B $1.659B $1.589B
YoY Change 58.09% -24.35% -1.55%
Inventory $4.734B $5.319B $4.096B
Prepaid Expenses
Receivables $3.833B $3.938B $3.650B
Other Receivables $0.00 $0.00 $0.00
Total Short-Term Assets $31.36B $23.01B $25.87B
YoY Change 21.2% -0.38% -18.16%
LONG-TERM ASSETS
Property, Plant & Equipment $27.98B $27.16B $23.63B
YoY Change 18.44% 30.7% 32.0%
Goodwill $9.710B $9.623B $9.254B
YoY Change 4.93% 5.27% 104.24%
Intangibles $6.235B $6.221B $6.267B
YoY Change -0.51% -7.15% 628.72%
Long-Term Investments $992.0M $1.010B $1.669B
YoY Change -40.56% -41.89% -6.81%
Other Assets $4.148B $4.033B $4.648B
YoY Change -10.76% -10.06% 9.34%
Total Long-Term Assets $52.99B $51.43B $45.25B
YoY Change 17.12% 19.63% 43.3%
TOTAL ASSETS
Total Short-Term Assets $31.36B $23.01B $25.87B
Total Long-Term Assets $52.99B $51.43B $45.25B
Total Assets $84.35B $74.44B $71.12B
YoY Change 18.61% 12.64% 12.55%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $3.023B $3.188B $2.956B
YoY Change 2.27% 16.27% 29.08%
Accrued Expenses $7.631B $6.755B $6.927B
YoY Change 10.16% 18.16% 10.8%
Deferred Revenue
YoY Change
Short-Term Debt $0.00 $0.00 $0.00
YoY Change
Long-Term Debt Due $312.0M $56.00M $66.00M
YoY Change 372.73% -21.13% 73.68%
Total Short-Term Liabilities $12.90B $11.95B $12.03B
YoY Change 7.23% 15.44% 28.96%
LONG-TERM LIABILITIES
Long-Term Debt $13.14B $7.100B $7.084B
YoY Change 85.43% 239.71% 241.07%
Other Long-Term Liabilities $3.702B $3.215B $3.479B
YoY Change 6.41% 27.63% 143.97%
Total Long-Term Liabilities $16.84B $10.32B $10.56B
YoY Change 59.41% 123.8% 201.54%
TOTAL LIABILITIES
Total Short-Term Liabilities $12.90B $11.95B $12.03B
Total Long-Term Liabilities $16.84B $10.32B $10.56B
Total Liabilities $29.74B $22.27B $22.59B
YoY Change 31.63% 48.82% 76.08%
SHAREHOLDERS EQUITY
Retained Earnings $32.14B $30.49B $29.66B
YoY Change 8.37% -4.75% -9.91%
Common Stock
YoY Change
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity $51.20B $49.27B $45.91B
YoY Change
Total Liabilities & Shareholders Equity $84.35B $74.44B $71.12B
YoY Change 18.61% 12.64% 12.55%

Cashflow Statement

Concept 2012 Q4 2012 Q3 2011 Q4
OPERATING ACTIVITIES
Net Income $2.468B $2.972B $3.468B
YoY Change -28.84% 0.61% 9.06%
Depreciation, Depletion And Amortization $2.005B $1.893B $1.529B
YoY Change 31.13% 25.86% 26.78%
Cash From Operating Activities $6.026B $5.147B $6.349B
YoY Change -5.09% 29.61% 14.4%
INVESTING ACTIVITIES
Capital Expenditures -$2.754B -$3.364B -$2.713B
YoY Change 1.51% 35.43% 45.16%
Acquisitions
YoY Change
Other Investing Activities -$2.578B -$1.488B -$1.394B
YoY Change 84.94% -187.48% 26.38%
Cash From Investing Activities -$5.332B -$4.852B -$4.107B
YoY Change 29.83% 519.67% 38.19%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities 4.267B -2.004B 183.0M
YoY Change 2231.69% -26.99% -107.05%
NET CHANGE
Cash From Operating Activities 6.026B 5.147B 6.349B
Cash From Investing Activities -5.332B -4.852B -4.107B
Cash From Financing Activities 4.267B -2.004B 183.0M
Net Change In Cash 4.961B -1.709B 2.425B
YoY Change 104.58% -485.78% -12863.16%
FREE CASH FLOW
Cash From Operating Activities $6.026B $5.147B $6.349B
Capital Expenditures -$2.754B -$3.364B -$2.713B
Free Cash Flow $8.780B $8.511B $9.062B
YoY Change -3.11% 31.85% 22.15%

Facts In Submission

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us-gaap Description Of New Accounting Pronouncements Not Yet Adopted
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<p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;margin-left:0px;">Note </font><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;">3</font><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;">: </font><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;">Recent Accounting Standards </font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">In July 2012, the Financial Accounting Standards Board (FASB) issued amended standards to simplify how entities test indefinite-lived intangible assets for impairment which improve consistency in impairment testing requirements among long-lived asset categories. These amended standards permit an assessment of qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. For assets in which this assessment concludes it is more likely than not that the fair value is more than its carrying value, these amended standards eliminate the requirement to perform quantitative impairment testing as outlined in the previously issued standards. These amended standards </font><font style="font-family:Times New Roman;font-size:10pt;">will be </font><font style="font-family:Times New Roman;font-size:10pt;">effective for us beginning in the fourth quarter of 2012</font><font style="font-family:Times New Roman;font-size:10pt;">. We do not expect these new standards to significantly impact our consolidated condensed financial statements.</font></p>
