Intel Corp (INTC) SEC Annual Report (10-K) for 2011

Long-Lived Assets

Property, Plant and Equipment

We assess property, plant and equipment for impairment when events or changes in circumstances indicate that the carrying value of the assets or the asset grouping may not be recoverable. Factors that we consider in deciding when to perform an impairment review include significant under-performance of a business or product line in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in our use of the assets. We measure the recoverability of assets that will continue to be used in our operations by comparing the carrying value of the asset grouping to our estimate of the related total future undiscounted net cash flows. If an asset grouping's carrying value is not recoverable through the related undiscounted cash flows, the asset grouping is considered to be impaired. The impairment is measured by comparing the difference between the asset grouping's carrying value and its fair value. Property, plant and equipment is considered a non-financial asset and is recorded at fair value only if an impairment charge is recognized.

Impairments are determined for groups of assets related to the lowest level of identifiable independent cash flows. Due to our asset usage model and the interchangeable nature of our semiconductor manufacturing capacity, we must make subjective judgments in determining the independent cash flows that can be related to specific asset groupings. In addition, as we make manufacturing process conversions and other factory planning decisions, we must make subjective judgments regarding the remaining useful lives of assets, primarily process-specific semiconductor manufacturing tools and building improvements. When we determine that the useful lives of assets are shorter than we had originally estimated, we accelerate the rate of depreciation over the assets' new, shorter useful lives. Over the past 12 quarters, including the fourth quarter of 2011, impairments and accelerated depreciation of property, plant and equipment ranged from $10 million to $75 million per quarter.

Goodwill

Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. Goodwill is allocated to our reporting units based on relative fair value of the future benefit of the purchased operations to our existing business units as well as the acquired business unit. Reporting units may be operating segments as a whole or an operation one level below an operating segment, referred to as a component. Our reporting units are consistent with the operating segments identified in "Note 30: Operating Segment and Geographic Information" in Part II, Item 8 of this Form 10-K.

We perform an annual impairment assessment in the fourth quarter of each year, or more frequently if indicators of potential impairment exist, to determine whether it is more likely than not that the fair value of a reporting unit in which goodwill resides is less than its carrying value. For reporting units in which this assessment concludes that it is more likely than not that the fair value is more than its carrying value, goodwill is not considered impaired and we are not required to perform the two-step goodwill impairment test. Qualitative factors considered in this assessment include industry and market considerations, overall financial performance, and other relevant events and factors affecting the reporting unit.

For reporting units in which the impairment assessment concludes that it is more likely than not that the fair value is less than its carrying value, we perform the first step of the goodwill impairment test, which compares the fair value of the reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not considered impaired and we are not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step of the goodwill impairment test in order to determine the implied fair value of the reporting unit's goodwill. If, during this second step, we determine that the carrying value of a reporting unit's goodwill exceeds its implied fair value, we would record an impairment loss equal to the difference.

Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. Our goodwill impairment test uses a weighting of both the income and market methods to estimate the reporting unit's fair value. The income method is based on a discounted future cash flow approach that uses the following reporting unit estimates: revenue, based on assumed market segment growth rates and Intel's assumed market segment share; estimated costs; and appropriate discount rates based on the reporting units' weighted average cost of capital as determined by considering the observable weighted average cost of capital of comparable companies. Our estimates of market segment growth, our market segment share, and costs are based on historical data, various internal estimates, and a variety of external sources, and are developed as part of our routine long-range planning process. The same estimates are also used in planning for our long-term manufacturing and assembly and test capacity needs as part of our capital budgeting process, and for both long-term and short-term business planning and forecasting. We test the reasonableness of the inputs and outcomes of our discounted cash flow analysis against available comparable market data. The market method is based on financial multiples of comparable companies and applies a control premium. The reporting unit's carrying value represents the assignment of various assets and liabilities, excluding certain corporate assets and liabilities, such as cash, investments, and debt.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

In order to determine what costs can be included in the valuation of inventory, we must determine normal capacity at our manufacturing and assembly and test facilities, based on historical loadings compared to total available capacity. If the factory loadings are below the established normal capacity level, a portion of our manufacturing overhead costs would not be included in the cost of inventory, and therefore would be recognized as cost of sales in that period, which would negatively impact our gross margin. We refer to these costs as excess capacity charges. Over the past 12 quarters, excess capacity charges ranged from zero to $680 million per quarter.

Loss Contingencies

We are subject to various legal and administrative proceedings and asserted and potential claims, accruals related to repair or replacement of parts in connection with product errata, as well as product warranties and potential asset impairments (loss contingencies) that arise in the ordinary course of business. An estimated loss from such contingencies is recognized as a charge to income if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Disclosure of a loss contingency is required if there is at least a reasonable possibility that a loss has been incurred. The outcomes of

legal and administrative proceedings and claims, and the estimation of product warranties and asset impairments, are subject to significant uncertainty. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. With respect to estimating the losses associated with repairing and replacing parts in connection with product errata, we make judgments with respect to customer return rates, costs to repair or replace parts, and where the product is in our customer's manufacturing process. At least quarterly, we review the status of each significant matter, and we may revise our estimates. These revisions could have a material impact on our results of operations and financial position.

Accounting Changes and Recent Accounting Standards

For a description of accounting changes and recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see "Note 3: Accounting Changes" and "Note 4: Recent Accounting Standards" in Part II, Item 8 of this Form 10-K.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations

The following table sets forth certain consolidated statements of income data as a percentage of net revenue for the periods indicated:

			000,000				000,000				000,000				000,000				000,000				000,000
		2011								2010								2009
(Dollars in Millions, Except Per Share Amounts)		Dollars				% of Net Revenue				Dollars				% of Net Revenue				Dollars				% of Net Revenue
Net revenue		$	53,999				100.0	%		$	43,623				100.0	%		$	35,127				100.0	%
Cost of sales			20,242				37.5	%			15,132				34.7	%			15,566				44.3	%
Gross margin			33,757				62.5	%			28,491				65.3	%			19,561				55.7	%
Research and development			8,350				15.4	%			6,576				15.1	%			5,653				16.1	%
Marketing, general and administrative			7,670				14.2	%			6,309				14.5	%			7,931				22.6	%
Restructuring and asset impairment charges			-				-	%			-				-	%			231				0.6	%
Amortization of acquisition-related intangibles			260				0.5	%			18				-	%			35				0.1	%
Operating income			17,477				32.4	%			15,588				35.7	%			5,711				16.3	%
Gains (losses) on equity investments, net			112				0.2	%			348				0.8	%			(170	)			(0.5	)%
Interest and other, net			192				0.3	%			109				0.3	%			163				0.4	%
Income before taxes			17,781				32.9	%			16,045				36.8	%			5,704				16.2	%
Provision for taxes			4,839				8.9	%			4,581				10.5	%			1,335				3.8	%
Net income		$	12,942				24.0	%		$	11,464				26.3	%		$	4,369				12.4	%
Diluted earnings per common share		$	2.39							$	2.01							$	0.77

Geographic Breakdown of Revenue

Our net revenue for 2011, which included 53 weeks, increased $10.4 billion, or 24%, compared to 2010, which included 52 weeks. The increase was due to significantly higher platform (microprocessor and chipset) average selling prices and, to a lesser extent, slightly higher platform unit sales. Revenue from Intel Mobile Communications (formerly the WLS business of Infineon) and McAfee contributed $3.6 billion to 2011 revenue. Revenue in the Americas, Europe, Asia-Pacific, and Japan regions increased by 31%, 24%, 23%, and 13%, respectively, compared to 2010.

Our overall gross margin dollars for 2011 increased $5.3 billion, or 18%, compared to 2010. The increase was primarily due to significantly higher revenue from our existing business as well as our acquired business. The increase was partially offset by approximately $1.0 billion of higher start-up costs compared to 2010. The amortization of acquisition-related intangibles resulted in a $482 million reduction to our overall gross margin dollars in 2011, compared to $65 million in 2010, primarily due to the acquisitions of McAfee and the WLS business of Infineon.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Our overall gross margin percentage decreased to 62.5% in 2011 from 65.3% in 2010. The decrease in gross margin percentage was primarily attributable to the gross margin percentage decrease in the PC Client Group and, to a lesser extent, the gross margin percentage decrease in the other Intel architecture operating segments. We derived a substantial majority of our overall gross margin dollars in 2011, and most of our overall gross margin dollars in 2010, from the sale of platforms in the PC Client Group and Data Center Group operating segments.

Our net revenue for 2010 increased $8.5 billion, or 24%, compared to 2009. The increase was due to significantly higher platform unit sales and, to a lesser extent, higher platform average selling prices. Revenue in the Japan, Asia-Pacific, Americas, and Europe regions increased by 31%, 29%, 21%, and 6%, respectively, compared to 2009.

Our overall gross margin dollars for 2010 increased $8.9 billion, or 46%, compared to 2009. The increase was primarily due to significantly higher revenue. To a lesser extent, excess capacity charges recorded in 2009 of $1.1 billion and lower platform unit costs contributed to the increase in gross margin dollars for 2010 compared to 2009. These increases were partially offset by charges recorded in the fourth quarter of 2010 to repair and replace materials and systems impacted by a design issue related to our Intel ® 6 Series Express Chipset family. For further information, see "Note 20: Chipset Design Issue" in Part II, Item 8 of this Form 10-K.

Our overall gross margin percentage increased to 65.3% in 2010 from 55.7% in 2009. The increase in gross margin percentage was primarily attributable to the gross margin percentage increase in the PC Client Group operating segment and, to a lesser extent, gross margin percentage increases in the Data Center Group, the other Intel architecture operating segments, and the Non-Volatile Memory Solutions Group. We derived most of our overall gross margin dollars in 2010 and 2009 from the sale of platforms in the PC Client Group and Data Center Group operating segments.

PC Client Group

The revenue and operating income for the PC Client Group (PCCG) for the three years ended December 31, 2011 were as follows:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
Net revenue		$	35,406			$	30,327			$	24,894
Operating income		$	14,793			$	12,971			$	7,441

Net revenue for the PCCG operating segment increased by $5.1 billion, or 17%, in 2011 compared to 2010. Platforms within PCCG include those designed for the notebook and desktop computing market segments. The increase in revenue was due to higher notebook platform unit sales and higher notebook platform average selling prices. To a lesser extent, higher desktop platform average selling prices and slightly higher desktop platform unit sales also contributed to the increase.

Operating income increased by $1.8 billion in 2011 compared to 2010. The increase in operating income was primarily due to significantly higher revenue. The increase was partially offset by approximately $960 million of higher start-up costs. Higher operating expenses, platform unit costs, and inventory write-offs compared to 2010 also contributed to the offset.

For 2010, net revenue for the PCCG operating segment increased by $5.4 billion, or 22%, in 2010 compared to 2009. Significantly higher notebook platform unit sales were the primary driver for the increase in revenue. To a lesser extent, higher desktop platform unit sales and slightly higher notebook platform average selling prices also contributed to the increase.

Operating income increased by $5.5 billion in 2010 compared to 2009. The increase in operating income was primarily due to significantly higher revenue. During 2009, PCCG recognized approximately $1.0 billion of excess capacity charges. Additionally, lower platform unit costs in 2010 contributed to the increase in operating income. These impacts were partially offset by charges recorded in the fourth quarter of 2010 to repair and replace materials and systems impacted by a design issue related to our Intel ® 6 Series Express Chipset family. Additionally, operating expenses in 2010 were higher compared to 2009.

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Data Center Group

The revenue and operating income for the Data Center Group (DCG) for the three years ended December 31, 2011 were as follows:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
Net revenue		$	10,129			$	8,693			$	6,450
Operating income		$	5,100			$	4,388			$	2,289

Net revenue for the DCG operating segment increased by $1.4 billion, or 17%, in 2011 compared to 2010. The increase in revenue was due to significantly higher server platform unit sales. To a lesser extent, slightly higher server platform average selling prices also contributed to the increase.

Operating income increased by $712 million in 2011 compared to 2010. The increase in operating income was primarily due to significantly higher revenue, partially offset by higher operating expenses compared to 2010.

For 2010, net revenue for the DCG operating segment increased by $2.2 billion, or 35%, in 2010 compared to 2009. The increase in revenue was primarily due to significantly higher server platform unit sales. To a lesser extent, higher server platform average selling prices also contributed to the increase.

Operating income increased by $2.1 billion in 2010 compared to 2009. The increase in operating income was due to significantly higher revenue and, to a lesser extent, lower platform unit costs.

Other Intel Architecture Operating Segments

The revenue and operating income (loss) for the other Intel architecture (Other IA) operating segments, including Intel Mobile Communications (IMC), the Intelligent Systems Group (ISG), the Netbook and Tablet Group (NTG), and the Ultra-Mobility Group (UMG), for the three years ended December 31, 2011 were as follows:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
Net revenue		$	5,005			$	3,055			$	2,683
Operating income (loss)		$	(577	)		$	270			$	(45	)

Net revenue for the Other IA operating segments increased by $2.0 billion, or 64%, in 2011 compared to 2010. The increase was primarily due to IMC revenue, an operating segment formed from the acquisition of the WLS business of Infineon in the first quarter of 2011. To a lesser extent, significantly higher embedded platform unit sales within ISG also contributed to the increase. These increases were partially offset by significantly lower netbook platform unit sales within NTG.

Operating results for the Other IA operating segments decreased by $847 million from an operating income of $270 million in 2010 to an operating loss of $577 million in 2011. The decline in operating results was primarily due to higher operating expenses within each of the Other IA operating segments, partially offset by higher revenue.

For 2010, net revenue for the Other IA operating segments increased by $372 million, or 14%, in 2010 compared to 2009. The increase was due to significantly higher embedded platform unit sales within ISG.

Operating results for the Other IA operating segments increased by $315 million, from an operating loss of $45 million in 2009 to an operating income of $270 million in 2010. The increase in operating results was due to higher revenue and lower netbook platform unit costs within NTG. To a lesser extent, lower embedded platform unit costs within ISG also contributed to the increase. These increases were partially offset by higher operating expenses in NTG and ISG.

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Software and Services Operating Segments

The revenue and operating income (loss) for the software and services operating segments, including McAfee, the Wind River Software Group, and the Software and Services Group, for the three years ended December 31, 2011 were as follows:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
Net revenue		$	1,870			$	264			$	115
Operating income (loss)		$	(32	)		$	(175	)		$	(100	)

Net revenue for the software and services operating segments increased by $1.6 billion in 2011 compared to 2010. The increase was due to revenue from McAfee, which was acquired during the first quarter of 2011. Due to the revaluation of McAfee's historic deferred revenue to fair value, we excluded $204 million of revenue that would have been reported in 2011 if McAfee's deferred revenue had not been written down due to the acquisition.

The operating loss for the software and services operating segments decreased by $143 million in 2011 compared to 2010. The decrease was due to higher revenue, partially offset by higher operating expense across each of the software and services operating segments. Due to the revaluation of McAfee's historic deferred revenue to fair value at the time of acquisition, we excluded revenue and associated costs that would have increased operating results by $190 million in 2011.

For 2010, net revenue for the software and services operating segments increased by $149 million in 2010 compared to 2009. The increase was primarily due to significantly higher revenue from the Wind River Software Group. We acquired Wind River Systems, Inc. during the third quarter of 2009.

The operating loss for the software and services operating segments increased by $75 million in 2010 compared to 2009. The increase in operating losses was due to higher operating expenses, partially offset by higher revenue within the Wind River Software Group.

Operating Expenses

Operating expenses for the three years ended December 31, 2011 were as follows:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
Research and development		$	8,350			$	6,576			$	5,653
Marketing, general and administrative		$	7,670			$	6,309			$	7,931
Restructuring and asset impairment charges		$	-			$	-			$	231
Amortization of acquisition-related intangibles		$	260			$	18			$	35

Research and Development.   R&D spending increased by $1.8 billion, or 27%, in 2011 compared to 2010, and increased by $923 million, or 16%, in 2010 compared to 2009. The increase in 2011 compared to 2010 was primarily due to the expenses of McAfee and IMC, and higher compensation expenses based on an increase in employees. In addition, lower overall process development costs due to the transition to manufacturing start-up costs related to our 22nm process technology were mostly offset by higher process development costs due to R&D of our next-generation 14nm process technology. The increase in 2010 compared to 2009 was primarily due to higher profit-dependent compensation, an increase in employees, and higher process development costs as we transitioned from manufacturing start-up costs related to our 32nm process technology to R&D of our 22nm process technology.

Marketing, General and Administrative .  Marketing, general and administrative expenses increased $1.4 billion, or 22%, in 2011 compared to 2010, and decreased $1.6 billion, or 20%, in 2010 compared to 2009. The increase in 2011

compared to 2010 was primarily due to the expenses of McAfee and IMC, higher compensation expenses based on an increase in employees, and higher advertising expenses (including cooperative advertising expenses). The decrease in 2010 compared to 2009 was due to the 2009 charge of $1.447 billion incurred as a result of the fine imposed by the European Commission (EC) and the $1.25 billion payment to AMD in 2009 as part of a settlement agreement. These decreases were partially offset by higher advertising expenses (including cooperative advertising expenses), higher profit-dependent compensation, and, to a lesser extent, expenses related to our Wind River Software Group operating segment and an expense of $100 million recognized during the fourth quarter of 2010 due to a patent cross-license agreement that we entered into with NVIDIA in January 2011 (see "Note 17: Identified Intangible Assets" in Part II, Item 8 of this Form 10-K).

R&D, combined with marketing, general and administrative expenses, were 30% of net revenue in 2011 and 2010, and 39% of net revenue in 2009.

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Restructuring and Asset Impairment Charges .  The following table summarizes restructuring and asset impairment charges by plan for the three years ended December 31, 2011:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
2009 restructuring program		$	-			$	-			$	215
2006 efficiency program			-				-				16
Total restructuring and asset impairment charges		$	-			$	-			$	231

The 2009 restructuring included closing two assembly and test facilities in Malaysia, one facility in the Philippines, and one facility in China; stopping production at a 200mm wafer fabrication facility in Oregon; and ending production at our 200mm wafer fabrication facility in California. The 2006 efficiency program was designed to improve operational efficiency and financial results. Both programs are complete.

Amortization of Acquisition-Related Intangibles.   The increase of $242 million was primarily due to the amortization of intangibles related to the acquisitions of McAfee and the WLS business of Infineon, both completed in the first quarter of 2011. For further information, see "Note 14: Acquisitions" and "Note 17: Identified Intangible Assets" in Part II, Item 8 of this Form 10-K.

Share-Based Compensation

Share-based compensation totaled $1.1 billion in 2011 ($917 million in 2010 and $889 million in 2009). Share-based compensation was included in cost of sales and operating expenses.

As of December 31, 2011, unrecognized share-based compensation costs and the weighted average periods over which the costs are expected to be recognized were as follows:

			000,000				000,000
(Dollars in Millions)		Unrecognized Share-Based Compensation Costs				Weighted Average Period
Stock options		$	161				1.0 years
Restricted stock units		$	1,275				1.2 years

As of December 31, 2011, there was $13 million in unrecognized share-based compensation costs related to rights to acquire common stock under our stock purchase plan, and we expect to recognize those costs over a period of approximately one and a half months.

Gains (Losses) on Equity Investments and Interest and Other

Gains (losses) on equity investments, net and interest and other, net for the three years ended December 31, 2011 were as follows:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
Gains (losses) on equity investments, net		$	112			$	348			$	(170	)
Interest and other, net		$	192			$	109			$	163

Net gains on equity investments were lower in 2011 compared to 2010. We recognized lower gains on sales, higher equity method losses, and lower gains on third-party merger transactions in 2011 compared to 2010. We recognized a net gain on equity investments in 2010 compared to a net loss in 2009. In 2010, we recognized higher gains on sales, higher gains on third-party merger transactions, lower impairment charges, and lower equity method losses compared to 2009.

Net gains on equity investments for 2011 included a gain of $150 million on the sale of shares in VMware, Inc. During 2010, we recognized a gain of $181 million on the initial public offering of SMART Technologies, Inc. and subsequent partial sale of our shares in the secondary offering. We also recognized a gain of $91 million on the sale of our ownership interest in Numonyx B.V., and a gain of $67 million on the sale of shares in Micron in 2010.

Net gains (losses) on equity investments also included our proportionate share of the income or loss from Clearwire Communications, LLC (Clearwire LLC) ($145 million loss in 2011, $116 million loss in 2010, and $27 million loss in 2009) and Numonyx ($42 million gain in 2010 and $31 million loss in 2009). The equity method losses recognized in 2011 reduced our carrying value in Clearwire LLC to zero. We do not expect to recognize additional equity method losses for Clearwire LLC in the future. For further information, see "Note 11: Equity Method and Cost Method Investments" in Part II, Item 8 of this Form 10-K.

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Interest and other, net increased in 2011 compared to 2010, primarily due to a $164 million gain recognized upon formation of the Intel-GE Care Innovations, LLC joint venture during 2011. For further information, see "Note 11: Equity Method and Cost Method Investments," in Part II, Item 8 of this Form 10-K. The gain was partially offset by the recognition of $41 million of interest expense in 2011 compared to zero in 2010 and lower interest income in 2011 compared to 2010 as a result of lower average investment balances. We recognized interest expense in 2011 due to the issuance of $5.0 billion aggregate principal of senior unsecured notes in the third quarter of 2011.

Interest and other, net was lower in 2010 compared to 2009 on lower interest income. Interest income was lower as a result of lower average interest rates, partially offset by higher average investment balances. The average interest rate earned during 2010 decreased by approximately 0.5 percentage points compared to 2009. In addition, lower fair value gains on our trading assets (zero in 2010 and $70 million in 2009) were partially offset by lower exchange rate losses (zero in 2010 and $40 million in 2009). Exchange rate losses in 2009 were due to euro exposure related to our euro-denominated liability for the EC fine of $1.447 billion in 2009. For further information on the EC fine, see "Note 29: Contingencies" in Part II, Item 8 of this Form 10-K.

Provision for Taxes

Our provision for taxes and effective tax rate were as follows:

			000,000				000,000				000,000
(Dollars in Millions)		2011				2010				2009
Income before taxes		$	17,781			$	16,045			$	5,704
Provision for taxes		$	4,839			$	4,581			$	1,335
Effective tax rate			27.2	%			28.6	%			23.4	%

We generated a higher percentage of our profits from lower tax jurisdictions in 2011 compared to 2010, positively impacting our effective tax rate for 2011.

We generated a higher percentage of our profits from higher tax jurisdictions in 2010 compared to 2009, negatively impacting our effective tax rate for 2010. The effective tax rate for 2009 was positively impacted by the reversal of previously accrued taxes of $366 million on settlements, effective settlements, and related remeasurements of various uncertain tax positions. These impacts were partially offset by the recognition of the EC fine of $1.447 billion in 2009, which was not tax deductible and therefore significantly increased our effective tax rate for 2009. For further information on the EC fine, see "Note 29: Contingencies" in Part II, Item 8 of this Form 10-K.

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Liquidity and Capital Resources

			000,000				000,000
(Dollars in Millions)		Dec. 31, 2011				Dec. 25, 2010
Cash and cash equivalents, short-term investments, and marketable debt instruments included in trading assets		$	14,837			$	21,497
Loans receivable and other long-term investments		$	1,769			$	3,876
Short-term and long-term debt		$	7,331			$	2,115
Debt as % of stockholders' equity			16.0	%			4.3	%

Sources and Uses of Cash

(In Millions)

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

In summary, our cash flows were as follows:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
Net cash provided by operating activities		$	20,963			$	16,692			$	11,170
Net cash used for investing activities			(10,301	)			(10,539	)			(7,965	)
Net cash used for financing activities			(11,100	)			(4,642	)			(2,568	)
Effect of exchange rate fluctuations on cash and cash equivalents			5				-				-
Net increase (decrease) in cash and cash equivalents		$	(433	)		$	1,511			$	637

Operating Activities

Cash provided by operating activities is net income adjusted for certain non-cash items and changes in certain assets and liabilities.

For 2011 compared to 2010, the $4.3 billion increase in cash provided by operating activities was due to adjustments for non-cash items and higher net income. The adjustments for non-cash items were higher for 2011 compared to 2010 primarily due to higher depreciation and amortization of intangibles, as well as increases in non-acquisition-related deferred tax liabilities as of December 31, 2011 compared to December 25, 2010. Income taxes paid, net of refunds, in 2011 compared to 2010 were $1.3 billion lower, largely due to the tax benefit of depreciating 100% of assets placed in service in the United States in 2011.

Changes in assets and liabilities as of December 31, 2011 compared to December 25, 2010 included the following:

•

Income taxes payable increased and income taxes receivable decreased due to timing of payments.

•

Accounts payable increased due to business growth as well as an increase in capital spending.

•

Accounts receivable increased due to higher revenue in the fourth quarter of 2011.