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<p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;margin-left:0px;">Note </font><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;">21</font><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;">: </font><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;">Contingencies</font><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;"> </font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times;font-size:10pt;font-weight:bold;font-style:italic;margin-left:0px;">Legal Proceedings</font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times;font-size:10pt;margin-left:0px;">We are currently a party to various legal proceedings, including those noted in this section. While management presently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm the company's financial position, results of operations, cash flows, or overall trends, legal proceedings and related government investigations are subject to inherent uncertainties, and unfavorable rulings or other events could occur. Unfavorable resolutions could include substantial monetary damages, and in matters for which injunctive relief or other conduct remedies are sought, an injunction or other order prohibiting us from selling one or more products at all or in particular ways, precluding particular business practices, or requiring other remedies. Were unfavorable final outcomes to occur, there exists the possibility of a material adverse impact on our business, results of operations, financial position, and overall trends. </font><font style="font-family:Times;font-size:10pt;">It is also possible that we could conclude it is in the best interests of our stockholders, employees, and customers to settle one or more such matters, and any such settlement could include substantial payments; however, we have not reached this conclusion with respect to any particular matter at this time.</font><font style="font-family:Times;font-size:10pt;"> </font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times;font-size:10pt;margin-left:0px;">A number of proceedings generally have challenged and continue to challenge certain of our competitive practices. The allegations in these proceedings vary and are described in more detail in the following paragraphs, but in general contend that we improperly condition price rebates and other discounts on our microprocessors on exclusive or near-exclusive dealing by some of our customers; and claim that our software compiler business unfairly prefers Intel</font><font style="font-family:Times;font-size:10pt;">&#174;</font><font style="font-family:Times;font-size:10pt;"> microprocessors over competing microprocessors and that, through the use of our compiler and other means, we have caused inaccurate and misleading benchmark results concerning our microprocessors to be disseminated. </font><font style="font-family:Times;font-size:10pt;">Based on the procedural posture of the various remaining competition matters, which we describe below, the investment of resources to explain and defend our position has declined as compared to the period 2005-2011. Nonetheless, certain of the matters remain active and these challenges could continue for a number of years and m</font><font style="font-family:Times;font-size:10pt;">ight</font><font style="font-family:Times;font-size:10pt;"> require the investment of additional</font><font style="font-family:Times;font-size:10pt;"> resources. We believe that we compete lawfully and that our marketing, business, intellectual property, and other challenged practices benefit our customers and our stockholders, and we will continue to conduct a vigorous defense in the remaining proceedings. </font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times;font-size:10pt;font-style:italic;margin-left:0px;">Government Competition Matters and Related Consumer Class&#160;Actions</font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times;font-size:10pt;margin-left:0px;">In 2001, the European Commission (EC) commenced an investigation regarding claims by Advanced Micro Devices, Inc. (AMD) that we used unfair business practices to persuade customers to buy our microprocessors. We have received numerous requests for information and documents from the EC, and we have responded to each of those requests. The EC issued a Statement of Objections in July 2007 and held a hearing on that Statement in March 2008. The EC issued a Supplemental Statement of Objections in July 2008.</font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times;font-size:10pt;margin-left:0px;">In May 2009, the EC issued a decision finding that we had violated Article 82 of the EC Treaty and Article 54 of the European Economic Area Agreement. In general, the EC found that we violated Article 82 (later renumbered as Article 102 by a new treaty) by offering alleged &#8220;conditional rebates and payments&#8221; that required our customers to purchase all or most of their x86 microprocessors from us. The EC also found that we violated Article 82 by making alleged &#8220;payments to prevent sales of specific rival products.&#8221; The EC imposed a fine in the amount of &#8364;</font><font style="font-family:Times;font-size:10pt;">1.06</font><font style="font-family:Times;font-size:10pt;"> billion ($</font><font style="font-family:Times;font-size:10pt;">1.447</font><font style="font-family:Times;font-size:10pt;"> billion as of May 2009), which we subsequently paid during the third quarter of 2009, and also ordered us to &#8220;immediately bring to an end the infringement referred to in&#8221; the EC decision. In the second quarter of 2009, </font><font style="font-family:Times;font-size:10pt;">we recorded the related charge within marketing, general and administrative. </font><font style="font-family:Times;font-size:10pt;">We strongly disagree with the EC's decision, and we appealed the decision to the Court of First Instance (which has been renamed the General Court) in July 2009. The hearing of our appeal took place on July 3 through July 6, 2012. The court's decision is expected in mid to late 2013. </font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times;font-size:10pt;margin-left:0px;">The EC decision exceeds 500 pages and does not contain specific direction on whether or how we should modify our business practices. Instead, the decision states that we should &#8220;cease and desist&#8221; from further conduct that, in the EC's opinion, would violate applicable law. We have taken steps, which are subject to the EC's ongoing review, to comply with that decision pending appeal. We opened discussions with the EC to better understand the decision and to explain changes to our business practices. Based on our current understanding and expectations, we do not believe that any such changes will be material to our financial position, results, or cash flows. </font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times;font-size:10pt;margin-left:0px;">In June&#160;2005, we received an inquiry from the Korea Fair Trade Commission (KFTC) requesting documents from our Korean subsidiary related to marketing and rebate programs that we entered into with Korean PC manufacturers. In February 2006, the KFTC initiated an inspection of documents at our offices in Korea. In September 2007, the KFTC served on us an Examination Report alleging that sales to two customers during parts of 2002&#8211;2005 violated Korea's Monopoly Regulation and Fair Trade Act. In December 2007, we submitted our written response to the KFTC. In February 2008, the KFTC's examiner submitted a written reply to our response. In March 2008, we submitted a further response. In April 2008, we participated in a pre-hearing conference before the KFTC, and we participated in formal hearings in May and June 2008. In June 2008, the KFTC announced its intent to fine us approximately $</font><font style="font-family:Times;font-size:10pt;">25</font><font style="font-family:Times;font-size:10pt;"> million for providing discounts to Samsung Electronics Co., Ltd. and TriGem Computer Inc. In November 2008, the KFTC issued a final written decision concluding that our discounts had violated Korean antitrust law and imposing a fine on us of approximately $</font><font style="font-family:Times;font-size:10pt;">20</font><font style="font-family:Times;font-size:10pt;"> million, which we paid in January 2009. In December 2008, we appealed this decision by filing a lawsuit in the Seoul High Court seeking to overturn the KFTC's decision. We expect a decision from the court in 2012.