For 2011, our two largest customers accounted for 34% of our net revenue (38% in 2010 and 2009), with one of these customers accounting for 19% of our net revenue (21% in 2010 and 2009), and another customer accounting for 15% of our net revenue (17% in 2010 and 2009). These two largest customers accounted for 32% of our accounts receivable as of December 31, 2011 (44% as of December 25, 2010).

For 2010 compared to 2009, the $5.5 billion increase in cash provided by operating activities was due to higher net income, partially offset by adjustments for non-cash items. Income taxes paid, net of refunds, in 2010 compared to 2009 were $3.7 billion higher, primarily due to higher income before taxes in 2010.

Investing Activities

Investing cash flows consist primarily of capital expenditures, investment purchases, sales, maturities, and disposals, as well as cash used for acquisitions.

Cash used for investing activities decreased slightly in 2011 compared to 2010. A decrease due to net maturities and sales of available-for-sale investments in 2011, as compared to net purchases of available-for-sale investments in 2010, was offset by higher cash paid for acquisitions, of which the substantial majority was for our acquisition of McAfee in the first quarter of 2011, and an increase in capital expenditures as we build and equip our 22nm process technology manufacturing capacity. Our capital expenditures were $10.8 billion in 2011 ($5.2 billion in 2010 and $4.5 billion in 2009) due to expanding our network of fabrication facilities to include an additional large-scale fabrication facility as well as bringing our 22nm process technology manufacturing capacity online in 2011.

The increase in cash used for investing activities in 2010 compared to 2009 was primarily due to an increase in net purchases of available-for-sale investments and, to a lesser extent, higher capital expenditures. These increases were partially offset by a decrease in net purchases of trading assets and lower cash paid for acquisitions.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Financing Activities

Financing cash flows consist primarily of repurchases of common stock, payment of dividends to stockholders, issuance and repayment of long-term debt, and proceeds from the sale of shares through employee equity incentive plans.

The increase in cash used in financing activities in 2011 compared to 2010 was primarily due to higher repurchases of common stock under our authorized common stock repurchase program, partially offset by the issuance of long-term debt in 2011 and higher proceeds from the sale of shares through employee equity incentive plans. We have an ongoing authorization, since October 2005, as amended, from our Board of Directors to repurchase up to $45 billion in shares of our common stock in open market or negotiated transactions. This amount includes $20 billion of increases in the authorization limit approved by our Board of Directors in 2011. During 2011, we repurchased $14.1 billion of common stock under our authorized common stock repurchase program compared to $1.5 billion in 2010. As of December 31, 2011, $10.1 billion remained available for repurchase under the existing repurchase authorization limit. We base our level of common stock repurchases on internal cash management decisions, and this level may fluctuate. Proceeds from the sale of shares through employee equity incentive plans totaled $2.0 billion in 2011 compared to $587 million in 2010. Our total dividend payments were $4.1 billion in 2011 compared to $3.5 billion in 2010 as a result of increases in quarterly cash dividends per common share. We have paid a cash dividend in each of the past 77 quarters. In January 2012, our Board of Directors declared a cash dividend of $0.21 per common share for the first quarter of 2012. The dividend is payable on March 1, 2012 to stockholders of record on February 7, 2012.

The increase in cash used in financing activities in 2010 compared to 2009 was due to the issuance of long-term debt in 2009.

Liquidity

Cash generated by operations is our primary source of liquidity. We maintain a diverse portfolio that we continuously analyze based on issuer, industry, and country. As of December 31, 2011, cash and cash equivalents, short-term investments, and marketable debt instruments included in trading assets totaled $14.8 billion ($21.5 billion as of

December 25, 2010). In addition to the $14.8 billion, we have $1.8 billion in loans receivable and other long-term investments that we include when assessing our investment portfolio. Substantially all of our investments in debt instruments are with A/A2 or better rated issuers, and a majority of the issuers are rated AA-/Aa3 or better. As certain countries in Europe are experiencing economic uncertainty, we continue to monitor the credit quality of our European sovereign and non-sovereign debt investments. The credit quality of our investment portfolio within the European region remains high, with substantially all of our sovereign debt investments with AA-/Aa3 or better rated issuers, and most of the non-sovereign debt issuers rated A/A2 or better. As of December 31, 2011, our total investments located in Spain, Italy, Ireland, Greece, and Portugal were approximately $50 million, all of which matures in 2012. We have $1 million in unrealized losses related to these investments. These countries have experienced significant economic uncertainty and credit downgrades, so we will only make investments in these countries in the future if their risk profile meets our investment objectives.

Our commercial paper program provides another potential source of liquidity. We have an ongoing authorization from our Board of Directors to borrow up to $3.0 billion, including through the issuance of commercial paper. Maximum borrowings under our commercial paper program during 2011 were $1.4 billion, and $200 million of commercial paper remained outstanding as of December 31, 2011. Our commercial paper was rated A-1+ by Standard & Poor's and P-1 by Moody's as of December 31, 2011. We also have an automatic shelf registration statement on file with the SEC pursuant to which we may offer an unspecified amount of debt, equity, and other securities. In the third quarter of 2011, we utilized this shelf registration statement and issued $5.0 billion aggregate principal of senior unsecured notes. These notes were issued primarily to repurchase shares of our common stock pursuant to our common stock repurchase program, and for general corporate purposes. For further information on the terms of the notes, see "Note 21: Borrowings" in Part II, Item 8 of this Form 10-K.

We believe that we have the financial resources needed to meet business requirements for the next 12 months, including capital expenditures for worldwide manufacturing and assembly and test; working capital requirements; and potential dividends, common stock repurchases, and acquisitions or strategic investments.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Fair Value of Financial Instruments

When determining fair value, we consider the principal or most advantageous market in which we would transact, and we consider assumptions that market participants would use when pricing the asset or liability. For further information, see "Fair Value" in "Note 2: Accounting Policies" in Part II, Item 8 of this Form 10-K.

Credit risk is factored into the valuation of financial instruments that we measure and record at fair value. When fair value is determined using pricing models, such as a discounted cash flow model, the issuer's credit risk or Intel's credit risk is factored into the calculation of the fair value, as appropriate.

Marketable Debt Instruments

As of December 31, 2011, our assets measured and recorded at fair value on a recurring basis included $15.1 billion of marketable debt instruments. Of these instruments, $6.1 billion was classified as Level 1, $8.7 billion as Level 2, and $218 million as Level 3.

Our balance of marketable debt instruments that are measured and recorded at fair value on a recurring basis and classified as Level 1 was classified as such due to the use of observable market prices for identical securities that are traded in active markets. Management judgment was required to determine the levels for the frequency of transactions that should be met for a market to be considered active. Our assessment of an active market for our marketable debt instruments generally takes into consideration the number of days each individual instrument trades over a specified period.

Of the $8.7 billion balance of marketable debt instruments measured and recorded at fair value on a recurring basis and classified as Level 2, approximately 60% of the balance was

classified as Level 2 due to the use of a discounted cash flow model and approximately 40% due to the use of non-binding market consensus prices that were corroborated with observable market data.

Our marketable debt instruments that are measured and recorded at fair value on a recurring basis and classified as Level 3 were classified as such due to the lack of observable market data to corroborate either the non-binding market consensus prices or the non-binding broker quotes. When observable market data is not available, we corroborate our fair value measurements using non-binding market consensus prices and non-binding broker quotes from a second source.

Loans Receivable

As of December 31, 2011, our assets measured and recorded at fair value on a recurring basis included $748 million of loans receivable. All of these securities were classified as Level 2, as the fair value is determined using a discounted cash flow model with all significant inputs derived from or corroborated with observable market data.

Marketable Equity Securities

As of December 31, 2011, our assets measured and recorded at fair value on a recurring basis included $562 million of marketable equity securities. Most of these securities were classified as Level 1 because the valuations were based on quoted prices for identical securities in active markets. Our assessment of an active market for our marketable equity securities generally takes into consideration the number of days that each individual equity security trades over a specified period.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Contractual Obligations

The following table summarizes our significant contractual obligations as of December 31, 2011:

			000,000				000,000				000,000				000,000				000,000
		Payments Due by Period
(In Millions)		Total				Less Than 1 Year				1–3 Years				3–5 Years				More Than 5 Years
Operating lease obligations		$	707			$	183			$	254			$	134			$	136
Capital purchase obligations 1			4,652				4,605				47				-				-
Other purchase obligations and commitments 2			1,001				633				309				55				4
Long-term debt obligations 3			14,822				292				572				2,072				11,886
Other long-term liabilities 4, 5			1,954				609				702				534				109
Total 6		$	23,136			$	6,322			$	1,884			$	2,795			$	12,135

1	Capital purchase obligations represent commitments for the construction or purchase of property, plant and equipment. They were not recorded as liabilities on our consolidated balance sheet as of December 31, 2011, as we had not yet received the related goods or taken title to the property.

2

Other purchase obligations and commitments include payments due under various types of licenses and agreements to purchase goods or services, as well as payments due under non-contingent funding obligations. Funding obligations include, for example, agreements to fund various projects with other companies.

3	Amounts represent principal and interest cash payments over the life of the debt obligations, including anticipated interest payments that are not recorded on our consolidated balance sheet. Any future settlement of convertible debt would impact our cash payments.

4

We are unable to reliably estimate the timing of future payments related to uncertain tax positions; therefore, $165 million of long-term income taxes payable has been excluded from the preceding table. However, long-term income taxes payable, recorded on our consolidated balance sheet, included these uncertain tax positions, reduced by the associated federal deduction for state taxes and U.S. tax credits arising from non-U.S. income taxes.

5

Amounts represent future cash payments to satisfy other long-term liabilities recorded on our consolidated balance sheet, including the short-term portion of these long-term liabilities. Expected required contributions to our U.S. and non-U.S. pension plans and other postretirement benefit plans of $65 million to be made during 2012 are also included; however, funding projections beyond 2012 are not practical to estimate.

6	Total excludes contractual obligations already recorded on our consolidated balance sheet as current liabilities except for the short-term portions of long-term debt obligations and other long-term liabilities.

Contractual obligations for purchases of goods or services include agreements that are enforceable and legally binding on Intel and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. For obligations with cancellation provisions, the amounts included in the preceding table were limited to the non-cancelable portion of the agreement terms or the minimum cancellation fee.

We have entered into certain agreements for the purchase of raw materials that specify minimum prices and quantities based on a percentage of the total available market or based on a percentage of our future purchasing requirements. Due to the uncertainty of the future market and our future

purchasing requirements, as well as the non-binding nature of these agreements, obligations under these agreements are not included in the preceding table. Our purchase orders for other products are based on our current manufacturing needs and are fulfilled by our vendors within short time horizons. In addition, some of our purchase orders represent authorizations to purchase rather than binding agreements.

Contractual obligations that are contingent upon the achievement of certain milestones are not included in the preceding table. These obligations include milestone-based co-marketing agreements, contingent funding/payment obligations, and milestone-based equity investment funding. These arrangements are not considered contractual obligations until the milestone is met by the third party.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

For the majority of restricted stock units granted, the number of shares issued on the date the restricted stock units vest is net of the minimum statutory withholding requirements that we pay in cash to the appropriate taxing authorities on behalf of our employees. The obligation to pay the relevant taxing authority is not included in the preceding table, as the amount is contingent upon continued employment. In addition, the amount of the obligation is unknown, as it is based in part on the market price of our common stock when the awards vest.

Contractual obligations with regard to our investment in IMFT/IMFS are not included in the preceding table. We are currently committed to purchasing 49% of IMFT's and 22% of IMFS's production output and production-related services. We also have several agreements with Micron related to IP, and R&D funding related to non-volatile memory manufacturing. The obligation to purchase our proportion of

IMFT/IMFS's inventory was approximately $125 million as of December 31, 2011. For further information, see "Note 11: Equity Method and Cost Method Investments" in Part II, Item 8 of this Form 10-K.

The expected timing of payments of the obligations above is estimated based on current information. Timing of payments and actual amounts paid may be different, depending on the time of receipt of goods or services, or changes to agreed-upon amounts for some obligations.

Off-Balance-Sheet Arrangements

As of December 31, 2011, we did not have any significant off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

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ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We use derivative financial instruments primarily to manage currency exchange rate and interest rate risk, and, to a lesser extent, equity market risk. All of the potential changes noted below are based on sensitivity analyses performed on our financial positions as of December 31, 2011 and December 25, 2010. Actual results may differ materially.

Currency Exchange Rates

In general, we economically hedge currency risks of non-U.S.-dollar-denominated investments in debt instruments and loans receivable with currency forward contracts or currency interest rate swaps. Gains and losses on these non-U.S.-currency investments would generally be offset by corresponding losses and gains on the related hedging instruments, resulting in an insignificant net exposure to loss.

Substantially all of our revenue is transacted in U.S. dollars. However, a significant amount of our operating expenditures and capital purchases is incurred in or exposed to other currencies, primarily the Japanese yen, the euro, the Israeli shekel, and the Chinese yuan. We have established balance sheet and forecasted transaction currency risk management programs to protect against fluctuations in fair value and the volatility of future cash flows caused by changes in exchange rates. We generally utilize currency forward contracts in these hedging programs. Our hedging programs reduce, but do not always entirely eliminate, the impact of currency exchange rate movements. For further information, see "Risk Factors" in Part I, Item 1A of this Form 10-K. We considered the historical trends in currency exchange rates and determined that it was reasonably possible that a weighted average adverse change of 20% in currency exchange rates could be experienced in the near term. Such an adverse change, after taking into account balance sheet hedges only and offsetting recorded monetary asset and liability positions, would have resulted in an adverse impact on income before taxes of less than $40 million as of December 31, 2011 (less than $35 million as of December 25, 2010).

Interest Rates

We generally hedge interest rate risks of fixed-rate debt instruments with interest rate swaps. Gains and losses on these investments would generally be offset by corresponding losses and gains on the related hedging instruments, resulting in an insignificant net exposure to interest rate loss.

We are exposed to interest rate risk related to our investment portfolio and indebtedness. Our indebtedness includes our debt issuances and the liability associated with a long-term patent cross-license agreement with NVIDIA. For further information, see "Note 17: Identified Intangible Assets" in Part II, Item 8 of this Form 10-K. The primary objective of our investments in debt instruments is to preserve principal while maximizing yields, which generally track the U.S.-dollar three-month LIBOR. A hypothetical decrease in interest rates of 1.0% would have resulted in an increase in the fair value of our indebtedness of approximately $900 million as of December 31, 2011 (an increase of approximately $250 million as of December 25, 2010). The significant increase from December 25, 2010 is primarily driven by the inclusion of the $5.0 billion of senior unsecured notes issued in the third quarter of 2011. A hypothetical decrease in interest rates of up to 1.0%, after taking into account investment hedges, would have resulted in an increase in the fair value of our investment portfolio of approximately $20 million as of December 31, 2011 (an increase of approximately $15 million as of December 25, 2010). The fluctuations in fair value of our investment portfolio and indebtedness reflect only the direct impact of the change in interest rates. Other economic variables, such as equity market fluctuations and changes in relative credit risk, could result in a significantly higher decline in the fair value of our net investment position. For further information on how credit risk is factored into the valuation of our investment portfolio and debt issuances, see "Note 5: Fair Value" in Part II, Item 8 of this Form 10-K.

Equity Prices

Our marketable equity investments include marketable equity securities and equity derivative instruments such as warrants and options. To the extent that our marketable equity securities have strategic value, we typically do not attempt to reduce or eliminate our equity market exposure through hedging activities; however, for our investments in strategic equity derivative instruments, we may enter into transactions to reduce or eliminate the equity market risks. For securities that we no longer consider strategic, we evaluate legal, market, and economic factors in our decision on the timing of disposal and whether it is possible and appropriate to hedge the equity market risk.

We hold derivative instruments that seek to offset changes in liabilities related to the equity market risks of certain deferred compensation arrangements. The gains and losses from changes in fair value of these derivatives are designed to offset the gains and losses on the related liabilities, resulting in an insignificant net exposure to loss.

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As of December 31, 2011, the fair value of our marketable equity investments and our equity derivative instruments, including hedging positions, was $585 million ($1.5 billion as of December 25, 2010). Our marketable equity investment in Imagination Technologies Group PLC was carried at a total fair market value of $327 million, or 56% of our marketable equity portfolio, as of December 31, 2011. Our marketable equity method investments are excluded from our analysis, as the carrying value does not fluctuate based on market price changes unless an other-than-temporary impairment is deemed necessary. To determine reasonably possible decreases in the market value of our marketable equity investments, we analyzed the expected market price sensitivity of our marketable equity investment portfolio. Assuming a loss of 45% in market prices, and after reflecting the impact of hedges and offsetting positions, the aggregate value of our marketable equity investments could decrease by approximately $265 million, based on the value as of December 31, 2011 (a decrease in value of approximately $365 million, based on the value as of December 25, 2010 using an assumed loss of 40%).

Many of the same factors that could result in an adverse movement of equity market prices affect our non-marketable equity investments, although we cannot always quantify the impact directly. Financial markets are volatile, which could negatively affect the prospects of the companies we invest in, their ability to raise additional capital, and the likelihood of our being able to realize value in our investments through liquidity events such as initial public offerings, mergers, and private sales. These types of investments involve a great deal of risk, and there can be no assurance that any specific company will grow or become successful; consequently, we could lose all or part of our investment. Our non-marketable equity investments, excluding investments accounted for under the equity method, had a carrying amount of $1.1 billion as of December 31, 2011 ($872 million as of December 25, 2010). As of December 31, 2011, the carrying amount of our non-marketable equity method investments was $1.6 billion ($1.8 billion as of December 25, 2010). Approximately half of the total non-marketable equity investments balance as of December 31, 2011 was concentrated in our IMFT/IMFS investment of $1.3 billion ($1.5 billion as of December 25, 2010).

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ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		Page
Consolidated Statements of Income			44
Consolidated Balance Sheets			45
Consolidated Statements of Cash Flows			46
Consolidated Statements of Stockholders' Equity			47
Notes to Consolidated Financial Statements			48
Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm			95
Supplemental Data: Financial Information by Quarter			97

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INTEL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

			000,000				000,000				000,000
Three Years Ended December 31, 2011 (In Millions, Except Per Share Amounts)		2011				2010				2009
Net revenue		$	53,999			$	43,623			$	35,127
Cost of sales			20,242				15,132				15,566
Gross margin			33,757				28,491				19,561
Research and development			8,350				6,576				5,653
Marketing, general and administrative			7,670				6,309				7,931
Restructuring and asset impairment charges			-				-				231
Amortization of acquisition-related intangibles			260				18				35
Operating expenses			16,280				12,903				13,850
Operating income			17,477				15,588				5,711
Gains (losses) on equity investments, net			112				348				(170	)
Interest and other, net			192				109				163
Income before taxes			17,781				16,045				5,704
Provision for taxes			4,839				4,581				1,335
Net income		$	12,942			$	11,464			$	4,369
Basic earnings per common share		$	2.46			$	2.06			$	0.79
Diluted earnings per common share		$	2.39			$	2.01			$	0.77
Weighted average common shares outstanding:
Basic			5,256				5,555				5,557
Diluted			5,411				5,696				5,645

See accompanying notes.

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INTEL CORPORATION

CONSOLIDATED BALANCE SHEETS

			000,000				000,000
December 31, 2011 and December 25, 2010 (In Millions, Except Par Value)		2011				2010
Assets
Current assets:
Cash and cash equivalents		$	5,065			$	5,498
Short-term investments			5,181				11,294
Trading assets			4,591				5,093
Accounts receivable, net of allowance for doubtful accounts of $36 ($28 in 2010)			3,650				2,867
Inventories			4,096				3,757
Deferred tax assets			1,700				1,488
Other current assets			1,589				1,614
Total current assets			25,872				31,611
Property, plant and equipment, net			23,627				17,899
Marketable equity securities			562				1,008
Other long-term investments			889				3,026
Goodwill			9,254				4,531
Identified intangible assets, net			6,267				860
Other long-term assets			4,648				4,251
Total assets		$	71,119			$	63,186
Liabilities and stockholders' equity
Current liabilities:
Short-term debt		$	247			$	38
Accounts payable			2,956				2,290
Accrued compensation and benefits			2,948				2,888
Accrued advertising			1,134				1,007
Deferred income			1,929				747
Other accrued liabilities			2,814				2,357
Total current liabilities			12,028				9,327
Long-term debt			7,084				2,077
Long-term deferred tax liabilities			2,617				926
Other long-term liabilities			3,479				1,426
Commitments and contingencies (Notes 23 and 29)
Stockholders' equity:
Preferred stock, $0.001 par value, 50 shares authorized; none issued			-				-
Common stock, $0.001 par value, 10,000 shares authorized; 5,000 issued and outstanding (5,581 issued and 5,511 outstanding in 2010) and capital in excess of par value			17,036				16,178
Accumulated other comprehensive income (loss)			(781	)			333
Retained earnings			29,656				32,919
Total stockholders' equity			45,911				49,430
Total liabilities and stockholders' equity		$	71,119			$	63,186

See accompanying notes.

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INTEL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

			000,000				000,000				000,000
Three Years Ended December 31, 2011 (In Millions)		2011				2010				2009
Cash and cash equivalents, beginning of year		$	5,498			$	3,987			$	3,350
Cash flows provided by (used for) operating activities:
Net income			12,942				11,464				4,369
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			5,141				4,398				4,744
Share-based compensation			1,053				917				889
Restructuring, asset impairment, and net loss on retirement of assets			96				67				368
Excess tax benefit from share-based payment arrangements			(37	)			(65	)			(9	)
Amortization of intangibles			923				240				308
(Gains) losses on equity investments, net			(112	)			(348	)			170
(Gains) losses on divestitures			(164	)			-				-
Deferred taxes			790				(46	)			271
Changes in assets and liabilities:
Trading assets			-				-				299
Accounts receivable			(678	)			(584	)			(535	)
Inventories			(243	)			(806	)			796
Accounts payable			596				407				(506	)
Accrued compensation and benefits			(95	)			161				247
Income taxes payable and receivable			660				53				110
Other assets and liabilities			91				834				(351	)
Total adjustments			8,021				5,228				6,801
Net cash provided by operating activities			20,963				16,692				11,170
Cash flows provided by (used for) investing activities:
Additions to property, plant and equipment			(10,764	)			(5,207	)			(4,515	)
Acquisitions, net of cash acquired			(8,721	)			(218	)			(853	)
Purchases of available-for-sale investments			(11,230	)			(17,675	)			(8,655	)
Sales of available-for-sale investments			9,076				506				220
Maturities of available-for-sale investments			11,029				12,627				7,536
Purchases of trading assets			(11,314	)			(8,944	)			(4,186	)
Maturities and sales of trading assets			11,771				8,846				2,543
Origination of loans receivable			(206	)			(498	)			(343	)
Collection of loans receivable			134				-				-
Investments in non-marketable equity investments			(693	)			(393	)			(250	)
Return of equity method investments			263				199				449
Proceeds from divestitures			50				-				-
Other investing			304				218				89
Net cash used for investing activities			(10,301	)			(10,539	)			(7,965	)
Cash flows provided by (used for) financing activities:
Increase (decrease) in short-term debt, net			209				23				(87	)
Proceeds from government grants			124				79				-
Excess tax benefit from share-based payment arrangements			37				65				9
Issuance of long-term debt			4,962				-				1,980
Repayment of debt			-				(157	)			-
Proceeds from sales of shares through employee equity incentive plans			2,045				587				400
Repurchase of common stock			(14,340	)			(1,736	)			(1,762	)
Payment of dividends to stockholders			(4,127	)			(3,503	)			(3,108	)
Other financing			(10	)			-				-
Net cash used for financing activities			(11,100	)			(4,642	)			(2,568	)
Effect of exchange rate fluctuations on cash and cash equivalents			5				-				-
Net increase (decrease) in cash and cash equivalents			(433	)			1,511				637
Cash and cash equivalents, end of year		$	5,065			$	5,498			$	3,987
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest, net of amounts capitalized		$	-			$	-			$	4
Income taxes, net of refunds		$	3,338			$	4,627			$	943

See accompanying notes.

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INTEL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

			000,000				000,000				000,000				000,000				000,000
		Common Stock and Capital in Excess of Par Value								Accumulated Other Comprehensive Income (Loss)				Retained Earnings				Total
Three Years Ended December 31, 2011 (In Millions, Except Per Share Amounts)		Number of Shares				Amount
Balance as of December 27, 2008			5,562			$	13,402			$	(393	)		$	26,537			$	39,546
Components of comprehensive income, net of tax:
Net income			-				-				-				4,369				4,369
Other comprehensive income (loss)			-				-				786				-				786
Total comprehensive income																			5,155
Proceeds from sales of shares through employee equity incentive plans, net tax deficiency, and other			55				381				-				-				381
Issuance of convertible debt			-				603				-				-				603
Share-based compensation			-				889				-				-				889
Repurchase of common stock			(94	)			(282	)			-				(1,480	)			(1,762	)
Cash dividends declared ($0.56 per common share)			-				-				-				(3,108	)			(3,108	)
Balance as of December 26, 2009			5,523				14,993				393				26,318				41,704
Components of comprehensive income, net of tax:
Net income			-				-				-				11,464				11,464
Other comprehensive income (loss)			-				-				(60	)			-				(60	)
Total comprehensive income																			11,404
Proceeds from sales of shares through employee equity incentive plans, net excess tax benefit, and other			68				644				-				-				644
Share-based compensation			-				917				-				-				917
Repurchase of common stock			(80	)			(376	)			-				(1,360	)			(1,736	)
Cash dividends declared ($0.63 per common share)			-				-				-				(3,503	)			(3,503	)
Balance as of December 25, 2010			5,511				16,178				333				32,919				49,430
Components of comprehensive income, net of tax:
Net income			-				-				-				12,942				12,942
Other comprehensive income (loss)			-				-				(1,114	)			-				(1,114	)
Total comprehensive income																			11,828
Proceeds from sales of shares through employee equity incentive plans, net excess tax deficiency, and other			142				2,019				-				-				2,019
Assumption of equity awards in connection with acquisitions			-				48				-				-				48
Share-based compensation			-				1,053				-				-				1,053
Repurchase of common stock			(653	)			(2,262	)			-				(12,078	)			(14,340	)
Cash dividends declared ($0.7824 per common share)			-				-				-				(4,127	)			(4,127	)
Balance as of December 31, 2011			5,000			$	17,036			$	(781	)		$	29,656			$	45,911

See accompanying notes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Basis of Presentation

We have a 52- or 53-week fiscal year that ends on the last Saturday in December. Fiscal year 2011 was a 53-week year. Fiscal years 2010 and 2009 were 52-week years. Our consolidated financial statements include the accounts of Intel Corporation and our wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated. We use the equity method to account for equity investments in instances in which we own common stock or similar interests and have the ability to exercise significant influence, but not control, over the investee.

In the first quarter of 2011, we completed the acquisition of McAfee, Inc. For further information, see "Note 14: Acquisitions." Certain of the operations acquired from McAfee have a functional currency other than the U.S. dollar. As a result, translation adjustments have been recorded through accumulated other comprehensive income (loss) beginning in 2011. Prior to the acquisition of McAfee, the U.S. dollar was the functional currency for Intel and all of our subsidiaries; therefore, we do not have a translation adjustment recorded through accumulated other comprehensive income (loss) for fiscal years 2010 and 2009.

Note 2: Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and judgments that affect the amounts reported in our consolidated financial statements and the accompanying notes. The accounting estimates that require our most significant, difficult, and subjective judgments include:

•

the valuation of non-marketable equity investments and the determination of other-than-temporary impairments;

•

the assessment of recoverability of long-lived assets (property, plant and equipment; goodwill; and identified intangibles);

•

the recognition and measurement of current and deferred income taxes (including the measurement of uncertain tax positions);

•

the valuation of inventory; and

•

the recognition and measurement of loss contingencies.

The actual results that we experience may differ materially from our estimates.

Fair Value

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, we consider the principal or most advantageous market in which we would transact, and we consider assumptions that market participants would use when pricing the asset or liability. Our financial assets and liabilities are measured and recorded at fair value, except for equity method investments, cost method investments, cost method loans receivable, and most of our liabilities.

Fair Value Hierarchy

The three levels of inputs that may be used to measure fair value are as follows:

Level 1.   Quoted prices in active markets for identical assets or liabilities.

Level 2.   Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. Level 2 inputs also include non-binding market consensus prices that can be corroborated with observable market data, as well as quoted prices that were adjusted for security-specific restrictions.

Level 3.   Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. Level 3 inputs also include non-binding market consensus prices or non-binding broker quotes that we were unable to corroborate with observable market data.

For further discussion of fair value, see "Note 5: Fair Value" and "Note 22: Retirement Benefit Plans."

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Trading Assets

Marketable debt instruments are generally designated as trading assets when the interest rate or foreign exchange rate risk is economically hedged at inception with a related derivative instrument or when the marketable debt instrument is used to economically hedge foreign exchange rate risk from the remeasurement of intercompany loans. Investments designated as trading assets are reported at fair value. The gains or losses of these investments arising from changes in fair value due to interest rate and currency market fluctuations and credit market volatility, offset by losses or gains on the related derivative instruments and intercompany loans, are recorded in interest and other, net. We also designate certain floating-rate securitized financial instruments, primarily asset-backed securities, as trading assets.

Available-for-Sale Investments

We consider all liquid available-for-sale debt instruments with original maturities from the date of purchase of approximately three months or less to be cash and cash equivalents. Available-for-sale debt instruments with original maturities at the date of purchase greater than approximately three months and remaining maturities of less than one year are classified as short-term investments. Available-for-sale debt instruments with remaining maturities beyond one year are classified as other long-term investments.

Investments that we designate as available-for-sale are reported at fair value, with unrealized gains and losses, net of tax, recorded in accumulated other comprehensive income (loss), except as noted in the "Other-Than-Temporary Impairment" section below. We determine the cost of the investment sold based on an average cost basis at the individual security level. Our available-for-sale investments include:

•

Marketable debt instruments when the interest rate and foreign currency risks are not hedged at inception of the investment or when our criteria for designation as trading assets are not met. We generally hold these debt instruments to generate a return commensurate with the U.S.-dollar three-month LIBOR. We record the interest income and realized gains and losses on the sale of these instruments in interest and other, net.

•

Marketable equity securities when there are barriers to mitigating equity market risk through the sale or use of derivative instruments at the time of original classification and there is no plan to sell the investment at the time of original classification. We acquire these equity investments for the promotion of business and strategic objectives. To the extent that these investments continue to have strategic value, we typically do not attempt to reduce or eliminate the equity market risks through hedging activities. We record the realized gains or losses on the sale or exchange of marketable equity securities in gains (losses) on equity investments, net.

Non-Marketable and Other Equity Investments

Our non-marketable equity and other equity investments are included in other long-term assets. We account for non-marketable equity and other equity investments for which we do not have control over the investee as:

•

Equity method investments when we have the ability to exercise significant influence, but not control, over the investee. Our proportionate share of the income or loss is recognized on a one-quarter lag and is recorded in gains (losses) on equity investments, net. Equity method investments include marketable and non-marketable investments.

•

Non-marketable cost method investments when the equity method does not apply. We record the realized gains or losses on the sale of non-marketable cost method investments in gains (losses) on equity investments, net.

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Other-Than-Temporary Impairment

Our available-for-sale investments and non-marketable and other equity investments are subject to a periodic impairment review. Investments are considered impaired when the fair value is below the investment's adjusted cost basis. Impairments affect earnings as follows:

•

Marketable debt instruments when the fair value is below amortized cost and we intend to sell the instrument, it is more likely than not that we will be required to sell the instrument before recovery of its amortized cost basis, or we do not expect to recover the entire amortized cost basis of the instrument (that is, a credit loss exists). When we do not expect to recover the entire amortized cost basis of the instrument, other-than-temporary impairments are separated into amounts representing credit losses, which are recognized in interest and other, net, and amounts related to all other factors, which are recognized in other comprehensive income (loss).

•

Marketable equity securities based on the specific facts and circumstances present at the time of assessment, which include the consideration of general market conditions, the duration and extent to which the fair value is below cost, and our ability and intent to hold the investment for a sufficient period of time to allow for recovery in value in the foreseeable future. We also consider specific adverse conditions related to the financial health of, and business outlook for, the investee, which may include industry and sector performance, changes in technology, operational and financing cash flow factors, and changes in the investee's credit rating. We record other-than-temporary impairment charges on marketable equity securities and marketable equity method investments in gains (losses) on equity investments, net.

•

Non-marketable equity investments based on our assessment of the severity and duration of the impairment, and qualitative and quantitative analysis, including:

•

the investee's revenue and earnings trends relative to pre-defined milestones and overall business prospects;

•

the technological feasibility of the investee's products and technologies;

•

the general market conditions in the investee's industry or geographic area, including adverse regulatory or economic changes;

•

factors related to the investee's ability to remain in business, such as the investee's liquidity, debt ratios, and the rate at which the investee is using its cash; and

•

the investee's receipt of additional funding at a lower valuation.

We record other-than-temporary impairment charges for non-marketable cost method investments and equity method investments in gains (losses) on equity investments, net.

Derivative Financial Instruments

Our primary objective for holding derivative financial instruments is to manage currency exchange rate and interest rate risk, and, to a lesser extent, equity market risk and commodity price risk. Our derivative financial instruments are recorded at fair value and are included in other current assets, other long-term assets, other accrued liabilities, or other long-term liabilities.

Our accounting policies for derivative financial instruments are based on whether they meet the criteria for designation as a cash flow hedge. A designated hedge of the exposure to variability in the future foreign currency equivalent cash flows of a forecasted transaction is referred to as a cash flow hedge. The criteria for designating a derivative as a cash flow hedge include the assessment of the instrument's effectiveness in risk reduction, matching of the derivative instrument to its underlying transaction, and the assessment of the probability that the underlying transaction will occur. For derivatives with cash flow hedge accounting designation, we report the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income (loss) and reclassify it into earnings in the same period or periods in which the hedged transaction affects earnings, and in the same line item on the consolidated statements of income as the impact of the hedged transaction. Derivatives that we designate as cash flow hedges are classified in the consolidated statements of cash flows in the same section as the underlying item, primarily within cash flows from operating activities.

We recognize gains and losses from changes in fair values of derivatives that are not designated as hedges for accounting purposes in the line item on the consolidated statements of income most closely associated with the related exposures, primarily in interest and other, net and gains (losses) on equity investments, net. As part of our strategic investment program, we also acquire equity derivative instruments, such as equity conversion rights associated with debt instruments, that we do not designate as hedging instruments. We recognize the gains or losses from changes in fair values of these equity derivative instruments in gains (losses) on equity investments, net. Gains and losses from derivatives not designated as hedges are classified in the consolidated statements of cash flows within cash flows from operating activities.

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Measurement of Effectiveness

•

Effectiveness for forwards is generally measured by comparing the cumulative change in the fair value of the hedge contract with the cumulative change in the fair value of the forecasted cash flows of the hedged item. For currency forward contracts used in cash flow hedging strategies related to capital purchases, forward points are excluded, and effectiveness is measured using spot rates to value both the hedge contract and the hedged item. For currency forward contracts used in cash flow hedging strategies related to operating expenditures, forward points are included and effectiveness is measured using forward rates to value both the hedge contract and the hedged item.

•

Effectiveness for options is generally measured by comparing the cumulative change in the intrinsic value of the hedge contract with the cumulative change in the intrinsic value of an option instrument representing the hedged risks in the hedged item. Time value is excluded and effectiveness is measured using spot rates to value both the hedge contract and the hedged item.

•

Effectiveness for interest rate swaps and commodity swaps is generally measured by comparing the cumulative change in fair value of the swap with the cumulative change in the fair value of the hedged item.

If a cash flow hedge is discontinued because it is no longer probable that the original hedged transaction will occur as previously anticipated, the cumulative unrealized gain or loss on the related derivative is reclassified from accumulated other comprehensive income (loss) into earnings. Subsequent gains or losses on the related derivative instrument are recognized in interest and other, net in each period until the instrument matures, is terminated, is re-designated as a qualified cash flow hedge, or is sold. Ineffective portions of cash flow hedges, as well as amounts excluded from the assessment of effectiveness, are recognized in earnings in interest and other, net. For further discussion of our derivative instruments and risk management programs, see "Note 8: Derivative Financial Instruments."

Securities Lending

We may enter into securities lending agreements with financial institutions, generally to facilitate hedging and certain investment transactions. Selected securities may be loaned, secured by collateral in the form of cash or securities. The loaned securities continue to be carried as investment assets on our consolidated balance sheets. Cash and cash equivalent collateral is recorded as an asset with a corresponding liability. For lending agreements collateralized by other securities, we do not record the collateral as an asset or a liability, unless the collateral is repledged.

Loans Receivable

We make loans to third parties that are classified within other current assets or other long-term assets. We may elect the fair value option for loans when the interest rate or foreign exchange rate risk is economically hedged at inception with a related derivative instrument. We record the gains or losses on these loans arising from changes in fair value due to interest rate, currency, and counterparty credit changes, mostly offset by losses or gains on the related derivative instruments, in interest and other, net. Loans that are denominated in U.S. dollars and have a floating-rate coupon are carried at amortized cost. We measure interest income for all loans receivable using the interest method, which is based on the effective yield of the loans rather than the stated coupon rate. For further discussion of our loans receivable, see "Note 5: Fair Value."

Inventories

We compute inventory cost on a currently adjusted standard basis (which approximates actual cost on an average or first-in, first-out basis). Inventories at year-ends were as follows:

			000,000				000,000
(In Millions)		2011				2010
Raw materials		$	644			$	471
Work in process			1,680				1,887
Finished goods			1,772				1,399
Total inventories		$	4,096			$	3,757

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Property, Plant and Equipment

Property, plant and equipment, net at year-ends was as follows:

			000,000				000,000
(In Millions)		2011				2010
Land and buildings		$	17,883			$	17,421
Machinery and equipment			34,351				30,421
Construction in progress			5,839				2,639
Total property, plant and equipment, gross			58,073				50,481
Less: accumulated depreciation			(34,446	)			(32,582	)
Total property, plant and equipment, net		$	23,627			$	17,899

We compute depreciation for financial reporting purposes using the straight-line method. Substantially all of our depreciable property, plant and equipment assets are depreciated over the following estimated useful lives: machinery and equipment, 2 to 4 years; buildings, 4 to 25 years.

We capitalize a substantial majority of interest on borrowings related to eligible capital expenditures. Capitalized interest is added to the cost of qualified assets and amortized over the estimated useful lives of the assets. We record capital-related government grants earned as a reduction to property, plant and equipment.

Goodwill

We record goodwill when the purchase price of an acquisition exceeds the fair value of the net tangible and intangible assets as of the date of acquisition, assigning the goodwill to our applicable reporting units based on the relative expected fair value provided by the acquisition. We perform a quarterly review of goodwill for indicators of impairment. During the fourth quarter of each year, we perform an impairment assessment for each reporting unit, and impairment tests using a fair value approach when necessary. The reporting unit's carrying value used in an impairment test represents the assignment of various assets and liabilities, excluding certain corporate assets and liabilities, such as cash, investments, and debt. For further discussion of goodwill, see "Note 16: Goodwill."

Identified Intangible Assets

Licensed technology assets are generally amortized on a straight-line basis over the periods of benefit. We amortize all acquisition-related intangible assets that are subject to amortization over the estimated useful life based on economic benefit. Acquisition-related in-process research and development assets represent the fair value of incomplete research and development projects that had not reached technological feasibility as of the date of acquisition and are initially classified as "other intangible assets" that are not subject to amortization. Assets related to projects that have been completed are transferred from "other intangible assets" to "acquisition-related developed technology," and are subject to amortization, while assets related to projects that have been abandoned are impaired. In the quarter following the period in which identified intangible assets become fully amortized, the fully amortized balances are removed from the gross asset and accumulated amortization amounts.

The estimated useful life ranges for identified intangible assets that are subject to amortization as of December 31, 2011 are as follows:

			000,000
		Estimated Useful Life (In Years)
Acquisition-related developed technology			3–9
Acquisition-related customer relationships			2–8
Acquisition-related trade names			5–7
Licensed technology			5–17

We perform a quarterly review of identified intangible assets to determine if facts and circumstances indicate that the useful life is shorter than we had originally estimated or that the carrying amount of assets may not be recoverable. If such facts and circumstances exist, we assess recoverability by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets. If the useful life is shorter than originally estimated, we accelerate the rate of amortization and amortize the remaining carrying value over the new shorter useful life.

For further discussion of identified intangible assets, see "Note 17: Identified Intangible Assets."

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Product Warranty

The vast majority of our products are sold with a limited warranty on product quality and a limited indemnification for customers against intellectual property rights (IP) infringement claims related to our products. The accrual and the related expense for known product warranty issues were not significant during the periods presented. Due to product testing, the short time typically between product shipment and the detection and correction of product failures, and the historical rate of payments on indemnification claims, the accrual and related expense for estimated incurred but unidentified issues were not significant during the periods presented.

Revenue Recognition

We recognize net product revenue when the earnings process is complete, as evidenced by an agreement with the customer, transfer of title, and acceptance, if applicable, as well as fixed pricing and probable collectibility. We record pricing allowances, including discounts based on contractual arrangements with customers, when we recognize revenue as a reduction to both accounts receivable and net revenue. Because of frequent sales price reductions and rapid technology obsolescence in the industry, we defer product revenue and related costs of sales from sales made to distributors under agreements allowing price protection or right of return until the distributors sell the merchandise. The right of return granted generally consists of a stock rotation program in which distributors are able to exchange certain products based on the number of qualified purchases made by the distributor. Under the price protection program, we give distributors credits for the difference between the original price paid and the current price that we offer. We record the net deferred income from product sales to distributors on our balance sheet as deferred income on shipments to distributors. We include shipping charges billed to customers in net revenue, and include the related shipping costs in cost of sales.

Revenue from license agreements with our McAfee business generally includes service and support agreements for which the related revenue is deferred and recognized ratably over the performance period. Revenue derived from online subscription products is deferred and recognized ratably over the performance period. Professional services revenue is recognized as services are performed or, if required, upon customer acceptance. For arrangements with multiple

elements, including software licenses, maintenance, and/or services, revenue is allocated across the separately identified deliverables and may be recognized or deferred. When vendor-specific objective evidence (VSOE) does not exist for undelivered elements such as maintenance and support, the entire arrangement fee is recognized ratably over the performance period. Direct costs, such as costs related to revenue-sharing and royalty arrangements associated with license arrangements, as well as component costs associated with product revenue, are deferred and amortized over the same period that the related revenue is recognized.

Sales of software through our Wind River Software Group are made through term licenses that are generally 12 months in length, or perpetual licenses. Revenue is generally deferred and recognized ratably over the course of the license.

Advertising

Cooperative advertising programs reimburse customers for marketing activities for certain of our products, subject to defined criteria. We accrue cooperative advertising obligations and record the costs at the same time that the related revenue is recognized. We record cooperative advertising costs as marketing, general and administrative expenses to the extent that an advertising benefit separate from the revenue transaction can be identified and the fair value of that advertising benefit received is determinable. We record any excess in cash paid over the fair value of the advertising benefit received as a reduction in revenue. Advertising costs, including direct marketing costs, recorded within marketing, general and administrative expenses were $2.1 billion in 2011 ($1.8 billion in 2010 and $1.4 billion in 2009).

Employee Equity Incentive Plans

We have employee equity incentive plans, which are described more fully in "Note 24: Employee Equity Incentive Plans." We use the straight-line attribution method to recognize share-based compensation over the service period of the award. Upon exercise, cancellation, forfeiture, or expiration of stock options, or upon vesting or forfeiture of restricted stock units, we eliminate deferred tax assets for options and restricted stock units with multiple vesting dates for each vesting period on a first-in, first-out basis as if each vesting period were a separate award.

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Note 3: Accounting Changes

2011

In the first quarter of 2011, we adopted new standards for revenue recognition with multiple deliverables. These new standards change the determination of whether the individual deliverables included in a multiple-element arrangement may be treated as separate units for accounting purposes. Additionally, these new standards modify the method by which revenue is allocated to the separately identified deliverables. The adoption of these new standards did not have a significant impact on our consolidated financial statements.

In the first quarter of 2011, we adopted new standards that remove certain tangible products and associated software from the scope of the software revenue recognition guidance. The adoption of these new standards did not have a significant impact on our consolidated financial statements.

In the fourth quarter of 2011, we adopted amended standards that simplify how entities test goodwill for impairment. These amended standards permit an assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit in which goodwill resides is less than its carrying value. For reporting units in which this assessment concludes that it is more likely than not that the fair value is more than its carrying value, these amended standards eliminate the requirement to perform goodwill impairment testing. The adoption of these amended standards did not have an impact on our consolidated financial statements.

2010

In the first quarter of 2010, we adopted new standards for determining whether to consolidate a variable interest entity. These new standards eliminated a mandatory quantitative approach in favor of a qualitative analysis, and require an ongoing reassessment. The adoption of these new standards did not impact our consolidated statements of income or balance sheets.

Note 4: Recent Accounting Standards

In May 2011, the Financial Accounting Standards Board (FASB) issued amended standards to achieve a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. generally accepted accounting principles and International Financial Reporting Standards. For assets and liabilities categorized as Level 3 and recognized at fair value, these amended standards require disclosure of quantitative information about unobservable inputs, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements. In addition, these amended standards require that we disclose the level in the fair value hierarchy for financial instruments disclosed at fair value but not recorded at fair value. These new standards are effective for us beginning in the first quarter of 2012; early adoption of these standards is prohibited. We do not expect these new standards to significantly impact our consolidated financial statements.

In 2011, the FASB issued amended standards to increase the prominence of items reported in other comprehensive income. These amendments eliminate the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity and require that all changes in stockholders' equity-except investments by, and distributions to, owners-be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. These new standards are effective for us beginning in the first quarter of 2012 and are to be applied retrospectively. These amended standards will impact the presentation of other comprehensive income but will not impact our financial position or results of operations.

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Note 5: Fair Value

Assets/Liabilities Measured and Recorded at Fair Value on a Recurring Basis

Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following types of instruments as of December 31, 2011 and December 25, 2010:

			000,000				000,000				000,000				000,000				000,000				000,000				000,000				000,000
		December 31, 2011																December 25, 2010
		Fair Value Measured and Recorded at Reporting Date Using												Total				Fair Value Measured and Recorded at Reporting Date Using												Total
(In Millions)		Level 1				Level 2				Level 3					Level 1				Level 2				Level 3
Assets
Cash equivalents:
Commercial paper		$	-			$	2,408			$	-			$	2,408			$	-			$	2,600			$	-			$	2,600
Government bonds			650				-				-				650				1,279				505				-				1,784
Bank deposits			-				795				-				795				-				560				-				560
Money market fund deposits			546				-				-				546				34				-				-				34
Short-term investments:
Government bonds			2,690				310				-				3,000				4,890				1,320				-				6,210
Commercial paper			-				1,409				-				1,409				-				2,712				-				2,712
Corporate bonds			120				428				28				576				121				1,378				1				1,500
Bank deposits			-				196				-				196				-				858				-				858
Asset-backed securities			-				-				-				-				-				-				14				14
Trading assets:
Government bonds			1,698				1,317				-				3,015				311				2,115				-				2,426
Corporate bonds			202				486				-				688				199				916				-				1,115
Commercial paper			-				305				-				305				-				488				-				488
Municipal bonds			-				284				-				284				-				375				-				375
Bank deposits			-				135				-				135				-				108				-				108
Asset-backed securities			-				-				115				115				-				-				190				190
Money market fund deposits			49				-				-				49				3				-				-				3
Marketable equity securities			-				-				-				-				388				-				-				388
Other current assets:
Derivative assets			-				159				7				166				-				330				-				330
Loans receivable			-				33				-				33				-				-				-				-
Marketable equity securities			522				40				-				562				785				223				-				1,008
Other long-term investments:
Government bonds			177				300				-				477				83				2,002				-				2,085
Corporate bonds			-				282				39				321				104				601				50				755
Bank deposits			-				55				-				55				-				133				-				133
Asset-backed securities			-				-				36				36				-				-				53				53
Other long-term assets:
Loans receivable			-				715				-				715				-				642				-				642
Derivative assets			-				34				29				63				-				19				31				50
Total assets measured and recorded at fair value		$	6,654			$	9,691			$	254			$	16,599			$	8,197			$	17,885			$	339			$	26,421
Liabilities
Other accrued liabilities:
Derivative liabilities		$	-			$	280			$	8			$	288			$	-			$	201			$	7			$	208
Long-term debt			-				-				131				131				-				-				128				128
Other long-term liabilities:
Derivative liabilities			-				27				-				27				-				47				-				47
Total liabilities measured and recorded at fair value		$	-			$	307			$	139			$	446			$	-			$	248			$	135			$	383

Government bonds include bonds issued or deemed to be guaranteed by government entities. Government bonds include instruments such as non-U.S. government bonds, U.S. Treasury securities, and U.S. agency securities.