</font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times;font-size:10pt;margin-left:0px;">At least 82 separate class actions have been filed in the U.S. District Courts for the Northern District of California, Southern District of California, District of Idaho, District of Nebraska, District of New Mexico, District of Maine, and District of Delaware, as well as in various California, Kansas, and Tennessee state courts. These actions generally repeat </font><font style="font-family:Times;font-size:10pt;">the allegations made in a now-settled lawsuit filed against Intel by AMD in June 2005 in the U.S. District Court for the District of Delaware (AMD litigation). Like the AMD litigation, these class-action suits allege that Intel engaged in various actions in violation of the Sherman Act and other laws by, among other things, providing discounts and rebates to our manufacturer and distributor customers conditioned on exclusive or near-exclusive dealings that allegedly unfairly interfered with AMD's ability to sell its microprocessors, interfering with certain AMD product launches, and interfering with AMD's participation in certain industry standards-setting groups. </font><font style="font-family:Times;font-size:10pt;">The </font><font style="font-family:Times;font-size:10pt;">class actions allege </font><font style="font-family:Times;font-size:10pt;">various consumer injuries, including that consumers in various states have been injured by paying higher prices for computers containing our microprocessors. </font><font style="font-family:Times;font-size:10pt;">We dispute the class-action claims and intend to defend the lawsuits vigorously.</font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times;font-size:10pt;margin-left:0px;">All of the federal class actions and the Kansas and Tennessee state court class actions have been transferred by the Multidistrict Litigation Panel to the U.S. District Court in Delaware for all pre-trial proceedings and discovery (MDL proceedings). The Delaware district court has appointed a Special Master to address issues in the MDL proceedings, as assigned by the court. In January 2010, the plaintiffs in the Delaware action filed a motion for sanctions for our alleged failure to preserve evidence. This motion largely copies a motion previously filed by AMD in the AMD litigation, which has settled. The plaintiffs in the MDL proceedings also moved for certification of a class of members who purchased certain PCs containing products sold by Intel. In July 2010, the Special Master issued a Report and Recommendation (Class Report) denying the motion to certify a class. The MDL plaintiffs filed objections to the Special Master's Class Report, and a hearing on those objections was held in March 2011. </font><font style="font-family:Times;font-size:10pt;">I</font><font style="font-family:Times;font-size:10pt;">n September 2012, the </font><font style="font-family:Times;font-size:10pt;">c</font><font style="font-family:Times;font-size:10pt;">ourt ruled that an evidentiary hearin</font><font style="font-family:Times;font-size:10pt;">g will be necessary to enable </font><font style="font-family:Times;font-size:10pt;">the </font><font style="font-family:Times;font-size:10pt;">c</font><font style="font-family:Times;font-size:10pt;">ourt to rule on the objections to the Special Master's </font><font style="font-family:Times;font-size:10pt;">Class Report</font><font style="font-family:Times;font-size:10pt;">, </font><font style="font-family:Times;font-size:10pt;">to resolve the </font><font style="font-family:Times;font-size:10pt;">m</font><font style="font-family:Times;font-size:10pt;">otion to </font><font style="font-family:Times;font-size:10pt;">c</font><font style="font-family:Times;font-size:10pt;">ertify the class, and to resolve a separate motion to exclude certain testimony and evidence from MDL plaintiffs' expert.</font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times;font-size:10pt;margin-left:0px;">All California class actions have been consolidated in the Superior Court of California in Santa Clara County. The plaintiffs in the California actions have moved for class certification, which we are in the process of opposing. At our request, the court in the California actions has agreed to delay ruling on this motion until after the Delaware district court rules on the similar motion in the MDL proceedings. Based on the procedural posture and the nature of the cases, including, but not limited to, the fact that the Delaware district court</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times;font-size:10pt;">has requested an evidentiary hearing and has not yet ruled on class certification issues</font><font style="font-family:Times;font-size:10pt;">, we are unable to make a reasonable estimate of the potential loss or range of losses, if any, arising from these matters.