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Marketable Debt Instruments

Marketable debt instruments include instruments such as commercial paper, corporate bonds, government bonds, bank deposits, asset-backed securities, municipal bonds, and money market fund deposits. When we use observable market prices for identical securities that are traded in less active markets, we classify our marketable debt instruments as Level 2. When observable market prices for identical securities are not available, we price our marketable debt instruments using non-binding market consensus prices that are corroborated with observable market data; quoted market prices for similar instruments; or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. Non-binding market consensus prices are based on the proprietary valuation models of pricing providers or brokers. These valuation models incorporate a number of inputs,

including non-binding and binding broker quotes; observable market prices for identical or similar securities; and the internal assumptions of pricing providers or brokers that use observable market inputs and, to a lesser degree, unobservable market inputs. We corroborate non-binding market consensus prices with observable market data using statistical models when observable market data exists. The discounted cash flow model uses observable market inputs, such as LIBOR-based yield curves, currency spot and forward rates, and credit ratings.

Our marketable debt instruments that are classified as Level 3 are classified as such due to the lack of observable market data to corroborate either the non-binding market consensus prices or the non-binding broker quotes. When observable market data is not available, we corroborate our fair value measurements using non-binding market consensus prices and non-binding broker quotes from a second source.

The following tables present reconciliations for all assets and liabilities measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) for 2011 and 2010:

			000,000				000,000				000,000				000,000				000,000				000,000
		Fair Value Measured and Recorded Using Significant Unobservable Inputs (Level 3)
(In Millions)		Corporate Bonds				Asset- Backed Securities				Derivative Assets				Derivative Liabilities				Long-Term Debt				Total Gains (Losses)
Balance as of December 25, 2010		$	51			$	257			$	31			$	(7	)		$	(128	)
Total gains or losses (realized and unrealized):
Included in earnings			(3	)			(6	)			2				(1	)			(3	)			(11	)
Included in other comprehensive income (loss)			7				(2	)			-				-				-				5
Purchases			24				13				6				-				-
Sales			-				(11	)			-				-				-
Settlements and maturities			(12	)			(100	)			-				-				-
Transfers out of Level 3			-				-				(3	)			-				-
Balance as of December 31, 2011		$	67			$	151			$	36			$	(8	)		$	(131	)
Changes in unrealized gains or losses included in earnings related to assets and liabilities still held as of December 31, 2011		$	(2	)		$	(2	)		$	2			$	(1	)		$	(3	)		$	(6	)

			000,000				000,000				000,000				000,000				000,000				000,000
		Fair Value Measured and Recorded Using Significant Unobservable Inputs (Level 3)
(In Millions)		Corporate Bonds				Asset- Backed Securities				Derivative Assets				Derivative Liabilities				Long-Term Debt				Total Gains (Losses)
Balance as of December 26, 2009		$	369			$	754			$	31			$	(65	)		$	(123	)
Total gains or losses (realized and unrealized):
Included in earnings			(2	)			6				(3	)			(2	)			(5	)			(6	)
Included in other comprehensive income (loss)			4				9				-				-				-				13
Purchases			6				-				7				-				-
Sales			(44	)			(28	)			(4	)			-				-
Settlements and maturities			(75	)			(484	)			-				-				-
Transfers out of Level 3			(207	)			-				-				60				-
Balance as of December 25, 2010		$	51			$	257			$	31			$	(7	)		$	(128	)
Changes in unrealized gains or losses included in earnings related to assets and liabilities still held as of December 25, 2010		$	-			$	6			$	(4	)		$	(1	)		$	(5	)		$	(4	)

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For all periods presented, gains and losses (realized and unrealized) included in earnings were primarily reported outside of operating income. During 2010, we transferred corporate bonds from Level 3 to Level 2 due to improved availability of observable market data and non-binding market consensus prices to value or corroborate the value of these instruments. Our policy is to reflect transfers in and transfers out at the beginning of the quarter in which a change in circumstances resulted in the transfer.

Fair Value Option for Financial Assets/Liabilities

We elected the fair value option for loans made to third parties when the interest rate or foreign exchange rate risk was hedged at inception with a related derivative instrument. As of December 31, 2011, the fair value of our loans receivable for which we elected the fair value option did not significantly differ from the contractual principal balance based on the contractual currency. These loans receivable are classified within other current assets and other long-term assets. Fair value is determined using a discounted cash flow model with all significant inputs derived from or corroborated with observable market data. Gains and losses from changes in fair value on the loans receivable and related derivative instruments, as well as interest income, are recorded in interest and other, net. For all years presented, changes in the fair value of our loans receivable were largely offset by changes in the related derivative instruments, resulting in an insignificant net impact on our consolidated statements of income. Gains and losses attributable to changes in credit risk are determined using observable credit default spreads for the issuer or comparable companies and were insignificant for all years presented. We did not elect the fair value option for loans when the interest rate or foreign exchange rate risk was not hedged at inception with a related derivative instrument.

We elected this fair value option for the bonds issued in 2007 by the Industrial Development Authority of the City of Chandler, Arizona (2007 Arizona bonds). In connection with the 2007 Arizona bonds, we entered into a total return swap agreement that effectively converts the fixed-rate obligation on the bonds to a floating U.S.-dollar LIBOR-based rate. As a result, changes in the fair value of this debt are largely offset by changes in the fair value of the total return swap agreement, without the need to apply hedge accounting provisions. The 2007 Arizona bonds are included in long-term debt. As of December 31, 2011 and December 25, 2010, no other instruments were similar to the 2007 Arizona bonds for which we elected fair value treatment.

As of December 31, 2011, the fair value of the 2007 Arizona bonds did not significantly differ from the contractual principal balance. The fair value of the 2007 Arizona bonds was determined using inputs that are observable in the market or that can be derived from or corroborated with observable market data, as well as unobservable inputs that were

significant to the fair value. Gains and losses on the 2007 Arizona bonds and the related total return swap are recorded in interest and other, net. We capitalize a portion of the interest associated with the 2007 Arizona bonds. We add capitalized interest to the cost of qualified assets and amortize it over the estimated useful lives of the assets. The remaining interest associated with the 2007 Arizona bonds is recorded as interest expense in interest and other, net.

Assets Measured and Recorded at Fair Value on a Non-Recurring Basis

Our non-marketable equity investments and non-financial assets, such as intangible assets and property, plant and equipment, are recorded at fair value only if an impairment charge is recognized. During 2011, we recognized $62 million of impairment charges on non-marketable equity investments held as of December 31, 2011 ($121 million of impairment charges during 2010 for non-marketable equity investments held as of December 25, 2010 and $187 million of impairment charges during 2009 for non-marketable equity investments held as of December 26, 2009). The fair value of the non-marketable equity investments at the time of impairment was $69 million during the year ended December 31, 2011 ($128 million during the year ended December 25, 2010 and $211 million during the year ended December 26, 2009). All of these assets were categorized as Level 3 in the fair value hierarchy.

A portion of our non-marketable equity investments was measured and recorded at fair value due to events or circumstances that significantly impacted the fair value of those investments, resulting in other-than-temporary impairment charges. We classified these measurements as Level 3, as we used unobservable inputs to the valuation methodologies that were significant to the fair value measurements, and the valuations required management judgment due to the absence of quoted market prices. We determine the fair value of our non-marketable equity investments using the market and income approaches. The market approach includes the use of financial metrics and ratios of comparable public companies. The selection of comparable companies requires management judgment and is based on a number of factors, including comparable companies' sizes, growth rates, industries, development stages, and other relevant factors. The income approach includes the use of a discounted cash flow model, which requires the following significant estimates for the investee: revenue, costs, and discount rates based on the risk profile of comparable companies. Estimates of revenues and costs are developed using available market, historical, and forecast data. The valuation of these non-marketable equity investments also takes into account variables such as conditions reflected in the capital markets, recent financing activities by the investees, the investees' capital structure, the terms of the investees' issued interests, and the lack of marketability of the investments.

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Financial Instruments Not Recorded at Fair Value on a Recurring Basis

We measure the fair value of our non-marketable equity investments, marketable equity method investments, indebtedness carried at amortized cost, and cost method loans receivable quarterly for disclosure purposes; however, the assets are recorded at fair value only when an impairment charge is recognized. The carrying amounts and fair values of financial instruments not recorded at fair value on a recurring basis as of December 31, 2011 and December 25, 2010 were as follows:

			000,000				000,000				000,000				000,000
		2011								2010
(In Millions)		Carrying Amount				Fair Value				Carrying Amount				Fair Value
Non-marketable equity investments		$	2,759			$	6,161			$	2,633			$	5,144
Marketable equity method investments		$	39			$	67			$	31			$	167
Loans receivable		$	132			$	132			$	208			$	208
Long-term debt		$	6,953			$	7,735			$	1,949			$	2,283
Short-term debt		$	200			$	200			$	-			$	-
NVIDIA Corporation cross-license agreement liability		$	1,156			$	1,174			$	-			$	-

As of December 31, 2011 and December 25, 2010, the unrealized loss position of our non-marketable equity investments was not significant.

Our marketable equity method investments are primarily made up of our ownership interest in SMART Technologies, Inc. The fair value of our ownership interest in our marketable equity method investments was based on the quoted closing stock prices as of December 31, 2011 and December 25, 2010.

The carrying amount and fair value of loans receivable exclude loans measured and recorded at a fair value of $748 million as of December 31, 2011 ($642 million as of December 25, 2010). The carrying amount and fair value of long-term debt exclude long-term debt measured and recorded at a fair value of $131 million as of December 31, 2011 ($128 million as of December 25, 2010). Short-term debt includes our commercial paper outstanding as of December 31, 2011, and the carrying amount and fair value exclude drafts payable.

The fair value of our loans receivable is determined using a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. The credit quality of our loans receivable remains high, with credit ratings of BBB+/Baa1 or better as of December 31, 2011. The fair value of our long-term debt is determined using third-party market prices and discounted cash flow models that take into consideration variables such as credit-rating changes and interest rate changes.

The NVIDIA Corporation cross-license agreement liability in the preceding table was incurred as a result of entering into a long-term patent cross-license agreement with NVIDIA in January 2011. We agreed to make payments to NVIDIA over six years. For further information on the payment terms and

recognition of licensed technology intangible assets, see "Note 17: Identified Intangible Assets." As of December 31, 2011, the carrying amount of the liability arising from the agreement was classified within other accrued liabilities and other long-term liabilities, as applicable. The fair value is determined using a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data.

Note 6: Trading Assets

Trading assets outstanding as of December 31, 2011 and December 25, 2010 were as follows:

			000,000				000,000
(In Millions)		2011				2010
Marketable debt instruments		$	4,591			$	4,705
Marketable equity securities			-				388
Total trading assets		$	4,591			$	5,093

Net losses on marketable debt instruments classified as trading assets still held at the reporting date were $71 million in 2011 (net losses of $50 million in 2010 and net gains of $91 million in 2009). Net gains on the related derivatives and intercompany loans were $58 million in 2011 (net gains of $43 million and $18 million in 2010 and 2009, respectively).

Net losses on marketable equity securities classified as trading assets still held at the reporting date, excluding the impacts of the related derivatives, were $14 million in 2010.

In 2010, we sold our ownership in Numonyx B.V. to Micron Technology, Inc. The Micron common stock that we received in the transaction was classified as marketable equity securities within trading assets. During the second quarter of 2011, we sold our remaining shares in Micron.

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Note 7: Available-for-Sale Investments

Available-for-sale investments as of December 31, 2011 and December 25, 2010 were as follows:

			000,000				000,000				000,000				000,000				000,000				000,000				000,000				000,000
		2011																2010
(In Millions)		Adjusted Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value				Adjusted Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
Government bonds		$	4,131			$	-			$	(4	)		$	4,127			$	10,075			$	9			$	(5	)		$	10,079
Commercial paper			3,820				-				(3	)			3,817				5,312				-				-				5,312
Bank deposits			1,046				1				(1	)			1,046				1,550				1				-				1,551
Corporate bonds			892				14				(9	)			897				2,250				9				(4	)			2,255
Marketable equity securities			189				385				(12	)			562				380				629				(1	)			1,008
Money market fund deposits			546				-				-				546				34				-				-				34
Asset-backed securities			48				-				(12	)			36				76				-				(9	)			67
Total available-for-sale investments		$	10,672			$	400			$	(41	)		$	11,031			$	19,677			$	648			$	(19	)		$	20,306

In the preceding table, government bonds include bonds issued or deemed to be guaranteed by government entities. Government bonds include instruments such as U.S. Treasury securities, non-U.S. government bonds, and U.S. agency securities as of December 31, 2011 and December 25, 2010. Bank deposits were primarily issued by institutions outside the U.S. as of December 31, 2011 and December 25, 2010.

The amortized cost and fair value of available-for-sale debt investments as of December 31, 2011, by contractual maturity, were as follows:

			000,000				000,000
(In Millions)		Cost				Fair Value
Due in 1 year or less		$	9,033			$	9,034
Due in 1–2 years			626				626
Due in 2–5 years			226				224
Due after 5 years			4				3
Instruments not due at a single maturity date			594				582
Total		$	10,483			$	10,469

Instruments not due at a single maturity date in the preceding table include asset-backed securities and money market fund deposits.

We sold available-for-sale investments for proceeds of $9.1 billion in 2011 ($475 million in 2010 and $192 million in 2009). Substantially all of the proceeds in 2011 were from debt investments that were primarily used to fund our acquisition of McAfee. The gross realized gains on sales of available-for-sale investments were $268 million in 2011 ($160 million in 2010 and $43 million in 2009) and were primarily related to our sales of marketable equity securities. Gains on third-party merger transactions during 2011 were insignificant (insignificant in 2010 and $56 million in 2009).

Impairment charges recognized on available-for-sale investments were $73 million in 2011 (insignificant in 2010 and 2009). Gross realized losses recognized on available-for-sale investments were insignificant in 2011 ($13 million in 2010 and $64 million in 2009). We had previously recognized other-than-temporary impairments totaling $34 million during 2008 and 2009 on the investments that were sold in 2009.

Note 8: Derivative Financial Instruments

Our primary objective for holding derivative financial instruments is to manage currency exchange rate risk and interest rate risk, and, to a lesser extent, equity market risk and commodity price risk. We currently do not hold derivative instruments for the purpose of managing credit risk since we limit the amount of credit exposure to any one counterparty and generally enter into derivative transactions with high-credit-quality counterparties.

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Currency Exchange Rate Risk

We are exposed to currency exchange rate risk and generally hedge our exposures with currency forward contracts, currency interest rate swaps, or currency options. Substantially all of our revenue is transacted in U.S. dollars. However, a significant amount of our operating expenditures and capital purchases are incurred in or exposed to other currencies, primarily the Japanese yen, the euro, the Israeli shekel, and the Chinese yuan. We have established balance sheet and forecasted transaction currency risk management programs to protect against fluctuations in fair value and the volatility of the functional currency equivalent of future cash flows caused by changes in exchange rates. Our non-U.S.-dollar-denominated investments in debt instruments and loans receivable are generally hedged with offsetting currency forward contracts or currency interest rate swaps. These programs reduce, but do not entirely eliminate, the impact of currency exchange movements.

Our currency risk management programs include:

•

Currency derivatives with cash flow hedge accounting designation that utilize currency forward contracts and currency options to hedge exposures to the variability in the U.S.-dollar equivalent of anticipated non-U.S.-dollar-denominated cash flows. These instruments generally mature within 12 months. For these derivatives, we report the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income (loss) and reclassify it into earnings in the same period or periods in which the hedged transaction affects earnings, and in the same line item on the consolidated statements of income as the impact of the hedged transaction.

•

Currency derivatives without hedge accounting designation that utilize currency forward contracts or currency interest rate swaps to economically hedge the functional currency equivalent cash flows of recognized monetary assets and liabilities, non-U.S.-dollar-denominated debt instruments classified as trading assets, and hedges of non-U.S.-dollar-denominated loans receivable recognized at fair value. The majority of these instruments mature within 12 months. Changes in the functional currency equivalent cash flows of the underlying assets and liabilities are approximately offset by the changes in fair values of the related derivatives. We record net gains or losses in the line item on the consolidated statements of income most closely associated with the related exposures, primarily in interest and other, net, except for equity-related gains or losses, which we primarily record in gains (losses) on equity investments, net.

Interest Rate Risk

Our primary objective for holding investments in debt instruments is to preserve principal while maximizing yields. We generally swap the returns on our investments in fixed-rate debt instruments with remaining maturities longer than six months into U.S.-dollar three-month LIBOR-based returns, unless management specifically approves otherwise. These swaps are settled at various interest payment times involving cash payments at each interest and principal payment date, with the majority of the contracts having quarterly payments.

Our interest rate risk management programs include:

•

Interest rate derivatives with cash flow hedge accounting designation that utilize interest rate swap agreements to modify the interest characteristics of debt instruments. For these derivatives, we report the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income (loss) and reclassify it into earnings in the same period or periods in which the hedged transaction affects earnings, and in the same line item on the consolidated statements of income as the impact of the hedged transaction.

•

Interest rate derivatives without hedge accounting designation that utilize interest rate swaps and currency interest rate swaps in economic hedging transactions, including hedges of non-U.S.-dollar-denominated debt instruments classified as trading assets and hedges of non-U.S.-dollar-denominated loans receivable recognized at fair value. Floating interest rates on the swaps are reset on a quarterly basis. Changes in fair value of the debt instruments classified as trading assets and hedges of loans receivable recognized at fair value are generally offset by changes in fair value of the related derivatives, both of which are recorded in interest and other, net.

Equity Market Risk

Our marketable investments include marketable equity securities and equity derivative instruments. To the extent that our marketable equity securities have strategic value, we typically do not attempt to reduce or eliminate our equity market exposure through hedging activities. We may enter into transactions to reduce or eliminate the equity market risks for our investments in strategic equity derivative instruments. For securities that we no longer consider strategic, we evaluate legal, market, and economic factors in our decision on the timing of disposal and whether it is possible and appropriate to hedge the equity market risk. Our equity market risk management program includes equity derivatives without hedge accounting designation that utilize warrants, equity options, or other equity derivatives. We recognize changes in the fair value of such derivatives in gains (losses) on equity investments, net.

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We also utilize total return swaps to offset changes in liabilities related to the equity market risks of certain deferred compensation arrangements. Gains and losses from changes in fair value of these total return swaps are generally offset by the gains and losses on the related liabilities, which are both recorded in cost of sales and operating expenses. The deferred compensation liabilities were $700 million as of December 31, 2011 ($646 million as of December 25, 2010) and are included in other accrued liabilities.

In 2010, we sold our ownership interest in Numonyx to Micron for consideration consisting of shares of Micron. We also entered into equity option transactions that economically hedged a portion of the ownership interest in Micron that we acquired. In the second quarter of 2011, we sold our remaining ownership interest in Micron and the related equity options matured.

Commodity Price Risk

We operate facilities that consume commodities and have established forecasted transaction risk management programs to protect against fluctuations in fair value and the volatility of future cash flows caused by changes in commodity prices, such as those for natural gas. These programs reduce, but do not always entirely eliminate, the impact of commodity price movements.

Our commodity price risk management program includes commodity derivatives with cash flow hedge accounting designation that utilize commodity swap contracts to hedge future cash flow exposures to the variability in commodity prices. These instruments generally mature within 12 months. For these derivatives, we report the after-tax gain (loss) from the effective portion of the hedge as a component of accumulated other comprehensive income (loss) and reclassify it into earnings in the same period or periods in which the hedged transaction affects earnings, and in the same line item on the consolidated statements of income as the impact of the hedged transaction.

Volume of Derivative Activity

Total gross notional amounts for outstanding derivatives (recorded at fair value) as of December 31, 2011, December 25, 2010, and December 26, 2009 were as follows:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
Currency forwards		$	11,203			$	8,502			$	5,732
Embedded debt derivatives			3,600				3,600				3,600
Interest rate swaps			1,837				2,166				1,698
Currency interest rate swaps			1,650				2,259				1,577
Total return swaps			761				627				530
Equity options			54				496				50
Currency options			2				94				375
Other			126				66				80
Total		$	19,233			$	17,810			$	13,642

The gross notional amounts for currency forwards, currency interest rate swaps, and currency options (presented by currency) as of December 31, 2011, December 25, 2010, and December 26, 2009 were as follows:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
Euro		$	3,904			$	4,445			$	3,330
Japanese yen			3,477				3,440				1,764
Israeli shekel			2,168				1,191				707
Malaysian ringgit			805				382				310
Chinese yuan			688				347				434
British pound sterling			459				424				563
Other			1,354				626				576
Total		$	12,855			$	10,855			$	7,684

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Fair Values of Derivative Instruments in the Consolidated Balance Sheets

The fair values of our derivative instruments as of December 31, 2011 and December 25, 2010 were as follows:

			000,000				000,000				000,000				000,000				000,000				000,000				000,000				000,000
		2011																2010
(In Millions)		Other Current Assets				Other Long-Term Assets				Other Accrued Liabilities				Other Long-Term Liabilities				Other Current Assets				Other Long-Term Assets				Other Accrued Liabilities				Other Long-Term Liabilities
Derivatives designated as hedging instruments
Currency forwards		$	61			$	-			$	170			$	7			$	120			$	3			$	43			$	3
Other			-				-				1				-				2				-				-				-
Total derivatives designated as hedging instruments		$	61			$	-			$	171			$	7			$	122			$	3			$	43			$	3
Derivatives not designated as hedging instruments
Currency forwards		$	54			$	-			$	34			$	-			$	35			$	-			$	14			$	-
Interest rate swaps			3				-				63				-				2				-				96				-
Currency interest rate swaps			41				33				11				10				64				17				47				13
Embedded debt derivatives			-				-				-				10				-				-				-				31
Total return swaps			7				-				-				-				41				6				-				-
Equity options			-				6				9				-				65				5				7				-
Other			-				24				-				-				1				19				1				-
Total derivatives not designated as hedging instruments		$	105			$	63			$	117			$	20			$	208			$	47			$	165			$	44
Total derivatives		$	166			$	63			$	288			$	27			$	330			$	50			$	208			$	47

Derivatives in Cash Flow Hedging Relationships

The before-tax effects of derivative instruments in cash flow hedging relationships for the three years ended December 31, 2011 were as follows:

			000,000				000,000				000,000			000,000			000,000				000,000				000,000
		Gains (Losses) Recognized in OCI on Derivatives (Effective Portion)												Gains (Losses) Reclassified from Accumulated OCI into Income by Derivative Instrument Type (Effective Portion)
(In Millions)		2011				2010				2009				Location		2011				2010				2009
Currency forwards		$	20			$	66			$	43			Cost of sales		$	118			$	49			$	(12	)
														Research and development			20				27				(30	)
														Marketing, general and administrative			19				4				(12	)
Other			-				4				(12	)		Cost of sales			4				(2	)			(13	)
Total		$	20			$	70			$	31					$	161			$	78			$	(67	)

Gains and losses on derivative instruments in cash flow hedging relationships related to hedge ineffectiveness and amounts excluded from effectiveness testing were insignificant during all periods presented in the preceding tables. We estimate that we will reclassify approximately $53 million (before taxes) of net derivative losses included in

accumulated other comprehensive income (loss) into earnings within the next 12 months. For all periods presented, there was an insignificant impact on results of operations from discontinued cash flow hedges as a result of forecasted transactions that were not probable to occur.

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Derivatives Not Designated as Hedging Instruments

The effects of derivative instruments not designated as hedging instruments on the consolidated statements of income for the three years ended December 31, 2011 were as follows:

		000,000			000,000				000,000				000,000
(In Millions)		Location of Gains (Losses) Recognized in Income on Derivatives		2011				2010				2009
Currency forwards		Interest and other, net		$	58			$	72			$	37
Interest rate swaps		Interest and other, net			(26	)			(59	)			15
Currency interest rate swaps		Interest and other, net			(17	)			74				(7	)
Total return swaps		Various			(13	)			70				51
Other		Interest and other, net			-				(1	)			2
Equity options		Gains (losses) on equity investments, net			(67	)			59				5
Other		Gains (losses) on equity investments, net			4				(2	)			12
Total				$	(61	)		$	213			$	115

Note 9: Concentrations of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist principally of investments in debt instruments, derivative financial instruments, loans receivable, and trade receivables. We enter into master netting arrangements with counterparties when possible to mitigate credit risk in derivative transactions. A master netting arrangement may allow counterparties to net settle amounts owed to each other as a result of multiple, separate derivative transactions. For presentation on our consolidated balance sheets, we do not offset fair value amounts recognized for derivative instruments under master netting arrangements.

We generally place investments with high-credit-quality counterparties and, by policy, limit the amount of credit exposure to any one counterparty based on our analysis of that counterparty's relative credit standing. Substantially all of our investments in debt instruments are with A/A2 or better rated issuers, and a majority of the issuers are rated AA-/Aa3 or better. Our investment policy requires substantially all investments with original maturities at the time of investment of up to six months to be rated at least A-2/P-2 by Standard & Poor's/Moody's, and specifies a higher minimum rating for investments with longer maturities. For instance, investments with maturities of greater than three years require a minimum rating of AA-/Aa3 at the time of investment. Government regulations imposed on investment alternatives of our non-U.S. subsidiaries, or the absence of A rated counterparties in certain countries, result in some minor exceptions. Credit-rating criteria for derivative instruments are similar to those for other investments. Due to master netting arrangements, the amounts subject to credit risk related to

derivative instruments are generally limited to the amounts, if any, by which the counterparty's obligations exceed our obligations with that counterparty. As of December 31, 2011, the total credit exposure to any single counterparty, excluding U.S. Treasury securities, did not exceed $750 million. We obtain and secure available collateral from counterparties against obligations, including securities lending transactions, when we deem it appropriate.

A substantial majority of our trade receivables are derived from sales to original equipment manufacturers and original design manufacturers. We also have accounts receivable derived from sales to industrial and retail distributors. Our two largest customers accounted for 34% of net revenue for 2011 and 38% of net revenue for 2010 and 2009. Additionally, these two largest customers accounted for 32% of our accounts receivable as of December 31, 2011 and 44% of our accounts receivable as of December 25, 2010. We believe that the receivable balances from these largest customers do not represent a significant credit risk based on cash flow forecasts, balance sheet analysis, and past collection experience.

We have adopted credit policies and standards intended to accommodate industry growth and inherent risk. We believe that credit risks are moderated by the financial stability of our major customers. We assess credit risk through quantitative and qualitative analysis, and from this analysis, we establish credit limits and determine whether we will seek to use one or more credit support devices, such as obtaining a third-party guarantee or standby letter of credit, or obtaining credit insurance.

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Note 10: Other Long-Term Assets

Other long-term assets as of December 31, 2011 and December 25, 2010 were as follows:

			000,000				000,000
(In Millions)		2011				2010
Equity method investments		$	1,669			$	1,791
Non-marketable cost method investments			1,129				872
Non-current deferred tax assets			335				289
Loans receivable			715				741
Other			800				558
Total other long-term assets		$	4,648			$	4,251

Note 11: Equity Method and Cost Method Investments

Equity Method Investments

Equity method investments as of December 31, 2011 and December 25, 2010 were as follows:

			000,000				000,000				000,000				000,000
		2011								2010
(In Millions, Except Percentages)		Carrying Value				Ownership Percentage				Carrying Value				Ownership Percentage
IM Flash Technologies, LLC		$	863				49	%		$	1,126				49	%
IM Flash Singapore, LLP			466				18	%			335				22	%
Intel-GE Care Innovations, LLC			167				50	%			-				-
SMART Technologies, Inc.			37				14	%			31				14	%
Clearwire Communications, LLC			-				7	%			145				7	%
Other equity method investments			136								154
Total		$	1,669							$	1,791

IMFT/IMFS

Micron and Intel formed IM Flash Technologies, LLC (IMFT) and IM Flash Singapore, LLP (IMFS) to manufacture NAND flash memory products for Micron and Intel. The carrying value of our investment in IMFT/IMFS was $1.3 billion as of December 31, 2011 ($1.5 billion as of December 25, 2010) and is classified within other long-term assets. In the third quarter of 2011, we made an additional investment of $131 million in IMFS. The IMFS fabrication facility began initial production in the second quarter of 2011. IMFT and IMFS are each governed by a Board of Managers, with Micron and Intel initially appointing an equal number of managers to each of the boards. The number of managers appointed by each party adjusts depending on the parties' ownership interests. As a result of our overall net reduction of our ownership interest in IMFS, Micron now appoints the majority of the managers on the IMFS board. Through our remaining managers on the IMFS board, we continue to have significant influence over the operations of IMFS, and therefore continue to account for our interests using the equity method of accounting. These ventures are expected to operate until 2016 but are subject to earlier termination under certain terms and conditions.

These joint ventures are variable interest entities. All costs of the joint ventures will be passed on to Micron and Intel through our purchase agreements. IMFT and IMFS are dependent upon Micron and Intel for any additional cash requirements. Our known maximum exposure to loss approximated the carrying value of our investment balance in IMFT/IMFS as of December 31, 2011. Except for the amount due to IMFT/IMFS for product purchases and services, we did not have any additional liabilities recognized on our consolidated balance sheets in connection with our interests in these joint ventures as of December 31, 2011. Future cash calls could increase our investment balance and the related exposure to loss. Potential future losses could be higher than the carrying amount of our investment, as Intel and Micron are liable for other future operating costs or obligations of IMFT/IMFS. Finally, as we are currently committed to purchasing 49% of IMFT's and 22% of IMFS's production output and production-related services, we may be required to purchase products at a cost in excess of realizable value. As of December 31, 2011, our contractual commitment to purchase product output and fund production-related services from IMFS adjusts to changes in our ownership percentage on an eight-month lag.

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Our portion of IMFT/IMFS costs, primarily related to product purchases and production-related services, was approximately $985 million during 2011 (approximately $795 million during 2010 and approximately $755 million during 2009). The amount due to IMFT/IMFS for product purchases and services provided was approximately $125 million as of December 31, 2011 (approximately $105 million as of December 25, 2010). During 2011, $263 million was returned to Intel by IMFT/IMFS, which is reflected as a return of equity method investment within investing activities on the consolidated statements of cash flows ($199 million during 2010 and $449 million during 2009). In 2010, IMFT increased its capital expenditures compared to 2009. The cash used for those capital expenditures reduced the amount of cash provided by IMFT to us as a return of equity method investment in 2010. Costs that Intel and Micron have incurred for product development and process development related to IMFT/IMFS are generally split evenly between Intel and Micron and are generally classified in research and development.

Under the accounting standards for consolidating variable interest entities, the consolidating investor is the entity with the power to direct the activities of the venture that most significantly impact the venture's economic performance and with the obligation to absorb losses or the right to receive benefits from the venture that could potentially be significant to the venture. We have determined that we do not have both of these characteristics and, therefore, we account for our interests using the equity method of accounting.

Intel-GE Care Innovations, LLC

In the first quarter of 2011, Intel and General Electric Company (GE) formed an equally owned joint venture, Intel-GE Care Innovations, LLC (Care Innovations), in the healthcare industry that focuses on independent living and delivery of health-related services via telecommunications. The company was formed by combining assets of GE Healthcare's Home Health division and Intel's Digital Health Group. As a result of the formation of Care Innovations, we recognized a gain of $164 million in the first quarter of 2011 that is recorded in interest and other, net.

Care Innovations is dependent upon Intel and GE for any additional cash requirements and, therefore, is a variable interest entity. Our known maximum exposure to loss approximated the carrying value of our investment balance in Care Innovations as of December 31, 2011. In addition to the potential loss of our existing investment, our actual losses could be higher, as we are liable to contribute additional future funding up to $38 million if Care Innovations meets established milestones.

Intel and GE equally share the power to direct all of Care Innovations' activities that most significantly impact its economic performance. As a result, we account for our interests in Care Innovations under the equity method of accounting.

SMART Technologies, Inc.

We hold an equity interest in SMART and account for our interest using the equity method of accounting. In 2010, SMART completed an initial public offering of shares approved for listing on The NASDAQ Global Select Market*. We sold approximately 10 million of our 27.5 million shares in the secondary offering. We recognized a gain of $181 million on the initial public offering and subsequent sale of our shares in the secondary offering, which is included in gains (losses) on equity investments, net.

Clearwire Communications, LLC

In 2008, we invested in Clearwire Communications, LLC (Clearwire LLC), a wholly owned subsidiary of Clearwire Corporation. Our investment in Clearwire LLC is accounted for under the equity method of accounting, and our proportionate share of the income or loss is recognized on a one-quarter lag. We recognize our proportionate share of losses to the extent that our investment has a positive carrying value. During 2011, we recognized $145 million of equity method losses ($116 million in 2010). During 2009, we recorded $27 million of equity method losses, which was net of a gain of $37 million as a result of a dilution of our ownership interest from an additional investment. These equity method losses are included in gains (losses) on equity investments, net.

Numonyx B.V.

In 2008, we divested our NOR flash memory business in exchange for an ownership interest in Numonyx. Our investment was accounted for under the equity method of accounting, and our proportionate share of the income or loss was recognized on a one-quarter lag. During 2010, we recognized $42 million of equity method gains ($31 million of equity method losses in 2009) within gains (losses) on equity investments, net.

During the second quarter of 2010, we sold our ownership interest in Numonyx to Micron and recognized a gain on the sale of $91 million, which is included in gains (losses) on equity investments, net. In exchange for our investment in Numonyx, we received 57.9 million shares of Micron common stock, with an additional 8.6 million shares held in escrow for 12 months after the sale, and we issued a $72 million short-term note payable, which was subsequently paid.

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In the fourth quarter of 2010, we sold 21.5 million shares of Micron common stock, which consisted of the 8.6 million shares held in escrow and an additional 12.9 million shares received in the sale of Numonyx. In 2011, we sold the remaining Micron shares.

Cost Method Investments

The carrying value of our non-marketable cost method investments was $1.1 billion as of December 31, 2011 and $872 million as of December 25, 2010. In 2011, we recognized impairment charges on non-marketable cost method investments of $56 million within gains (losses) on equity investments, net ($109 million in 2010 and $179 million in 2009).

Note 12: Gains (Losses) on Equity Investments, Net

Gains (losses) on equity investments, net included:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
Share of equity method investee losses, net		$	(204	)		$	(113	)		$	(131	)
Impairment charges			(132	)			(125	)			(221	)
Gains on sales, net			303				424				80
Other, net			145				162				102
Total gains (losses) on equity investments, net		$	112			$	348			$	(170	)

Note 13: Interest and Other, Net

The components of interest and other, net were as follows:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
Interest income		$	98			$	119			$	168
Interest expense			(41	)			-				(1	)
Other, net			135				(10	)			(4	)
Total interest and other, net		$	192			$	109			$	163

In 2011, we recognized a gain upon formation of the Intel and GE joint venture, Care Innovations, of $164 million, included within "other, net," in the preceding table. For further information, see "Note 11: Equity Method and Cost Method Investments." Interest expense in the preceding table is net of $150 million of interest capitalized in 2011 ($134 million in 2010 and $86 million in 2009).

Note 14: Acquisitions

2011 Acquisitions

McAfee, Inc.

On February 28, 2011, we completed the acquisition of McAfee by acquiring all issued and outstanding common shares in exchange for cash. The acquired company continues to operate as McAfee and offers products for endpoint security, network and content security, risk and compliance, and consumer and mobile security. In addition to managing the existing McAfee business, the objective of the acquisition was to accelerate and enhance Intel's combination of hardware and software security solutions, improving the overall security of our platforms.

Total consideration to acquire McAfee was $6.7 billion (net of $943 million of cash and cash equivalents acquired) and comprised the following:

			000,000
(In Millions)
Cash		$	6,652
Share-based awards assumed			48
Total		$	6,700

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The fair values of the assets acquired and liabilities assumed by major class in the acquisition of McAfee were recognized as follows:

			000,000
(In Millions)
Marketable debt securities		$	329
Goodwill			4,299
Identified intangible assets			3,552
Deferred tax assets			738
Other assets			417
Deferred income			(1,049	)
Deferred tax liabilities			(1,191	)
Other liabilities			(395	)
Total		$	6,700

The goodwill of $4.3 billion arising from the acquisition is primarily attributed to synergies to enable a single company to combine security and hardware for the protection of online devices, as well as the assembled workforce of McAfee. Substantially all of the goodwill recognized is not deductible for tax purposes. For information on the assignment of goodwill to our operating segments for the acquisition, see "Note 16: Goodwill."

The identified intangible assets assumed in the acquisition of McAfee were recognized as follows based upon their fair values as of February 28, 2011:

			000,000				000,000
		Fair Value (In Millions)				Estimated Useful Life (In Years)
Developed technology		$	1,221				4
Customer relationships			1,418				2–7
Total identified intangible assets subject to amortization		$	2,639
In-process research and development			92
Trade names			821
Total identified intangible assets		$	3,552

Acquired developed technology represents the fair values of McAfee products that have reached technological feasibility and were part of McAfee's product offerings at the date of acquisition. Customer relationships represent the fair values of the underlying relationships and agreements with McAfee's customers. In-process research and development represents the fair values of incomplete McAfee research and development projects that had not reached technological feasibility as of the date of acquisition. Incremental costs incurred for those projects are expensed as incurred in research and development. Since the acquisition was completed, most of the projects have been completed and the associated costs are being amortized. Trade names are indefinite-lived intangible assets and represent the fair values of brand and name recognition associated with the marketing of McAfee's products and services.

Other 2011 Acquisitions

During 2011, in addition to the McAfee acquisition, we completed 13 acquisitions qualifying as business combinations in exchange for total consideration of $2.1 billion, substantially all cash consideration. Total net cash consideration to acquire the Wireless Solutions (WLS) business of Infineon Technologies AG, which operates as Intel Mobile Communications, was $1.4 billion. The WLS business offers mobile phone components such as baseband processors, radio frequency transceivers, and power management integrated circuits. In addition to managing the existing WLS business, the objective of the acquisition was to provide solutions that enable wireless connectivity for a broad range of computing applications.

The fair values of the assets acquired and liabilities assumed by major class in the acquisitions completed during 2011, excluding McAfee, were allocated as follows:

			000,000
(In Millions)
Fair value of net tangible assets acquired		$	206
Goodwill			517
Identified intangible assets			1,409
Total		$	2,132

For information on the assignment of goodwill to our operating segments for the acquisitions, see "Note 16: Goodwill."

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The identified intangible assets assumed in the acquisitions completed during 2011, excluding McAfee, were recognized as follows:

			000,000				000,000
		Fair Value (In Millions)				Estimated Useful Life (In Years)
Developed technology		$	1,102				3–9
Customer relationships			144				5–8
Other intangible assets			44				2–7
Total identified intangible assets subject to amortization		$	1,290
In-process research and development			119
Total identified intangible assets		$	1,409

Acquired developed technology represents the fair values of the acquirees' products that have reached technological feasibility and are a part of the acquirees' product lines at the time acquired. Customer relationships represent the fair values of the underlying relationships and agreements with the acquirees' customers. In-process research and development represents the fair values of incomplete research and development projects that had not reached technological feasibility as of the date of acquisition. In the future, the fair value of each project at the acquisition date will be either amortized or impaired, depending on whether the project is completed or abandoned. As of December 31, 2011, no projects had been completed or abandoned.

Actual and Pro Forma Results of Acquirees

Net revenue and net income attributable to acquisitions completed during 2011 have been included in our consolidated statements of income from their respective acquisition dates to the period ended December 31, 2011. The acquisitions completed during 2011 were not individually significant to our consolidated results of operations; however, they were significant in the aggregate. During 2011, the results of the businesses acquired in 2011 contributed approximately $3.6 billion to our net revenue and reduced our net income by approximately $275 million; substantially all of these impacts were attributable to McAfee and Intel Mobile Communications and include the impacts of the amortization of acquired identified intangible assets.

McAfee is a non-reportable operating segment and is aggregated with similar non-reportable operating segments within the software and services operating segments category for segment reporting purposes. Intel Mobile Communications

is a non-reportable operating segment and is aggregated with similar non-reportable operating segments within the other Intel architecture operating segments category for segment reporting purposes. For further information, see "Note 30: Operating Segment and Geographic Information."

The unaudited pro forma financial results for 2011 and 2010 combine the historical results of Intel for 2011 and 2010, respectively, along with the historical results of the businesses acquired during 2011 for 2011 and 2010, respectively. The results include the effects of pro forma adjustments as if businesses acquired in 2011 were acquired on December 27, 2009. The 2010 pro forma results include a non-recurring adjustment of $307 million, which reduces net income due to the revaluation of McAfee's historic deferred revenue to fair value.

The unaudited pro forma financial results presented below do not include any anticipated synergies or other expected benefits of the acquisitions. This is presented for informational purposes only and is not indicative of future operations or results that would have been achieved had the acquisitions been completed as of December 27, 2009.

			000,000				000,000
(In Millions, Except Per Share Amounts-Unaudited)		2011				2010
Net revenue		$	54,738			$	47,350
Net income		$	13,028			$	11,190
Diluted earnings per share		$	2.41			$	1.96

2010 and 2009 Acquisitions

During 2010, we completed three business acquisitions qualifying as business combinations in exchange for aggregate net cash consideration of $218 million. Substantially all of the consideration was allocated to goodwill and intangibles.

During the third quarter of 2009, we completed two acquisitions qualifying as business combinations for total consideration of $885 million (net of $59 million cash acquired). Substantially all of this amount related to the acquisition of Wind River Systems, Inc., a vendor of software for embedded devices, completed by acquiring all issued and outstanding Wind River Systems common shares. The objective of the acquisition of Wind River Systems was to enable the introduction of products for the embedded and mobile market segments, resulting in benefits for our existing operations.

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The combined consideration for acquisitions completed during 2009 was allocated as follows:

			000,000
(In Millions)
Fair value of net tangible assets acquired		$	47
Goodwill			489
Acquired developed technology			148
Other identified intangible assets			169
Share-based awards assumed			32
Total		$	885

The completed acquisitions in 2010 and 2009, both individually and in the aggregate, were not significant to our consolidated results of operations.

Note 15: Divestitures

In the first quarter of 2011, we completed the divestiture of our Digital Health Group by entering into an agreement with GE to form an equally owned joint venture to create a new healthcare company focused on independent living and delivery of health-related services via telecommunications. The new company, Care Innovations, was formed by combining assets of GE Healthcare's Home Health division and Intel's Digital Health Group. During the first quarter of 2011, as a result of the formation of Care Innovations, we recognized a gain of $164 million, within interest and other, net. For further information, see "Note 11: Equity Method and Cost Method Investments."

Note 16: Goodwill

Goodwill activity for the years ended December 31, 2011 and December 25, 2010 was as follows:

			000,000				000,000				000,000				000,000				000,000
(In Millions)		PC Client Group				Data Center Group				Other Intel Architecture Operating Segments				Software and Services Operating Segments				Total
December 26, 2009		$	2,220			$	1,459			$	507			$	235			$	4,421
Additions due to acquisitions			14				-				75				21				110
December 25, 2010		$	2,234			$	1,459			$	582			$	256			$	4,531
Additions due to McAfee acquisition			746				-				-				3,553				4,299
Additions due to other acquisitions			24				94				176				223				517
Transfers			(86	)			-				86				-				-
Effect of exchange rate fluctuations			-				-				-				(93	)			(93	)
December 31, 2011		$	2,918			$	1,553			$	844			$	3,939			$	9,254

The goodwill recognized from our acquisitions during 2010 was assigned to our Digital Home Group (combined within the Netbook and Tablet Group in 2011), our Software and Services Group, our Ultra-Mobility Group, our PC Client Group, and our Intelligent Systems Group (formerly known as the Embedded and Communications Group). Our Software and Services Group is included in the software and services operating segments category in the preceding table, while our Netbook and Tablet Group, our Ultra-Mobility Group, and our Intelligent Systems Group are all included in the other Intel architecture operating segments category.

During the first quarter of 2011, we formed the Netbook and Tablet Group, which includes platforms designed for the netbook and tablet market segments. Due to the formation of this new operating segment, goodwill was transferred from our PC Client Group to our Netbook and Tablet Group as shown in the preceding table. Our Netbook and Tablet Group is included in the other Intel architecture operating segments category in the preceding table.

During the first quarter of 2011, we completed the acquisition of McAfee. The goodwill recognized from this acquisition was allocated between the McAfee operating segment and the PC Client Group based on the relative expected fair value provided by the acquisition, which reflected the estimated synergistic value generated within the PC Client Group from incorporating McAfee's security expertise, reputation, and customer base. The goodwill recognized from our other acquisitions during 2011 was allocated to McAfee, the Software and Services Group, Intel Mobile Communications, the Data Center Group, the Ultra-Mobility Group, and the PC Client Group. McAfee and the Software and Services Group are included in the software and services operating segments category in the preceding table, while Intel Mobile Communications and the Ultra-Mobility Group are included in the other Intel architecture operating segments category. For further information about our acquisitions during 2011, see "Note 14: Acquisitions."

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During the fourth quarters of 2011, 2010, and 2009, we completed our annual impairment assessments, and impairment tests when necessary, and concluded that goodwill was not impaired in any of these years. The

accumulated impairment losses as of December 31, 2011 were $713 million: $341 million associated with our PC Client Group, $279 million associated with our Data Center Group, and $93 million associated with other Intel architecture operating segments.

Note 17: Identified Intangible Assets

Identified intangible assets consisted of the following as of December 31, 2011 and December 25, 2010:

			000,000				000,000				000,000
		December 31, 2011
(In Millions)		Gross Assets				Accumulated Amortization				Net
Acquisition-related developed technology		$	2,615			$	(570	)		$	2,045
Acquisition-related customer relationships			1,714				(254	)			1,460
Acquisition-related trade names			68				(21	)			47
Licensed technology			2,395				(707	)			1,688
Identified intangible assets subject to amortization		$	6,792			$	(1,552	)		$	5,240
Acquisition-related trade names			806				-				806
Other intangible assets			221				-				221
Identified intangible assets not subject to amortization		$	1,027			$	-			$	1,027
Total identified intangible assets		$	7,819			$	(1,552	)		$	6,267

			000,000				000,000				000,000
		December 25, 2010
(In Millions)		Gross Assets				Accumulated Amortization				Net
Acquisition-related developed technology		$	235			$	(97	)		$	138
Acquisition-related customer relationships			152				(10	)			142
Acquisition-related trade names			46				(10	)			36
Licensed technology			1,204				(765	)			439
Identified intangible assets subject to amortization		$	1,637			$	(882	)		$	755
Other intangible assets			105				-				105
Total identified intangible assets		$	1,742			$	(882	)		$	860

As a result of our acquisition of McAfee during the first quarter of 2011, we recorded $3.6 billion of identified intangible assets. In addition, as a result of our other acquisitions during 2011, we recorded $1.4 billion of identified intangible assets, the substantial majority of which was from the acquisition of the WLS business of Infineon. For further information about identified intangible assets recorded as a result of acquisitions during 2011, see "Note 14: Acquisitions."

In January 2011, we entered into a long-term patent cross-license agreement with NVIDIA. Under the agreement, we received a license to all of NVIDIA's patents with a capture period that runs through March 2017 while NVIDIA products are licensed to our patents, subject to exclusions for x86 products, certain chipsets, and certain flash memory technology products. The agreement also included settlement of the existing litigation between the companies as well as broad mutual general releases. We agreed to make payments totaling $1.5 billion to NVIDIA over six years ($300 million in each of January 2011, 2012, and 2013; and $200 million in each of January 2014, 2015, and 2016), which

resulted in a liability totaling approximately $1.4 billion, on a discounted basis. In the fourth quarter of 2010, we recognized an expense of $100 million related to the litigation settlement. In the first quarter of 2011, we recognized the remaining amount of $1.3 billion as licensed technology, which will be amortized into cost of sales over its estimated useful life of 17 years. The initial recognition of the intangible asset and associated liability for future payments to NVIDIA is treated as a non-cash transaction and, therefore, has no impact on our consolidated statements of cash flows. Future payments will be treated as cash used for financing activities. As of December 31, 2011, the remaining liability of $1.2 billion is classified within other accrued liabilities and other long-term liabilities, based on the expected timing of the underlying payments.

As a result of our acquisitions in 2010, we recorded acquisition-related developed technology for $37 million with lives of four years, and additions to acquisition-related customer relationships of $58 million with a weighted average life of seven years. In addition, we acquired other intangible assets for $104 million in 2010 that are not subject to amortization.

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We recorded amortization expense on the consolidated statements of income as follows: acquisition-related developed technology and licensed technology substantially all are in cost of sales, and acquisition-related customer relationships and trade names in amortization of acquisition-related intangibles.

Amortization expenses for the three years ended December 31, 2011 were as follows:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
Acquisition-related developed technology		$	482			$	65			$	30
Acquisition-related customer relationships		$	250			$	10			$	-
Acquisition-related trade names		$	10			$	8			$	3
Licensed technology		$	181			$	157			$	149
Other intangible assets		$	-			$	-			$	126

Based on identified intangible assets that are subject to amortization as of December 31, 2011, we expect future amortization expense to be as follows:

			000,000				000,000				000,000				000,000				000,000
(In Millions)		2012				2013				2014				2015				2016
Acquisition-related developed technology		$	541			$	526			$	504			$	235			$	154
Acquisition-related customer relationships		$	283			$	265			$	260			$	252			$	234
Acquisition-related trade names		$	11			$	11			$	10			$	10			$	4
Licensed technology		$	181			$	164			$	154			$	135			$	120

Note 18: Deferred Income

Deferred income at the end of each period was as follows:

			000,000				000,000
(In Millions)		Dec. 31, 2011				Dec. 25, 2010
Deferred income on shipments of components to distributors		$	751			$	622
Deferred income from software and services operating segments			1,178				125
Current deferred income		$	1,929			$	747
Non-current deferred income from software and services operating segments			460				21
Total deferred income		$	2,389			$	768

We classify non-current deferred income from the software and services operating segments in other long-term liabilities.