</font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times;font-size:10pt;font-style:italic;margin-left:0px;">Lehman Matter</font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times;font-size:10pt;margin-left:0px;">In November 2009, representatives of the Lehman Brothers OTC Derivatives Inc. (LOTC) bankruptcy estate advised us informally that the estate was considering a claim against us arising from a 2008 contract between Intel and LOTC. Under the terms of the 2008 contract, Intel prepaid $</font><font style="font-family:Times;font-size:10pt;">1.0</font><font style="font-family:Times;font-size:10pt;"> billion to LOTC, in exchange for which LOTC was required to purchase and deliver to Intel the number of shares of Intel common stock that could be purchased for $</font><font style="font-family:Times;font-size:10pt;">1.0</font><font style="font-family:Times;font-size:10pt;"> billion at the discounted volume-weighted average price specified in the contract for the period September 2, 2008 to September 26, 2008. LOTC's performance under the contract was secured by $</font><font style="font-family:Times;font-size:10pt;">1.0</font><font style="font-family:Times;font-size:10pt;"> billion of cash collateral. Under the terms of the contract, LOTC was obligated to deliver approximately </font><font style="font-family:Times;font-size:10pt;">50</font><font style="font-family:Times;font-size:10pt;"> million shares of our common stock to us on September 29, 2008. LOTC failed to deliver any shares of our common stock, and we exercised our right to setoff against the $</font><font style="font-family:Times;font-size:10pt;">1.0</font><font style="font-family:Times;font-size:10pt;"> billion collateral. LOTC has not initiated any action against us to date, but in February&#160;2010, LOTC served a subpoena on us in connection with this transaction.&#160;In October 2010, LOTC demanded that Intel pay it at least $</font><font style="font-family:Times;font-size:10pt;">417</font><font style="font-family:Times;font-size:10pt;"> million. In September 2010, we entered into an agreement with LOTC that tolled any applicable statutes of limitations for 90 days and precluded the parties from commencing any formal proceedings to prosecute any claims against each other in any forum during that period. The tolling agreement with LOTC was extended several times, but lapsed in June 2011. We continue to believe that we acted appropriately under our agreement with LOTC, and we intend to defend any claim to the contrary. </font><font style="font-family:Times;font-size:10pt;">No complaint has been filed, and we are unable </font><font style="font-family:Times New Roman;font-size:10pt;">to make a reasonable estimate of the potential loss or range of losses, if any, that might arise from any such complaint</font><font style="font-family:Times;font-size:10pt;">.</font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times;font-size:10pt;font-style:italic;margin-left:0px;">McAfee Shareholder Litigation</font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times;font-size:10pt;margin-left:0px;">On August 19, 2010, we announced that we had agreed to acquire all of McAfee's common stock for </font><font style="font-family:Times;font-size:10pt;">$48.00</font><font style="font-family:Times;font-size:10pt;"> per share. Four McAfee shareholders filed putative class action lawsuits in Santa Clara County, California Superior Court challenging the proposed transaction. The cases were ordered consolidated in September 2010. Plaintiffs have filed an amended complaint that names the former McAfee board members, McAfee and Intel as defendants, and alleges that the McAfee board members breached their fiduciary duties and that Intel aided and abetted those breaches of duty. The complaint requests rescission of the merger agreement and such other equitable relief as the court may deem proper and an award of damages in an unspecified amount. In June 2012, plaintiffs' damages expert asserted that the value of a McAfee share for purposes of assessing damages should be </font><font style="font-family:Times;font-size:10pt;">$62.08.