Note 19: Restructuring and Asset Impairment Charges

The following table summarizes restructuring and asset impairment charges by plan for the three years ended December 31, 2011:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
2009 restructuring program		$	-			$	-			$	215
2006 efficiency program			-				-				16
Total restructuring and asset impairment charges		$	-			$	-			$	231

2009 Restructuring Program

In the first quarter of 2009, management approved plans to restructure some of our manufacturing and assembly and test operations. These plans included closing two assembly and test facilities in Malaysia, one facility in the Philippines, and one facility in China; stopping production at a 200mm wafer fabrication facility in Oregon; and ending production at our 200mm wafer fabrication facility in California. The 2009 restructuring program is complete. Under the 2009 restructuring program, we incurred $208 million in charges related to employee severance and benefit arrangements for approximately 6,500 employees, and $7 million in asset impairment charges.

2006 Efficiency Program

In the third quarter of 2006, management approved several actions as part of a restructuring plan designed to improve operational efficiency and financial results. The 2006 efficiency program is complete. From the third quarter of 2006 through 2009, we incurred a total of $1.6 billion in restructuring and asset impairment charges related to this program.

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Note 20: Chipset Design Issue

In January 2011, as part of our ongoing quality assurance procedures, we identified a design issue with the Intel ® 6 Series Express Chipset family (formerly code named Cougar Point). The issue affected chipsets sold in the fourth quarter of 2010 and January 2011. We subsequently implemented a silicon fix, and began shipping the updated version of the affected chipset in February 2011. We estimate that the total cost to repair and replace affected materials and systems, located with customers and in the market, will be $733 million. We recorded a charge of $311 million in the fourth quarter of 2010, which comprised $67 million in product costs for the affected chipsets and $244 million to establish a product accrual for this issue. We recognized a charge of $343 million in the first quarter of 2011, primarily related to an additional product accrual for the estimated costs to repair and replace affected materials and systems associated with products sold subsequent to December 25, 2010. In the second quarter of 2011, we recognized an additional $79 million charge as we finalized agreements with customers for reimbursement to repair and replace affected materials and systems. We do not expect to have any significant future

adjustments to our estimate. The charges incurred in 2011 and 2010 are reflected in the results of the PC Client Group operating segment. As of December 31, 2011, the remaining product accrual for the chipset design issue was $64 million and is classified within other accrued liabilities.

Note 21: Borrowings

Short-Term Debt

Short-term debt included drafts payable of $47 million as of December 31, 2011 ($38 million as of December 25, 2010). We have an ongoing authorization from our Board of Directors to borrow up to $3.0 billion, including through the issuance of commercial paper. Maximum borrowings under our commercial paper program during 2011 were $1.4 billion ($150 million during 2010). We had $200 million of outstanding commercial paper as of December 31, 2011 (none as of December 25, 2010). Our commercial paper was rated A-1+ by Standard & Poor's and P-1 by Moody's as of December 31, 2011.

Long-Term Debt

Our long-term debt as of December 31, 2011 and December 25, 2010 was as follows:

			000,000				000,000
(In Millions)		2011				2010
Senior notes due 2016 at 1.95%		$	1,498			$	-
Senior notes due 2021 at 3.30%			1,995				-
Senior notes due 2041 at 4.80%			1,489				-
2009 junior subordinated convertible debentures due 2039 at 3.25%			1,052				1,041
2005 junior subordinated convertible debentures due 2035 at 2.95%			919				908
2007 Arizona bonds due 2037 at 5.30%			131				128
Total long-term debt		$	7,084			$	2,077

Senior Notes

In the third quarter of 2011, we issued $5.0 billion aggregate principal amount of senior unsecured notes (the notes). The notes pay a fixed rate of interest semiannually. We may redeem the notes, in whole or in part, at any time at our option at specified redemption prices. The notes rank equally in right of payment with all of our other existing and future senior unsecured indebtedness and will effectively rank junior to all liabilities of our subsidiaries.

The notes were issued primarily to repurchase shares of our common stock pursuant to our stock repurchase program, and for general corporate purposes.

Convertible Debentures

In 2009, we issued $2.0 billion of junior subordinated convertible debentures (the 2009 debentures). In 2005, we issued $1.6 billion of junior subordinated convertible debentures (the 2005 debentures). Both the 2009 and 2005 debentures pay a fixed rate of interest semiannually.

			000,000				000,000
		2009 Debentures				2005 Debentures
Annual coupon interest rate			3.25	%			2.95	%
Annual effective interest rate			7.20	%			6.45	%
Maximum amount of contingent interest that will accrue per year			0.50	%			0.40	%

The effective interest rate is based on the rate for a similar instrument that does not have a conversion feature.

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Both the 2009 and 2005 debentures have a contingent interest component that requires us to pay interest based on certain thresholds and for certain events, commencing on August 1, 2019 for the 2009 debentures. As of December 31, 2011, we have not met any of the thresholds and events related to the 2005 debentures. The fair values of the related embedded derivatives were $10 million and zero as of December 31, 2011 for the 2009 and 2005 debentures, respectively ($12 million and $19 million as of December 25, 2010 for the 2009 and 2005 debentures, respectively).

Both the 2009 and 2005 debentures are convertible, subject to certain conditions, into shares of our common stock. Holders can surrender the 2009 debentures for conversion if the closing price of Intel common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during the 30 consecutive trading-day period ending on the last trading day of the preceding fiscal quarter. Holders can surrender the 2005 debentures for conversion at any time. We will settle any conversion or repurchase of the 2009 debentures in cash up to the face value, and any amount in excess of face value will be settled in cash or stock at our option. However, we can settle any conversion or repurchase of the 2005 debentures in cash or stock at our option. On or after August 5, 2019, we can redeem, for cash, all or part of the 2009 debentures for the principal amount,

plus any accrued and unpaid interest, if the closing price of Intel common stock has been at least 150% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading-day period prior to the date on which we provide notice of redemption. On or after December 15, 2012, we can redeem, for cash, all or part of the 2005 debentures for the principal amount, plus any accrued and unpaid interest, if the closing price of Intel common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading-day period prior to the date on which we provide notice of redemption. If certain events occur in the future, the indentures governing the 2009 and 2005 debentures provide that each holder of the debentures can, for a pre-defined period of time, require us to repurchase the holder's debentures for the principal amount plus any accrued and unpaid interest. Both the 2009 and 2005 debentures are subordinated in right of payment to any existing and future senior debt and to the other liabilities of our subsidiaries. We have concluded that both the 2009 and 2005 debentures are not conventional convertible debt instruments and that the embedded stock conversion options qualify as derivatives. In addition, we have concluded that the embedded conversion options would be classified in stockholders' equity if they were freestanding derivative instruments. As such, the embedded conversion options are not accounted for separately as derivatives.

			000,000				000,000				000,000				000,000
		2009 Debentures								2005 Debentures
(In Millions, Except Per Share Amounts)		Dec. 31, 2011				Dec. 25, 2010				Dec. 31, 2011				Dec. 25, 2010
Outstanding principal		$	2,000			$	2,000			$	1,600			$	1,600
Equity component carrying amount		$	613			$	613			$	466			$	466
Unamortized discount		$	933			$	943			$	669			$	680
Net debt carrying amount		$	1,052			$	1,041			$	919			$	908
Conversion rate (shares of common stock per $1,000 principal amount of debentures)			44.55				44.09				32.94				32.52
Effective conversion price (per share of common stock)		$	22.45			$	22.68			$	30.36			$	30.75

In the preceding table, the remaining amortization periods for the unamortized discounts for the 2009 and 2005 debentures are approximately 28 and 24 years, respectively, as of December 31, 2011.

The conversion rate adjusts for certain events outlined in the indentures governing the 2009 and 2005 debentures, such as quarterly dividend distributions in excess of $0.14 and $0.10 per share for the 2009 and 2005 debentures, respectively, but does not adjust for accrued interest. In addition, the conversion rate will increase for a holder of either the 2009 or 2005 debentures who elects to convert the debentures in connection with certain share exchanges, mergers, or consolidations involving Intel.

Arizona Bonds

In 2007, we guaranteed repayment of principal and interest on bonds issued by the Industrial Development Authority of the City of Chandler, Arizona, which constitute an unsecured general obligation for Intel. The aggregate principal amount of the bonds issued in December 2007 is $125 million, and the bonds bear interest at a fixed rate of 5.3%. The 2007 Arizona bonds are subject to mandatory tender, at our option, on any interest payment date beginning on or after December 1, 2012 until their final maturity on December 1, 2037. Upon such tender, we can re-market the bonds as either fixed-rate bonds for a specified period or as variable-rate bonds until their final maturity. We also entered into a total return swap agreement that effectively converts the fixed-rate obligation on the bonds to a floating U.S.-dollar LIBOR-based rate. We have elected to account for the 2007 Arizona bonds at fair value. For further discussion, see "Note 5: Fair Value."

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Debt Maturities

As of December 31, 2011, our aggregate debt maturities based on outstanding principal were as follows (in millions):

			000,000
Year Payable
2012		$	-
2013			-
2014			-
2015			-
2016			1,500
2017 and thereafter			7,225
Total		$	8,725

Substantially all of the difference between the total aggregate debt maturities above and the total carrying amount of our debt is due to the unamortized discount of our convertible debentures.

Note 22: Retirement Benefit Plans

Retirement Contribution Plans

We provide tax-qualified retirement contribution plans for the benefit of eligible employees, former employees, and retirees in the U.S. and certain other countries. The plans are designed to provide employees with an accumulation of funds for retirement on a tax-deferred basis. Employees hired prior to January 1, 2011 are eligible for the U.S. Intel Retirement Contribution Plan, while employees hired on or after January 1, 2011 receive discretionary employer contributions in the Intel 401(k) Savings Plan. Our Chief Executive Officer (CEO) determines the annual discretionary employer contribution amounts for the U.S. Intel Retirement Contribution Plan and the Intel 401(k) Savings Plan under delegation of authority from our Board of Directors, pursuant to the terms of the plans. As of December 31, 2011, 68% of our U.S. Intel Retirement Contribution Plan assets were invested in equities, 25% were invested in fixed-income instruments, and 7% were invested in real assets. These assets are managed by external investment managers. The discretionary employer contributions made to the Intel 401(k) Savings Plan are participant directed.

For the benefit of eligible U.S. employees, we also provide a non-tax-qualified supplemental deferred compensation plan for certain highly compensated employees. This plan is designed to permit certain discretionary employer contributions and to permit employee deferral of a portion of compensation in addition to their Intel 401(k) Savings Plan deferrals. This plan is unfunded.

We expensed $340 million for the qualified and non-qualified U.S. retirement contribution plans in 2011 ($319 million in 2010 and $260 million in 2009). In the first quarter of 2012, we funded $320 million for the 2011 contributions to the qualified U.S. retirement contribution plans.

Pension and Postretirement Benefit Plans

U.S. Pension Benefits.   For employees hired prior to January 1, 2011, we provide a tax-qualified defined-benefit pension plan, the U.S. Intel Minimum Pension Plan, for the benefit of eligible employees, former employees, and retirees in the U.S. The U.S. Intel Minimum Pension Plan benefit is determined by a participant's years of service and final average compensation (taking into account the participant's social security wage base). The plan generates a minimum pension benefit if the participant's U.S. Intel Minimum Pension Plan benefit exceeds the annuitized value of his or her U.S. Intel Retirement Contribution Plan benefit. If participant balances in the U.S. Intel Retirement Contribution Plan do not grow sufficiently, the projected benefit obligation of the U.S. Intel Minimum Pension Plan could increase significantly.

Non-U.S. Pension Benefits.   We also provide defined-benefit pension plans in certain other countries. Consistent with the requirements of local law, we deposit funds for certain plans with insurance companies, with third-party trustees, or into government-managed accounts, and/or accrue for the unfunded portion of the obligation.

U.S. Postretirement Medical Benefits.   Upon retirement, eligible U.S. employees are credited with a defined dollar amount, based on years of service, into a U.S. Sheltered Employee Retirement Medical Account (SERMA). In 2010, we approved a plan amendment, effective January 1, 2011, to expand use of these credits to pay all or a portion of the cost to purchase coverage in the retiree's choice of medical plan. Prior to 2011, these credits could only be used to pay all or a portion of the cost to purchase coverage in an Intel-sponsored medical plan. If the available credits are not sufficient to pay the entire cost of the coverage, the remaining cost is the retiree's responsibility.

Funding Policy.   Our practice is to fund the various pension plans and the U.S. postretirement medical benefits plan in amounts sufficient to meet the minimum requirements of U.S. federal laws and regulations or applicable local laws and regulations. Additional funding may be provided as deemed appropriate. Depending on the design of the plan, local customs, and market circumstances, the liabilities of a plan may exceed qualified plan assets.

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Benefit Obligation and Plan Assets

The changes in the benefit obligations and plan assets for the plans described above were as follows:

			000,000				000,000				000,000				000,000				000,000				000,000
		U.S. Pension Benefits								Non-U.S. Pension Benefits								U.S. Postretirement Medical Benefits
(In Millions)		2011				2010				2011				2010				2011				2010
Change in projected benefit obligation:
Beginning benefit obligation		$	739			$	567			$	902			$	653			$	297			$	200
Service cost			51				38				63				40				18				16
Interest cost			42				34				52				35				16				14
Plan acquisitions			-				-				68				-				-				-
Plan participants' contributions			-				-				10				8				4				4
Actuarial (gain) loss			688				123				98				187				45				7
Currency exchange rate changes			-				-				(38	)			(4	)			-				-
Plan amendments			-				-				-				3				-				65
Plan curtailments			-				-				(6	)			-				-				-
Plan settlements			-				-				(13	)			-				-				-
Benefits paid to plan participants			(40	)			(23	)			(15	)			(20	)			(11	)			(9	)
Ending projected benefit obligation		$	1,480			$	739			$	1,121			$	902			$	369			$	297

			000,000				000,000				000,000				000,000				000,000				000,000
		U.S. Pension Benefits								Non-U.S. Pension Benefits								U.S. Postretirement Medical Benefits
(In Millions)		2011				2010				2011				2010				2011				2010
Change in plan assets:
Beginning fair value of plan assets		$	569			$	411			$	642			$	552			$	59			$	2
Actual return on plan assets			26				18				(26	)			53				1				(2	)
Plan acquisitions			-				-				72				-				-				-
Employer contributions			93				163				76				52				63				64
Plan participants' contributions			-				-				10				8				4				4
Currency exchange rate changes			-				-				(24	)			(3	)			-				-
Plan settlements			-				-				(13	)			-				-				-
Benefits paid to plan participants			(40	)			(23	)			(15	)			(20	)			(11	)			(9	)
Ending fair value of plan assets		$	648			$	569			$	722			$	642			$	116			$	59

The following table summarizes the amounts recognized on the consolidated balance sheets as of December 31, 2011 and December 25, 2010:

			000,000				000,000				000,000				000,000				000,000				000,000
		U.S. Pension Benefits								Non-U.S. Pension Benefits								U.S. Postretirement Medical Benefits
(In Millions)		2011				2010				2011				2010				2011				2010
Other long-term assets		$	-			$	-			$	6			$	35			$	-			$	-
Accrued compensation and benefits			-				-				(7	)			(6	)			-				-
Other long-term liabilities			(832	)			(170	)			(398	)			(289	)			(253	)			(238	)
Accumulated other comprehensive loss (income), before tax			1,039				373				330				185				66				27
Net amount recognized		$	207			$	203			$	(69	)		$	(75	)		$	(187	)		$	(211	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the amounts recorded in accumulated other comprehensive income (loss) before taxes, as of December 31, 2011 and December 25, 2010:

			000,000				000,000				000,000				000,000				000,000				000,000
		U.S. Pension Benefits								Non-U.S. Pension Benefits								U.S. Postretirement Medical Benefits
(In Millions)		2011				2010				2011				2010				2011				2010
Net prior service credit (cost)		$	-			$	-			$	14			$	15			$	(63	)		$	(71	)
Net actuarial gain (loss)			(1,039	)			(373	)			(344	)			(200	)			(3	)			44
Defined benefit plans, net		$	(1,039	)		$	(373	)		$	(330	)		$	(185	)		$	(66	)		$	(27	)

As of December 31, 2011, the accumulated benefit obligation was $426 million for the U.S. Intel Minimum Pension Plan ($284 million as of December 25, 2010) and $836 million for the non-U.S. defined-benefit pension plans ($632 million as of December 25, 2010). Included in the aggregate data in the following tables are the amounts applicable to our pension plans, with accumulated benefit obligations in excess of plan assets, as well as plans with projected benefit obligations in excess of plan assets. Amounts related to such plans were as follows:

			000,000				000,000				000,000				000,000
		U.S. Pension Benefits								Non-U.S. Pension Benefits
(In Millions)		2011				2010				2011				2010
Plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligations		$	-			$	-			$	563			$	241
Plan assets		$	-			$	-			$	363			$	73
Plans with projected benefit obligations in excess of plan assets:
Projected benefit obligations		$	1,480			$	739			$	1,064			$	665
Plan assets		$	648			$	569			$	658			$	369

Assumptions

Weighted average actuarial assumptions used to determine benefit obligations for the plans as of December 31, 2011 and December 25, 2010 were as follows:

			000,000				000,000				000,000				000,000				000,000				000,000
		U.S. Pension Benefits								Non-U.S. Pension Benefits								U.S. Postretirement Medical Benefits
		2011				2010				2011				2010				2011				2010
Discount rate			4.7	%			5.8	%			4.9	%			5.1	%			4.6	%			5.6	%
Rate of compensation increase			4.5	%			4.7	%			4.2	%			4.5	%			n/a				n/a

Weighted average actuarial assumptions used to determine costs for the plans were as follows:

			000,000				000,000				000,000				000,000				000,000				000,000				000,000				000,000				000,000
		U.S. Pension Benefits												Non-U.S. Pension Benefits												U.S. Postretirement Medical Benefits
		2011				2010				2009				2011				2010				2009				2011				2010				2009
Discount rate			5.8	%			6.1	%			6.7	%			5.3	%			5.6	%			5.5	%			5.6	%			6.3	%			6.8	%
Expected long-term rate of return on plan assets			5.5	%			4.5	%			4.5	%			6.3	%			6.2	%			6.7	%			3.0	%			n/a				n/a
Rate of compensation increase			4.7	%			5.1	%			5.0	%			4.3	%			3.6	%			3.4	%			n/a				n/a				n/a

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For the U.S. plans, we developed the discount rate by calculating the benefit payment streams by year to determine when benefit payments will be due. We then matched the benefit payment streams by year to the AA corporate bond rates to match the timing and amount of the expected benefit payments and discounted back to the measurement date to determine the appropriate discount rate. For the non-U.S. plans, we used two approaches to develop the discount rate. In certain countries, we used a model consisting of a theoretical bond portfolio for which the timing and amount of cash flows approximated the estimated benefit payments of our pension plans. In other countries, we analyzed current market long-term bond rates and matched the bond maturity with the average duration of the pension liabilities. The expected long-term rate of return on plan

assets assumptions take into consideration both duration and risk of the investment portfolios, and are developed through consensus and building-block methodologies. The consensus methodology includes unadjusted estimates by the fund manager on future market expectations by broad asset classes and geography. The building-block approach determines the rates of return implied by historical risk premiums across asset classes. In addition, we analyzed rates of return relevant to the country where each plan is in effect and the investments applicable to the plan, expectations of future returns, local actuarial projections, and the projected long-term rates of return from external investment managers. The expected long-term rate of return on plan assets shown for the non-U.S. plan assets is weighted to reflect each country's relative portion of the non-U.S. plan assets.

Net Periodic Benefit Cost

The net periodic benefit cost for the plans included the following components:

			000,000				000,000				000,000				000,000				000,000				000,000				000,000				000,000				000,000
		U.S. Pension Benefits												Non-U.S. Pension Benefits												U.S. Postretirement Medical Benefits
(In Millions)		2011				2010				2009				2011				2010				2009				2011				2010				2009
Service cost		$	51			$	38			$	12			$	63			$	40			$	47			$	18			$	16			$	12
Interest cost			42				34				35				52				35				37				16				14				11
Expected return on plan assets			(31	)			(18	)			(13	)			(47	)			(34	)			(31	)			(2	)			-				-
Amortization of prior service cost			-				-				-				(1	)			1				(4	)			8				6				4
Recognized net actuarial loss (gain)			26				18				22				11				5				9				(1	)			(1	)			(4	)
Recognized curtailment gains			-				-				-				(4	)			-				(6	)			-				-				-
Recognized settlement losses			-				-				-				6				-				6				-				-				-
Net periodic benefit cost		$	88			$	72			$	56			$	80			$	47			$	58			$	39			$	35			$	23

U.S. Pension Plan Assets

In general, the investment strategy for U.S. Intel Minimum Pension Plan assets is to maximize risk-adjusted returns, taking into consideration the investment horizon and expected volatility, to ensure that there are sufficient assets available to pay pension benefits as they come due. The allocation to each asset class will fluctuate with market

conditions, such as volatility and liquidity concerns, and will typically be rebalanced when outside the target ranges, which are 80% to 90% for fixed-income debt instrument investments and 10% to 20% for hedge fund investments. The expected long-term rate of return for the U.S. Intel Minimum Pension Plan assets is 5.0%.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. Intel Minimum Pension Plan assets measured at fair value on a recurring basis consisted of the following investment categories as of December 31, 2011 and December 25, 2010:

			000,000				000,000				000,000				000,000
		December 31, 2011
		Fair Value Measured at Reporting Date Using												Total
(In Millions)		Level 1				Level 2				Level 3
Equity securities:
Hedge fund pool		$	-			$	97			$	-			$	97
Fixed income:
Global Bond Fund-common collective trusts			-				51				-				51
Global Bond Fund-government bonds			94				166				-				260
Global Bond Fund-asset-backed securities			-				-				78				78
Global Bond Fund-corporate bonds			-				147				-				147
Global Bond Fund-other			-				6				-				6
Total assets measured at fair value		$	94			$	467			$	78			$	639
Cash															9
Total U.S. pension plan assets at fair value														$	648

			000,000				000,000				000,000				000,000
		December 25, 2010
		Fair Value Measured at Reporting Date Using												Total
(In Millions)		Level 1				Level 2				Level 3
Equity securities:
U.S. Large Cap Stock Fund		$	-			$	36			$	-			$	36
U.S. Small Cap Stock Fund			-				9				-				9
International Stock Fund			11				30				-				41
Fixed income:
U.S. treasuries			-				261				-				261
U.S. corporate bonds			-				79				-				79
Global Bond Fund-common collective trusts			-				62				-				62
Global Bond Fund-government bonds			18				22				-				40
Global Bond Fund-asset-backed securities			-				-				17				17
Global Bond Fund-corporate bonds			-				19				-				19
Global Bond Fund-other			3				2				-				5
Total U.S. pension plan assets at fair value		$	32			$	520			$	17			$	569

The Global Bond Fund's target allocation is approximately 30% of assets in government and high-quality corporate bonds and asset-backed securities to mitigate risks related to deflation, 15% in global inflation-indexed bonds to provide protection from inflation, and another 15% in international government and corporate bonds. The residual 40% of the fund is allocated to opportunistic bond investments, which are used to enhance return and provide diversification. Such opportunistic bond investments include emerging market debt instruments with un-hedged currency exposure, high-yield investments, asset- and mortgage-backed securities, and corporate credit. Government bonds include bonds issued or deemed to be guaranteed by government entities. Government bonds include instruments such as non-U.S. government bonds, U.S. Treasury securities, and U.S. agency securities. We classified asset-backed securities in

the Global Bond Fund as Level 3, as we have used unobservable inputs to the valuations that were significant to the fair value measurements. The majority of the increase in asset-backed securities in 2011 represents current-year purchases.

The "U.S. treasuries" category in the preceding table represents two common collective trust funds that sought to replicate the performance of the Barclays Capital U.S. 1–3 Year Treasury Bond Index and Barclays Capital U.S. 1–3 Year Agency Bond Index over the long term.

The "U.S. corporate bonds" category in the table represents a common collective trust fund that sought to replicate the performance of the Barclays Capital U.S. 1–3 Year Credit Bond Index over the long term.

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Non-U.S. Plan Assets

The investments of the non-U.S. plans are managed by insurance companies, third-party trustees, or pension funds, consistent with regulations or market practice of the country where the assets are invested. The investment manager makes investment decisions within the guidelines set by Intel or local regulations. The investment manager evaluates performance by comparing the actual rate of return to the return on other similar assets. Investments managed by qualified insurance companies or pension funds under

standard contracts follow local regulations, and we are not actively involved in their investment strategies. For the assets that we have discretion to set investment guidelines, the assets are invested in developed country equities and fixed-income debt instruments, either through index funds or direct investment. In general, the investment strategy is designed to accumulate a diversified portfolio among markets, asset classes, or individual securities in order to reduce market risk and assure that the pension assets are available to pay benefits as they come due. The average expected long-term rate of return for the non-U.S. plan assets is 5.8%.

Non-U.S. plan assets measured at fair value on a recurring basis consisted of the following investment categories as of December 31, 2011 and December 25, 2010:

			000,000				000,000				000,000				000,000
		December 31, 2011
		Fair Value Measured at Reporting Date Using												Total
(In Millions)		Level 1				Level 2				Level 3
Equity securities:
Global equities		$	153			$	70			$	-			$	223
Real estate			-				-				10				10
Non-U.S. venture capital			-				-				3				3
Fixed income:
Non-U.S. government bonds			-				138				-				138
Money market funds			57				-				-				57
Investments held by insurance companies			-				207				-				207
Insurance contracts			-				-				29				29
Other			5				37				-				42
Total assets measured at fair value		$	215			$	452			$	42			$	709
Cash															13
Total non-U.S. plan assets at fair value														$	722

			000,000				000,000				000,000				000,000
		December 25, 2010
		Fair Value Measured at Reporting Date Using												Total
(In Millions)		Level 1				Level 2				Level 3
Equity securities:
Global equities		$	165			$	75			$	-			$	240
Real estate			-				-				10				10
Non-U.S. venture capital			-				-				2				2
Fixed income:
Non-U.S. government bonds			-				150				-				150
Investments held by insurance companies			-				202				-				202
Insurance contracts			-				-				28				28
Total assets measured at fair value		$	165			$	427			$	40			$	632
Cash															10
Total non-U.S. plan assets at fair value														$	642

The majority of the assets in the "Global equities" category in the preceding tables are invested in a diversified mix of equities of developed countries, including the U.S., and emerging markets throughout the world.

The "Investments held by insurance companies" and "Insurance contracts" categories in the preceding tables are managed by qualified insurance companies. We do not have

control over the target allocation or visibility of the investment strategies of those investments. Insurance contracts and investments held by insurance companies made up 33% of total non-U.S. plan assets as of December 31, 2011 (36% as of December 25, 2010).

The target allocation of the non-U.S. plan assets that we have control over is 49% equity securities and 51% fixed-income instruments.

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U.S. Postretirement Medical Plan Assets

In general, the investment strategy for U.S. postretirement medical benefits plan assets is to primarily invest in liquid assets due to the level of expected future benefit payments. The expected long-term rate of return for the U.S. postretirement medical benefits plan assets is 3.0%. As of December 31, 2011, all of the U.S. postretirement medical benefits plan assets were invested in a money market fund and were measured at fair value using Level 1 inputs.

Concentrations of Risk

We manage a variety of risks, including market, credit, and liquidity risks, across our plan assets through our investment managers. We define a concentration of risk as an undiversified exposure to one of the aforementioned risks that

increases the exposure of the loss of plan assets unnecessarily. We monitor exposure to such risks in both the U.S. and non-U.S. plans by monitoring the magnitude of the risk in each plan and diversifying our exposure to such risks across a variety of instruments, markets, and counterparties. As of December 31, 2011, we did not have concentrations of risk in any single entity, manager, counterparty, sector, industry, or country.

Funding Expectations

Under applicable law for the U.S. Intel Minimum Pension Plan and the U.S. postretirement medical benefits plan, we are not required to make any contributions during 2012. Our expected required funding for the non-U.S. plans during 2012 is approximately $65 million.

Estimated Future Benefit Payments

Estimated benefit payments over the next 10 fiscal years are as follows (in millions):

			000,000				000,000				000,000
Year Payable		U.S. Pension Benefits				Non-U.S. Pension Benefits				U.S. Postretirement Medical Benefits
2012		$	32			$	32			$	13
2013		$	45			$	31			$	14
2014		$	54			$	35			$	18
2015		$	69			$	41			$	18
2016		$	86			$	44			$	20
2017–2021		$	761			$	297			$	128

Note 23: Commitments

A portion of our capital equipment and certain facilities are under operating leases that expire at various dates through 2028. Additionally, portions of our land are under leases that expire at various dates through 2062. Rental expense was $178 million in 2011 ($124 million in 2010 and $120 million in 2009).

Minimum rental commitments under all non-cancelable leases with an initial term in excess of one year were as follows as of December 31, 2011 (in millions):

			000,000
Year Payable
2012		$	183
2013			142
2014			112
2015			81
2016			53
2017 and thereafter			136
Total		$	707

Commitments for construction or purchase of property, plant and equipment totaled $4.7 billion as of December 31, 2011 ($4.6 billion as of December 25, 2010), substantially all of which will be due within the next year. Other purchase obligations and commitments totaled approximately $1.0 billion as of December 31, 2011 (approximately $600 million as of December 25, 2010). Other purchase obligations and commitments include payments due under various types of licenses and agreements to purchase goods or services, as well as payments due under non-contingent funding obligations. Funding obligations include, for example, agreements to fund various projects with other companies. In addition, we have various contractual commitments with Micron and IMFT/IMFS. For further information on these contractual commitments, see "Note 11: Equity Method and Cost Method Investments."

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Note 24: Employee Equity Incentive Plans

Our equity incentive plans are broad-based, long-term programs intended to attract and retain talented employees and align stockholder and employee interests.

In May 2011, stockholders approved an extension of the 2006 Equity Incentive Plan (the 2006 Plan). Stockholders approved 168 million additional shares for issuance, increasing the total shares of common stock available for issuance as equity awards to employees and non-employee directors to 596 million shares. The approval also extended the expiration date of the 2006 Plan to June 2014. The maximum shares to be awarded as non-vested shares (restricted stock) or non-vested share units (restricted stock units) was increased to 394 million shares. As of December 31, 2011, 307 million shares remained available for future grant under the 2006 Plan. We may assume the equity incentive plans and the outstanding equity awards of certain acquired companies. Once they are assumed, we do not grant additional shares under those plans.

In connection with our completed acquisitions of McAfee and Wind River Systems, we assumed their equity incentive plans and issued replacement awards in 2011 and 2009, respectively. The stock options and restricted stock units issued generally retain the terms and conditions of the respective plans under which they were originally granted.

In May 2009, stockholders approved an employee stock option exchange program (Option Exchange) to give employees (not listed officers) the opportunity to exchange eligible stock options for a lesser number of new stock options that have approximately the same fair value as the options surrendered, as of the date of the exchange. The Option Exchange commenced on September 28, 2009 and expired on October 30, 2009. Eligible options included stock options granted under any Intel stock option or equity incentive plan between October 1, 2000 and September 28, 2008 that had an exercise price above $20.83, which was the 52-week closing-price high as of October 30, 2009. A total of 217 million eligible stock options were tendered and cancelled in exchange for 83 million new stock options granted. The new stock options have an exercise price of $19.04, which is equal to the market price of Intel common stock (defined as the average of the high and low trading prices) on October 30, 2009. The new stock options were issued under the 2006 Plan and are subject to its terms and conditions. The new stock options vest in equal annual increments over a four-year period from the date of grant and will expire seven years from the grant date. Using the Black-Scholes option pricing model, we determined that the fair value of the surrendered stock options on a grant-by-grant basis was approximately equal, as of the date of the exchange, to the fair value of the eligible stock options exchanged, resulting in insignificant incremental share-based compensation.

We issue restricted stock units with both a market condition and a service condition (market-based restricted stock units), referred to in our 2011 Proxy Statement as outperformance stock units, to a small group of senior officers and non-employee directors. For market-based restricted stock units issued in 2011, the number of shares of Intel common stock to be received at vesting will range from 50% to 200% of the target amount, based on total stockholder return (TSR) on Intel common stock measured against the benchmark TSR of a peer group over a three-year period. TSR is a measure of stock price appreciation plus any dividends paid in this performance period. As of December 31, 2011, there were 4 million market-based restricted stock units outstanding. These market-based restricted stock units accrue dividend equivalents and generally vest three years and one month from the grant date.

Equity awards granted to employees in 2011 under our equity incentive plans generally vest over 4 years from the date of grant, and options expire 7 years from the date of grant, with the exception of market-based restricted stock units, a small number of restricted stock units granted to executive-level employees, and replacement awards related to acquisitions.

The 2006 Stock Purchase Plan allows eligible employees to purchase shares of our common stock at 85% of the value of our common stock on specific dates. In May 2011, stockholders approved an extension of the 2006 Stock Purchase Plan. Stockholders approved 133 million additional shares for issuance, increasing the total shares of common stock available for issuance to 373 million shares. The approval also extended the expiration date of the 2006 Stock Purchase Plan to August 2016. As of December 31, 2011, 254 million shares were available for issuance under the 2006 Stock Purchase Plan.

Share-Based Compensation

Share-based compensation recognized in 2011 was $1.1 billion ($917 million in 2010 and $889 million in 2009).

On a quarterly basis, we assess changes to our estimate of expected equity award forfeitures based on our review of recent forfeiture activity and expected future employee turnover. We recognize the effect of adjustments made to the forfeiture rates, if any, in the period that we change the forfeiture estimate. The effect of forfeiture adjustments in 2011, 2010, and 2009 was not significant.

The total share-based compensation cost capitalized as part of inventory as of December 31, 2011 was $38 million ($48 million as of December 25, 2010 and $33 million as of December 26, 2009). During 2011, the tax benefit that we realized for the tax deduction from share-based awards totaled $327 million ($266 million in 2010 and $119 million in 2009).

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We estimate the fair value of restricted stock unit awards with time-based vesting using the value of our common stock on the date of grant, reduced by the present value of dividends expected to be paid on our common stock prior to vesting. We estimate the fair value of market-based restricted stock units using a Monte Carlo simulation model on the date of grant. We based the weighted average estimated values of restricted stock unit grants, as well as the weighted average assumptions that we used in calculating the fair value, on estimates at the date of grant, as follows:

			000,000				000,000				000,000
		2011				2010				2009
Estimated values		$	19.86			$	22.56			$	14.63
Risk-free interest rate			0.7	%			1.1	%			0.9	%
Dividend yield			3.4	%			2.6	%			3.5	%
Volatility			27	%			31	%			46	%

We use the Black-Scholes option pricing model to estimate the fair value of options granted under our equity incentive plans and rights to acquire stock granted under our stock purchase plan. We based the weighted average estimated values of employee stock option grants (excluding stock option grants in connection with the Option Exchange in 2009) and rights granted under the stock purchase plan, as well as the weighted average assumptions used in calculating these values, on estimates at the date of grant, as follows:

			000,000				000,000				000,000				000,000				000,000				000,000
		Stock Options												Stock Purchase Plan
		2011				2010				2009				2011				2010				2009
Estimated values		$	3.91			$	4.82			$	4.72			$	4.69			$	4.71			$	4.14
Expected life (in years)			5.4				4.9				4.9				0.5				0.5				0.5
Risk-free interest rate			2.2	%			2.5	%			1.8	%			0.2	%			0.2	%			0.4	%
Volatility			27	%			28	%			46	%			26	%			32	%			44	%
Dividend yield			3.4	%			2.7	%			3.6	%			3.6	%			3.1	%			3.6	%

We base the expected volatility on implied volatility because we have determined that implied volatility is more reflective of market conditions and a better indicator of expected volatility than historical volatility. Prior to 2011, we used the simplified method of calculating expected life due to significant differences in the vesting terms and contractual life of current option grants compared to our historical grants. In 2011, we began using historical option exercise data as the basis for determining expected life, as we believe we have sufficient historical data to provide a reasonable basis upon which to estimate the expected life input for valuing options using the Black-Scholes model.

Restricted Stock Unit Awards

Information with respect to outstanding restricted stock unit (RSU) activity is as follows:

			000,000				000,000
(In Millions, Except Per RSU Amounts)		Number of RSUs				Weighted Average Grant-Date Fair Value
December 27, 2008			67.3			$	20.18
Granted			60.0			$	14.63
Assumed in acquisition			1.6			$	17.52
Vested			(20.1	)		$	20.24
Forfeited			(3.4	)		$	18.19
December 26, 2009			105.4			$	17.03
Granted			32.4			$	22.56
Vested			(34.6	)		$	17.70
Forfeited			(3.4	)		$	17.98
December 25, 2010			99.8			$	18.56
Granted			43.3			$	19.86
Assumed in acquisition			5.8			$	20.80
Vested			(37.5	)		$	18.60
Forfeited			(4.4	)		$	19.07
December 31, 2011			107.0			$	19.18
Expected to vest as of December 31, 2011			101.0			$	19.16

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The aggregate fair value of awards that vested in 2011 was $753 million ($808 million in 2010 and $320 million in 2009), which represents the market value of Intel common stock on the date that the restricted stock units vested. The grant date fair value of awards that vested in 2011 was $697 million ($612 million in 2010 and $407 million in 2009). The number of restricted stock units vested includes shares that we withheld on behalf of employees to satisfy the minimum statutory tax

withholding requirements. Restricted stock units that are expected to vest are net of estimated future forfeitures.

As of December 31, 2011, there was $1.3 billion in unrecognized compensation costs related to restricted stock units granted under our equity incentive plans. We expect to recognize those costs over a weighted average period of 1.2 years.

Stock Option Awards

As of December 31, 2011, options outstanding that have vested and are expected to vest are as follows:

			000,000				000,000				000,000				000,000
		Number of Options (In Millions)				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (In Years)				Aggregate Intrinsic Value (In Millions)
Vested			203.6			$	20.44				2.2			$	835
Expected to vest			89.5			$	19.40				5.0			$	434
Total			293.1			$	20.12				3.1			$	1,269

Aggregate intrinsic value represents the difference between the exercise price and $24.25, the closing price of Intel common stock on December 30, 2011, as reported on The NASDAQ Global Select Market, for all in-the-money options outstanding. Options outstanding that are expected to vest are net of estimated future option forfeitures.

Options with a fair value of $226 million completed vesting during 2011 ($240 million during 2010 and $288 million during 2009). As of December 31, 2011, there was $161 million in unrecognized compensation costs related to stock options granted under our equity incentive plans. We expect to recognize those costs over a weighted average period of 1.0 years.

Additional information with respect to stock option activity is as follows:

			000,000				000,000
(In Millions, Except Per Option Amounts)		Number of Options				Weighted Average Exercise Price
December 27, 2008			612.0			$	27.70
Grants			118.5			$	18.01
Assumed in acquisition			9.0			$	15.42
Exercises			(3.6	)		$	15.90
Cancellations and forfeitures			(29.6	)		$	28.16
Exchanged			(217.4	)		$	26.75
Expirations			(37.6	)		$	31.92
December 26, 2009			451.3			$	25.08
Grants			20.2			$	23.25
Exercises			(16.6	)		$	18.36
Cancellations and forfeitures			(16.1	)		$	24.76
Expirations			(52.4	)		$	60.68
December 25, 2010			386.4			$	20.45
Grants			14.7			$	21.49
Assumed in acquisition			12.0			$	15.80
Exercises			(86.3	)		$	20.06
Cancellations and forfeitures			(8.6	)		$	20.47
Expirations			(19.9	)		$	24.85
December 31, 2011			298.3			$	20.12
Options exercisable as of:
December 26, 2009			297.7			$	28.44
December 25, 2010			263.0			$	21.03
December 31, 2011			203.6			$	20.44

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The aggregate intrinsic value of stock option exercises in 2011 was $318 million ($65 million in 2010 and $13 million in 2009), which represents the difference between the exercise

price and the value of Intel common stock at the time of exercise. Grants in 2009 include new stock options granted in connection with the Option Exchange.

The following table summarizes information about options outstanding as of December 31, 2011:

			000,000				000,000				000,000				000,000				000,000
		Outstanding Options												Exercisable Options
Range of Exercise Prices		Number of Shares (In Millions)				Weighted Average Remaining Contractual Life (In Years)				Weighted Average Exercise Price				Number of Shares (In Millions)				Weighted Average Exercise Price
$1.12–$15.00			4.9				4.7			$	11.78				3.1			$	11.52
$15.01–$20.00			156.9				3.6			$	18.24				97.8			$	18.37
$20.01–$25.00			119.3				2.5			$	21.84				85.8			$	21.68
$25.01–$30.00			15.7				1.8			$	27.47				15.6			$	27.47
$30.01–$35.46			1.5				0.9			$	31.23				1.3			$	31.16
Total			298.3				3.1			$	20.12				203.6			$	20.44

These options will expire if they are not exercised by specific dates through April 2021. Option exercise prices for options exercised during the three-year period ended December 31, 2011 ranged from $0.05 to $24.54.

Stock Purchase Plan

Approximately 70% of our employees were participating in our stock purchase plan as of December 31, 2011. Employees purchased 18.5 million shares in 2011 for $318 million under the 2006 Stock Purchase Plan (17.2 million shares for $281 million in 2010 and 30.9 million shares for $344 million in 2009). As of December 31, 2011, there was $13 million in unrecognized compensation costs related to rights to acquire common stock under our stock purchase plan. We expect to recognize those costs over a period of approximately one and a half months.

Note 25: Common Stock Repurchases

Common Stock Repurchase Program

We have an ongoing authorization, since October 2005, as amended, from our Board of Directors to repurchase up to $45 billion in shares of our common stock in open market or negotiated transactions. This amount includes $20 billion of increases in the authorization limit approved by our Board of Directors in 2011. As of December 31, 2011, $10.1 billion remained available for repurchase under the existing repurchase authorization limit. During 2011, we repurchased 642.3 million shares of common stock at a cost of $14.1 billion. During 2010, we repurchased 70.3 million shares of common stock at a cost of $1.5 billion. We utilized the

majority of the proceeds from the issuance of the 2009 debentures to repurchase 88.2 million shares at a cost of $1.7 billion during 2009 (for further information on the issuance of the 2009 debentures, see "Note 21: Borrowings"). We have repurchased 4.1 billion shares at a cost of $84 billion since the program began in 1990.

Restricted Stock Unit Withholdings

We issue restricted stock units as part of our equity incentive plans. For the majority of restricted stock units granted, the number of shares issued on the date the restricted stock units vest is net of the minimum statutory withholding requirements that we pay in cash to the appropriate taxing authorities on behalf of our employees. During 2011, we withheld 10.3 million shares (10.1 million shares during 2010 and 5.8 million shares during 2009) to satisfy $207 million ($236 million during 2010 and $92 million during 2009) of employees' tax obligations. Although shares withheld are not issued, they are treated as common stock repurchases in our consolidated financial statements, as they reduce the number of shares that would have been issued upon vesting.

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Note 26: Earnings Per Share

We computed our basic and diluted earnings per common share as follows:

			000,000				000,000				000,000
(In Millions, Except Per Share Amounts)		2011				2010				2009
Net income available to common stockholders		$	12,942			$	11,464			$	4,369
Weighted average common shares outstanding-basic			5,256				5,555				5,557
Dilutive effect of employee equity incentive plans			101				89				37
Dilutive effect of convertible debt			54				52				51
Weighted average common shares outstanding-diluted			5,411				5,696				5,645
Basic earnings per common share		$	2.46			$	2.06			$	0.79
Diluted earnings per common share		$	2.39			$	2.01			$	0.77

We computed our basic earnings per common share using net income available to common stockholders and the weighted average number of common shares outstanding during the period. We computed diluted earnings per common share using net income available to common stockholders and the weighted average number of common shares outstanding plus potentially dilutive common shares outstanding during the period. Net income available to participating securities was insignificant for all periods presented.

Potentially dilutive common shares from employee incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options, the assumed vesting of outstanding restricted stock units, and the assumed issuance of common stock under the stock purchase plan. Potentially dilutive common shares are determined by applying the if-converted method for the 2005 debentures. However, as our 2009 debentures require settlement of the principal amount of the debt in cash upon conversion, with the conversion premium paid in cash or stock at our option, potentially dilutive common shares for the 2009 debentures are determined by applying the treasury stock method. For further discussion on the specific conversion features of our 2005 and 2009 debentures, see "Note 21: Borrowings."

For 2011, we excluded 90 million outstanding weighted average stock options (161 million in 2010 and 486 million in 2009) from the calculation of diluted earnings per common share because the exercise prices of these stock options were greater than or equal to the average market value of the common shares. These options could be included in the calculation in the future if the average market value of the common shares increases and is greater than the exercise price of the options. In 2011, we included our 2009 debentures in the calculation of diluted earnings per common share because the average market price was above the conversion price. In 2010 and 2009, we excluded the 2009 debentures from the calculation of diluted earnings per common share because the conversion option of the debentures was anti-dilutive, and we could potentially exclude the 2009 debentures again in the future if the average market price is below the conversion price.

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Note 27: Comprehensive Income

The components of total comprehensive income were as follows:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
Net income		$	12,942			$	11,464			$	4,369
Other comprehensive income (loss)			(1,114	)			(60	)			786
Total comprehensive income		$	11,828			$	11,404			$	5,155

The components of other comprehensive income (loss) and related tax effects were as follows:

			000,000				000,000				000,000				000,000				000,000				000,000				000,000				000,000				000,000
		2011												2010												2009
(In Millions)		Before Tax				Tax				Net of Tax				Before Tax				Tax				Net of Tax				Before Tax				Tax				Net of Tax
Change in unrealized holding gain (loss) on investments		$	35			$	(13	)		$	22			$	311			$	(111	)		$	200			$	578			$	(210	)		$	368
Less: adjustment for (gain) loss on investments included in net income			(299	)			107				(192	)			(94	)			34				(60	)			50				(18	)			32
Change in deferred tax asset valuation allowance			-				-				-				-				72				72				-				152				152
Less: adjustment for (gain) loss on deferred tax asset valuation allowance included in net income			-				(99	)			(99	)			-				(15	)			(15	)			-				(6	)			(6	)
Change in unrealized holding gain (loss) on derivatives			20				(16	)			4				73				(23	)			50				75				(4	)			71
Less: adjustment for amortization of (gain) loss on derivatives			(161	)			38				(123	)			(80	)			17				(63	)			22				(1	)			21
Change in prior service costs			-				-				-				(67	)			24				(43	)			21				(7	)			14
Less: adjustment for amortization of prior service costs			7				(3	)			4				7				(3	)			4				(1	)			-				(1	)
Change in actuarial loss			(900	)			284				(616	)			(300	)			81				(219	)			132				(15	)			117
Less: adjustment for amortization of actuarial loss			43				(15	)			28				22				(8	)			14				26				(8	)			18
Change in net foreign currency translation adjustment			(155	)			13				(142	)			-				-				-				-				-				-
Total other comprehensive income (loss)		$	(1,410	)		$	296			$	(1,114	)		$	(128	)		$	68			$	(60	)		$	903			$	(117	)		$	786

The change in deferred tax asset valuation allowance in the preceding table is related to the reversal of a portion of our deferred tax asset valuation allowance attributed to changes in unrealized holding gains on our available-for-sale investments. The amount is reduced and included in our provision for taxes as these investments are sold or mature.

The components of accumulated other comprehensive income (loss), net of tax, were as follows:

			000,000				000,000
(In Millions)		2011				2010
Accumulated net unrealized holding gain (loss) on available-for-sale investments		$	231			$	401
Accumulated net deferred tax asset valuation allowance			104				203
Accumulated net unrealized holding gain on derivatives			8				127
Accumulated net prior service costs			(32	)			(36	)
Accumulated net actuarial losses			(950	)			(362	)
Accumulated net foreign currency translation adjustment			(142	)			-
Total accumulated other comprehensive income (loss)		$	(781	)		$	333

The estimated net prior service cost and actuarial loss for the defined benefit plan that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost during 2012 are $5 million and $91 million, respectively.