</font><font style="font-family:Times;font-size:10pt;"> </font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times;font-size:10pt;margin-left:0px;">In January 2012, the court certified the action as a class action, and appointed the Central Pension Laborers' Fund to act as the class representative. In January 2012, the court also scheduled trial to begin in January 2013. In March 2012, </font><font style="font-family:Times;font-size:10pt;">defendants</font><font style="font-family:Times;font-size:10pt;"> filed a petition with the California Court of Appeal for a writ of mandate to reverse the class certification order, which was denied in June 2012. In March 2012, the court entered an order, at </font><font style="font-family:Times;font-size:10pt;">defendants'</font><font style="font-family:Times;font-size:10pt;"> request, holding that plaintiffs are not entitled to a jury trial in this case, and ordered a bench trial. In April 2012, plaintiffs filed a petition with the California Court of Appeal for a writ of mandate to reverse that order, which the court of appeal denied in July 2012.</font><font style="font-family:Times;font-size:10pt;"> Defendants filed their motion</font><font style="font-family:Times;font-size:10pt;"> for summary judgment in August</font><font style="font-family:Times;font-size:10pt;"> 2012. Oral argument on that motion is expected to be heard on November 2, 2012</font><font style="font-family:Times;font-size:10pt;">. </font><font style="font-family:Times;font-size:10pt;">Because the resolution of the contemplated motions for summary judgment and other potential motions related to damages may materially impact the scope and nature of the proceeding, because discovery is not yet complete, and becau</font><font style="font-family:Times;font-size:10pt;">se plaintiffs seek equitable relief including rescission, we are unable to make a reasonable estimate of the potential loss or range of losses, if any, arising from this matter. </font><font style="font-family:Times;font-size:10pt;">We dispute the class-action claims and intend to defend the lawsuit vigorously.</font><font style="font-family:Times;font-size:10pt;">&#160; </font><font style="font-family:Times;font-size:10pt;"> </font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times;font-size:10pt;font-style:italic;margin-left:0px;">X2Y Attenuators, LLC v. Intel et al </font></p><p style='margin-top:0pt; margin-bottom:0pt'>&#160;</p><p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times;font-size:10pt;margin-left:0px;">In May 2011, X2Y Attenuators, LLC (X2Y) filed a patent infringement lawsuit in the U.S. District Court for the Western District of Pennsylvania and a complaint with the U.S. International Trade Commission (ITC) pursuant to Section 337 of the Tariff Act of 1930 against us and two of our customers, Apple Inc. and Hewlett-Packard Company (HP), alleging infringement of five patents. X2Y subsequently added a sixth patent to both actions. The district court action is stayed pending resolution of the ITC proceeding. X2Y alleges that at least Intel&#174; Core&#8482; and </font><font style="font-family:Times;font-size:10pt;">Intel</font><font style="font-family:Times;font-size:10pt;">&#174;</font><font style="font-family:Times;font-size:10pt;"> </font><font style="font-family:Times;font-size:10pt;">Xeon&#174; </font><font style="font-family:Times;font-size:10pt;">processor </font><font style="font-family:Times;font-size:10pt;">families infringe the asserted patents and X2Y requests that the ITC issue permanent exclusion and cease and desist orders to, among other things, prohibit the importation of these microprocessors and Apple and HP products incorporating these microprocessors into the United States. In the district court action, X2Y seeks unspecified damages, including enhanced damages for alleged willful infringement, and injunctive relief. On June 13, 2012, the Administrative Law Judge issued an initial determination granting X2Y's motion to partially terminate the ITC investigation with respect to three of the asserted patents. The hearing on the remaining three patents </font><font style="font-family:Times;font-size:10pt;">was held</font><font style="font-family:Times;font-size:10pt;"> in August 2012</font><font style="font-family:Times;font-size:10pt;">. The initial determination is scheduled for December 14, 2012</font><font style="font-family:Times;font-size:10pt;"> and the target date for completion of this investigation is April 2013. Based on the procedural posture and nature of the cases, including, but not limited to, the fact that money damages are not an available remedy in the ITC, and because discovery regarding X2Y's claimed damages has not commenced in the stayed district court action, we are unable to make </font><font style="font-family:Times;font-size:10pt;">a reasonable estimate of the potential loss or range of losses, if any, arising from these matters. We dispute the claims and intend to defend the lawsuits vigorously.</font></p>

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