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Note 28: Taxes

Income before taxes and the provision for taxes consisted of the following:

			000,000				000,000				000,000
(Dollars in Millions)		2011				2010				2009
Income before taxes:
U.S.		$	14,659			$	13,926			$	3,229
Non-U.S.			3,122				2,119				2,475
Total income before taxes		$	17,781			$	16,045			$	5,704
Provision for taxes:
Current:
Federal		$	3,212			$	4,049			$	604
State			104				51				(2	)
Non-U.S.			374				359				336
Total current provision for taxes		$	3,690			$	4,459			$	938
Deferred:
Federal		$	1,175			$	187			$	355
Other			(26	)			(65	)			42
Total deferred provision for taxes		$	1,149			$	122			$	397
Total provision for taxes		$	4,839			$	4,581			$	1,335
Effective tax rate			27.2	%			28.6	%			23.4	%
The difference between the tax provision at the statutory federal income tax rate and the tax provision as a percentage of income before income taxes (effective tax rate) was as follows:
(In Percentages)		2011				2010				2009
Statutory federal income tax rate			35.0	%			35.0	%			35.0	%
Increase (reduction) in rate resulting from:
Non-U.S. income taxed at different rates			(4.4	)			(3.4	)			(12.4	)
Domestic manufacturing deduction benefit			(1.9	)			(2.1	)			(1.5	)
Research and development tax credits			(1.0	)			(0.9	)			(2.0	)
Settlements, effective settlements, and related remeasurements			(0.3	)			(0.3	)			(6.4	)
European Commission fine			-				-				8.9
Other			(0.2	)			0.3				1.8
Effective tax rate			27.2	%			28.6	%			23.4	%

Income in certain foreign countries is fully exempt from income taxes for a limited period of time due to eligible activities and certain capital investment actions. These full tax exemptions expire at various dates through 2020; however, the exemptions in certain countries are eligible for renewal. In 2011, the tax benefit attributable to tax holidays was $554 million with a $0.10 impact on diluted earnings per share. The tax holiday benefits for 2010 and 2009 were $256 million ($0.04 per diluted share) and $115 million ($0.02 per diluted share), respectively.

During 2011, net income tax deficiencies attributable to equity-based compensation transactions that were allocated to stockholders' equity totaled $18 million (net benefits of $40 million in 2010 and net deficiencies of $41 million in 2009).

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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Significant components of our deferred tax assets and liabilities at year-ends were as follows:

			000,000				000,000
(In Millions)		2011				2010
Deferred tax assets
Accrued compensation and other benefits		$	1,016			$	675
Share-based compensation			732				782
Deferred income			616				240
Inventory			613				95
Unrealized losses on investments and derivatives			293				375
State credits and net operating losses			230				158
Other, net			756				544
Gross deferred tax assets			4,256				2,869
Valuation allowance			(373	)			(252	)
Total deferred tax assets		$	3,883			$	2,617
Deferred tax liabilities
Property, plant and equipment		$	(2,329	)		$	(564	)
Licenses and intangibles			(915	)			(135	)
Convertible debt			(799	)			(740	)
Investment in foreign subsidiaries			(214	)			(52	)
Other, net			(208	)			(275	)
Total deferred tax liabilities		$	(4,465	)		$	(1,766	)
Net deferred tax assets (liabilities)		$	(582	)		$	851
Reported as:
Current deferred tax assets		$	1,700			$	1,488
Non-current deferred tax assets			335				289
Non-current deferred tax liabilities			(2,617	)			(926	)
Net deferred tax assets (liabilities)		$	(582	)		$	851

Non-current deferred tax assets are included within other long-term assets on the consolidated balance sheets.

The valuation allowance is based on our assessment that it is more likely than not that certain deferred tax assets will not be realized in the foreseeable future. The valuation allowance as of December 31, 2011 included allowances related to unrealized state credit carryforwards of $215 million and matters related to our non-U.S. subsidiaries of $158 million.

As of December 31, 2011, our federal, state, and foreign net operating loss carryforwards for income tax purposes were approximately $317 million, $320 million, and $793 million, respectively. The majority of the foreign net operating loss carryforwards have no expiration date. The remaining foreign as well as the U.S. federal and state net operating loss carryforwards expire at various dates through 2032. A significant amount of the net operating loss carryforwards in the U.S. relates to acquisitions and, as a result, is limited in the amount that can be recognized in any one year. The foreign net operating loss carryforwards include $491 million that is not likely to be recovered and has been reduced by a valuation allowance.

As of December 31, 2011, we had not recognized U.S. deferred income taxes on a cumulative total of $14.2 billion of undistributed earnings for certain non-U.S. subsidiaries and $2.8 billion of other basis differences of our investments in certain non-U.S. subsidiaries primarily related to McAfee. Determining the unrecognized deferred tax liability related to investments in these non-U.S. subsidiaries that are indefinitely reinvested is not practicable. We currently intend to indefinitely reinvest those earnings and other basis differences in operations outside the U.S.

Long-term income taxes payable of $165 million as of December 31, 2011 ($190 million as of December 25, 2010), within other long-term liabilities, includes uncertain tax positions, reduced by the associated federal deduction for state taxes and non-U.S. tax credits, and may also include other long-term tax liabilities that are not uncertain but have not yet been paid.

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The aggregate changes in the balance of gross unrecognized tax benefits were as follows:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
Beginning gross unrecognized tax benefits		$	216			$	220			$	744
Settlements and effective settlements with tax authorities and related remeasurements			(63	)			(73	)			(526	)
Lapse of statute of limitations			(17	)			-				-
Increases in balances related to tax positions taken during prior periods			91				28				28
Decreases in balances related to tax positions taken during prior periods			(21	)			(30	)			(58	)
Increases in balances related to tax positions taken during current period			6				71				32
Ending gross unrecognized tax benefits		$	212			$	216			$	220

During 2011, we settled and effectively settled matters with the U.S. Internal Revenue Service and certain state tax authorities related to tax positions taken during prior periods. The result of the settlements, effective settlements, and resulting remeasurements was a reduction of $63 million in the balance of our gross unrecognized tax benefits ($73 million in 2010, $526 million in 2009), $61 million of which resulted in a tax benefit for 2011 ($48 million for 2010, $366 million for 2009).

If the remaining balance of $212 million of unrecognized tax benefits as of December 31, 2011 ($216 million as of December 25, 2010) were realized in a future period, it would result in a tax benefit of $92 million and a reduction in the effective tax rate ($124 million as of December 25, 2010).

During all years presented, we recognized interest and penalties related to unrecognized tax benefits within the provision for taxes on the consolidated statements of income. In 2011, we recognized an expense of $24 million, primarily due to the accrual of interest and penalties related to foreign unrecognized tax benefits. In 2009, we recognized a net benefit of $62 million, primarily due to the reversal of accrued interest and penalties related to settled and effectively settled matters described above (insignificant for 2010). As of December 31, 2011, we had $90 million of accrued interest and penalties related to unrecognized tax benefits ($49 million as of December 25, 2010).

Although the timing of the resolution and/or closure on audits is highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. However, given the number of years remaining subject to examination and the number of matters being examined, we are unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits.

We file U.S. federal, U.S. state, and non-U.S. tax returns. For U.S. state and non-U.S. tax returns, we are generally no longer subject to tax examinations for years prior to 2001. For U.S. federal tax returns, we are no longer subject to tax examination for years prior to 2008.

Note 29: Contingencies

Legal Proceedings

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 such as compulsory licensing of IP. 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. 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.

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; claim that our software compiler business unfairly prefers Intel 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; allege that we unfairly controlled the content and timing of release of various standard computer interfaces developed by Intel in cooperation with other industry participants; and accuse us of engaging in various acts of improper competitive activity in

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competing against what is referred to as general-purpose graphics processing units, including certain licensing practices and our actions in connection with developing and disclosing potentially competitive technology.

We believe that we compete lawfully and that our marketing, business, IP, and other challenged practices benefit our customers and our stockholders, and we will continue to conduct a vigorous defense in these proceedings. While we have settled some of these matters, the distractions caused by challenges to our conduct from the remaining matters are undesirable, and the legal and other costs associated with defending and resolving our position have been and continue to be significant. We assume that these challenges could continue for a number of years and may require the investment of substantial additional management time and substantial financial resources to explain and defend our position.

Government Competition Matters and Related Consumer Class Actions

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.

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 "conditional rebates and payments" 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 "payments to prevent sales of specific rival products." The EC imposed a fine in the amount of € 1.06 billion ($1.447 billion as of May 2009), which we subsequently paid during the third quarter of 2009, and also ordered us to "immediately bring to an end the infringement referred to in" the EC decision. In the second quarter of 2009, we recorded the related charge within marketing, general and administrative. 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 EC filed an answer to our reply brief in November 2010. The court's decision, after oral argument, is expected in late 2012 or early 2013.

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 "cease and desist" 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.

In June 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 2002–2005 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 $25 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 $20 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.

In November 2009, the State of New York filed a lawsuit against us in the U.S. District Court for the District of Delaware. The lawsuit alleged that we violated federal antitrust laws; the New York Donnelly Act, which prohibits contracts or agreements to monopolize; and the New York Executive Law, which proscribes underlying violations of federal and state antitrust laws. The lawsuit alleged that we engaged in a systematic worldwide campaign of illegal, exclusionary conduct to maintain monopoly power and prices in the market for x86 microprocessors through the use of various alleged actions, including exclusive or near-exclusive agreements from large computer makers in exchange for "loyalty payments" and "bribes," and other alleged threats and retaliation. New York claimed that our alleged actions harmed New York consumers, competition, and innovation. The complaint sought a declaration that our alleged actions violated federal and New York antitrust laws and New York Executive Law; an injunction to prevent further alleged unlawful acts; damages in an amount to be proven at trial based on alleged overcharges on purchases of computers containing Intel microprocessors by New York state agencies and non-state entities, as well as by individual New York consumers, trebled as provided for by law under the Sherman

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Act or Donnelly Act, restitution, and disgorgement; $1 million in civil penalties for alleged violations of the Donnelly Act; and attorneys' fees and costs. We disagreed with the State of New York's allegations and claims, and noted that we intended to conduct a vigorous defense of the lawsuit. We filed our answer in January 2010.

In December 2010, the State of New York requested the court's permission to amend its complaint to expand the scope of parties covered by its Donnelly Act and Executive Law claims to include small and medium businesses operating within the state of New York. We opposed that request, and in May 2011, the court denied the State of New York permission to amend its complaint. In May 2011, we filed three motions: the first seeking partial summary judgment on any claims for damages under the Sherman Act based on purchases of computers containing Intel microprocessors not made within four years of the filing of the complaint, and any claims for damages under the Donnelly Act and Executive Law based on purchases not made within three years of the filing of the complaint; the second seeking dismissal of all claims brought on behalf of non-State of New York public entities on the ground that the State of New York did not obtain proper requests to represent them; and the third seeking judgment on the pleadings on the ground that the State of New York could not recover damages on behalf of New York consumers for certain claims. The court granted each of these motions in December 2011. These rulings greatly reduced the scope of the New York Attorney General's lawsuit. In addition, in October 2011, we filed two other motions for summary judgment and a motion seeking to exclude the opinions and testimony of New York's economic expert. We sought summary judgment on the grounds that each of New York's claims lacked legal merit because our discounted prices challenged in the lawsuit were lawful and that New York could not establish antitrust injury because, among other things, it had no evidence of any harm to competition from our alleged actions.

In February 2012, we announced a settlement of the lawsuit. The agreement, which followed the court's December 2011 rulings in Intel's favor, expressly states that Intel does not admit either any violation of law or that the allegations in the complaint are true, and it calls for no changes to the way Intel does business. The agreement includes a payment of $6.5 million from Intel that is intended only to cover some of the costs incurred by the State of New York in the litigation. New York agreed to dismiss its action with prejudice, close any pending investigations arising out of the allegations of the complaint and those previously investigated by the Federal Trade Commission, and provide a release of claims against Intel and a covenant not to sue. New York also agreed to seek and obtain separate releases from non-state entities that receive any portion of the settlement fund.

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 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. The class actions allege various consumer injuries, including that consumers in various states have been injured by paying higher prices for computers containing our microprocessors. We dispute the class-action claims and intend to defend the lawsuits vigorously.

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 these objections was held in March 2011. The Delaware district court has not yet ruled on those objections. 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 Special Master's Class Report is on review in the Delaware district court, we are unable to make a reasonable estimate of the potential loss or range of losses, if any, arising from these matters.

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Lehman Matter

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 $1.0 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 $1.0 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 $1.0 billion of cash collateral. Under the terms of the contract, LOTC was obligated to deliver approximately 50 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 $1.0 billion collateral. LOTC has not initiated any action against us to date, but in February 2010, LOTC served a subpoena on us in connection with this transaction. In October 2010, LOTC demanded that Intel pay it at least $417 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. No complaint has been filed and we are in the early stages of evaluating this dispute, and accordingly are unable to make a reasonable estimate of the potential loss or range of losses, if any, arising from this matter.

Frank T. Shum v. Intel Corporation, Jean-Marc Verdiell, and LightLogic, Inc.

We acquired LightLogic, Inc. in May 2001. Frank Shum subsequently sued us, LightLogic, and LightLogic's founder, Jean-Marc Verdiell, claiming that much of LightLogic's IP is based on alleged inventions that Shum conceived while he and Verdiell were partners at Radiance Design, Inc. Shum has alleged claims for fraud, breach of fiduciary duty, fraudulent concealment, and breach of contract. Shum also seeks alleged correction of inventorship of seven patents acquired by us as part of the LightLogic acquisition. In January 2005, the U.S. District Court for the Northern District of California denied Shum's inventorship claim, and thereafter granted our motion for summary judgment on Shum's remaining claims. In August 2007, the U.S. Court of Appeals for the Federal Circuit vacated the District Court's rulings and remanded the case for further proceedings. In October 2008, the District Court granted our motion for summary judgment on Shum's claims for breach of fiduciary duty and fraudulent concealment, but denied our

motion on Shum's remaining claims. A jury trial on Shum's remaining claims took place in November and December 2008. In pre-trial proceedings and at trial, Shum requested monetary damages against the defendants in amounts ranging from $31 million to $931 million, and his final request to the jury was for as much as $175 million. Following deliberations, the jury was unable to reach a verdict on most of the claims. With respect to Shum's claim that he is the proper inventor on certain LightLogic patents now assigned to us, the jury agreed with Shum on some of those claims and was unable to reach a verdict regarding the remaining claims. In April 2009, the court granted defendants' motions for judgment as a matter of law. Shum appealed that ruling to the U.S. Court of Appeals for the Federal Circuit, which heard oral arguments in August 2010 and affirmed the trial court's orders in favor of Intel in December 2010. In January 2011, Shum petitioned the Federal Circuit for a re-hearing and re-hearing en banc. In February 2011, the Federal Circuit denied Shum's request. Shum petitioned the U.S. Supreme Court for review in May 2011, and we filed our response in August 2011. The U.S. Supreme Court denied certiorari in October 2011, ending the matter.

Note 30: Operating Segment and Geographic Information

Our operating segments in effect as of December 31, 2011 include:

•

PC Client Group

•

Data Center Group

•

Intel Mobile Communications

•

Intelligent Systems Group

•

Netbook and Tablet Group

•

Ultra-Mobility Group

•

McAfee

•

Wind River Software Group

•

Software and Services Group

•

Non-Volatile Memory Solutions Group

In the first quarter of 2011, we formed the Netbook and Tablet Group, which includes platforms designed for the netbook and tablet market segments, and we divested the Digital Health Group (for further information see "Note 15: Divestitures"). In the fourth quarter of 2011, we combined the Digital Home Group within the Netbook and Tablet Group. Prior-period amounts have been adjusted retrospectively to reflect these operating segment changes as well as other minor reorganizations. Additionally, in the first quarter of 2011, we formed the Intel Mobile Communications and McAfee operating segments as a result of acquisitions (for further information see "Note 14: Acquisitions").

The Chief Operating Decision Maker (CODM) is our President and CEO. The CODM allocates resources to and assesses the performance of each operating segment using information about its revenue and operating income (loss).

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Our PC Client Group and our Data Center Group are reportable operating segments. We also aggregate and disclose the financial results of the following non-reportable operating segments: Intel Mobile Communications, Intelligent Systems Group (formerly known as the Embedded and Communications Group), Netbook and Tablet Group, and Ultra-Mobility Group. We also aggregate and disclose the financial results of the following non-reportable operating segments within "software and services operating segments": McAfee, Wind River Software Group, and Software and Services Group. Each of these aggregated operating segments does not meet the quantitative thresholds to qualify as reportable operating segments; however, we have elected to disclose the aggregation of these non-reportable operating segments. Revenue for our reportable and aggregated non-reportable operating segments is primarily related to the following product lines:

•

PC Client Group .  Includes platforms designed for the notebook and desktop (including high-end enthusiast PCs) market segments; and wireless connectivity products.

•

Data Center Group.   Includes platforms designed for the server, workstation, and storage computing market segments; and wired network connectivity products.

•

Other Intel architecture operating segments.   Includes mobile phone components such as baseband processors, radio frequency transceivers, and power management chips; platforms designed for embedded applications; platforms for the netbook and tablet market segments; and products designed for the smartphone market segment.

•

Software and services operating segments.   Includes software products for endpoint security, network and content security, risk and compliance, and consumer and mobile security from our McAfee business; software optimized products for the embedded and mobile market segments; and software products and services that

promote Intel ® architecture as the platform of choice for software development.

We have sales and marketing, manufacturing, finance, and administration groups. Expenses for these groups are generally allocated to the operating segments, and the expenses are included in the operating results reported below.

During 2009, we incurred charges of $1.447 billion as a result of the fine from the EC and $1.25 billion as a result of our legal settlement with AMD. These charges were included in the "All other" category. Additionally, the "All other" category includes revenue, expenses, and charges such as:

•

results of operations from our Non-Volatile Memory Solutions Group that includes NAND flash memory products for use in a variety of devices;

•

a portion of profit-dependent compensation and other expenses not allocated to the operating segments;

•

divested businesses for which discrete operating results are not reviewed by our CODM;

•

results of operations of seed businesses that support our initiatives; and

•

acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill.

The CODM does not evaluate operating segments using discrete asset information. Operating segments do not record inter-segment revenue. We do not allocate gains and losses from equity investments, interest and other income, or taxes to operating segments. Although the CODM uses operating income to evaluate the segments, operating costs included in one segment may benefit other segments. Except as discussed above, the accounting policies for segment reporting are the same as for Intel as a whole.

Net revenue and operating income (loss) for the three years ended December 31, 2011 were as follows:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
Net revenue
PC Client Group		$	35,406			$	30,327			$	24,894
Data Center Group			10,129				8,693				6,450
Other Intel architecture operating segments			5,005				3,055				2,683
Software and services operating segments			1,870				264				115
All other			1,589				1,284				985
Total net revenue		$	53,999			$	43,623			$	35,127
Operating income (loss)
PC Client Group		$	14,793			$	12,971			$	7,441
Data Center Group			5,100				4,388				2,289
Other Intel architecture operating segments			(577	)			270				(45	)
Software and services operating segments			(32	)			(175	)			(100	)
All other			(1,807	)			(1,866	)			(3,874	)
Total operating income		$	17,477			$	15,588			$	5,711

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In 2011, Hewlett-Packard Company accounted for 19% of our net revenue (21% in 2010 and 2009), and Dell Inc. accounted for 15% of our net revenue (17% in 2010 and 2009). The majority of the revenue from these customers was from the sale of platforms and other components by the PC Client Group and the Data Center Group operating segments.

Geographic revenue information for the three years ended December 31, 2011 is based on the location of the customer. Revenue from unaffiliated customers was as follows:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
Asia-Pacific (geographic region/country)
Taiwan		$	17,076			$	14,498			$	10,574
China (including Hong Kong)			8,114				7,195				5,835
Other Asia-Pacific			5,532				3,279				2,933
			30,722				24,972				19,342
Americas (geographic region/country)
United States			8,411				6,549				5,280
Other Americas			2,887				2,066				1,838
			11,298				8,615				7,118
Europe			6,955				5,606				5,278
Japan			5,024				4,430				3,389
Total net revenue		$	53,999			$	43,623			$	35,127

Revenue from unaffiliated customers outside the U.S. totaled $45,588 million in 2011 ($37,074 million in 2010 and $29,847 million in 2009).

Net property, plant and equipment by country was as follows:

			000,000				000,000				000,000
(In Millions)		2011				2010				2009
United States		$	16,448			$	12,652			$	11,644
Israel			3,356				2,087				2,567
Other countries			3,823				3,160				3,014
Total property, plant and equipment, net		$	23,627			$	17,899			$	17,225

Net property, plant and equipment outside the U.S. totaled $7,179 million in 2011 ($5,247 million in 2010 and $5,581 million in 2009).

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REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Intel Corporation

We have audited the accompanying consolidated balance sheets of Intel Corporation as of December 31, 2011 and December 25, 2010, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2011. Our audits also included the financial statement schedule listed in the Index at Part IV, Item 15. These financial statements and schedule are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Intel Corporation at December 31, 2011 and December 25, 2010, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Intel Corporation's internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2012 expressed an unqualified opinion thereon.

San Jose, California

February 23, 2012

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REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Intel Corporation

We have audited Intel Corporation's internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Intel Corporation's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Intel Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2011 consolidated financial statements of Intel Corporation and our report dated February 23, 2012 expressed an unqualified opinion thereon.

San Jose, California

February 23, 2012

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INTEL CORPORATION

FINANCIAL INFORMATION BY QUARTER (UNAUDITED)

			000,000				000,000				000,000				000,000
2011 for Quarter Ended (In Millions, Except Per Share Amounts)		December 31				October 1				July 2				April 2
Net revenue		$	13,887			$	14,233			$	13,032			$	12,847
Gross margin		$	8,952			$	9,018			$	7,902			$	7,885
Net income		$	3,360			$	3,468			$	2,954			$	3,160
Basic earnings per common share		$	0.66			$	0.67			$	0.56			$	0.58
Diluted earnings per common share		$	0.64			$	0.65			$	0.54			$	0.56
Dividends per common share
Declared		$	-			$	0.42			$	-			$	0.3624
Paid		$	0.21			$	0.21			$	0.1812			$	0.1812
Market price range common stock 1
High		$	25.66			$	23.23			$	23.88			$	22.14
Low		$	20.62			$	19.19			$	19.49			$	19.72
2010 for Quarter Ended (In Millions, Except Per Share Amounts)		December 25				September 25				June 26				March 27
Net revenue		$	11,457			$	11,102			$	10,765			$	10,299
Gross margin		$	7,406			$	7,321			$	7,235			$	6,529
Net income		$	3,180			$	2,955			$	2,887			$	2,442
Basic earnings per common share		$	0.57			$	0.53			$	0.52			$	0.44
Diluted earnings per common share		$	0.56			$	0.52			$	0.51			$	0.43
Dividends per common share
Declared		$	-			$	0.315			$	-			$	0.315
Paid		$	0.1575			$	0.1575			$	0.1575			$	0.1575
Market price range common stock 1
High		$	21.91			$	21.78			$	24.22			$	22.67
Low		$	18.87			$	17.67			$	19.93			$	19.02

1	Intel's common stock (symbol INTC) trades on The NASDAQ Global Select Market. All stock prices are closing prices per The NASDAQ Global Select Market.

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ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on management's evaluation (with the participation of our CEO and Chief Financial Officer (CFO)), as of the end of the period covered by this report, our CEO and CFO have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in U.S. Securities and Exchange Commission (SEC) rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Management assessed our internal control over financial reporting as of December 31, 2011, the end of our fiscal year. Management based its assessment on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management's assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment.

Based on our assessment, management has concluded that our internal control over financial reporting was effective as of the end of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. We reviewed the results of management's assessment with the Audit Committee of our Board of Directors.

Our independent registered public accounting firm, Ernst & Young LLP, independently assessed the effectiveness of the company's internal control over financial reporting, as stated in their attestation report, which is included at the end of Part II, Item 8 of this Form 10-K.

Inherent Limitations on Effectiveness of Controls

Our management, including the CEO and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

ITEM 9B.

OTHER INFORMATION

None.

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PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information in our 2012 Proxy Statement regarding directors and executive officers appearing under the headings "Proposal 1: Election of Directors" and "Other Matters-Section 16(a) Beneficial Ownership Reporting Compliance" is incorporated by reference in this section. The information under the heading "Executive Officers of the Registrant" in Part I, Item 1 of this Form 10-K is also incorporated by reference in this section. In addition, the information under the heading "Corporate Governance" in our 2012 Proxy Statement is incorporated by reference in this section.

The Intel Code of Conduct (the Code) is our code of ethics document applicable to all employees, including all officers, and including our independent directors, who are not employees of the company, with regard to their Intel-related activities. The Code incorporates our guidelines designed to deter wrongdoing and to promote honest and ethical conduct and compliance with applicable laws and regulations. The Code also incorporates our expectations of our employees that enable us to provide accurate and timely disclosure in our filings with the SEC and other public communications. In addition, the Code incorporates guidelines pertaining to topics such as complying with applicable laws, rules, and regulations; reporting Code violations; and maintaining accountability for adherence to the Code.

The full text of our Code is published on our Investor Relations web site at www.intc.com . We intend to disclose future amendments to certain provisions of our Code, or waivers of such provisions granted to executive officers and directors, on the web site within four business days following the date of such amendment or waiver.

ITEM 11.

EXECUTIVE COMPENSATION

The information appearing in our 2012 Proxy Statement under the headings "Director Compensation," "Compensation Discussion and Analysis," "Report of the Compensation Committee," and "Executive Compensation" is incorporated by reference in this section.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information appearing in our 2012 Proxy Statement under the heading "Security Ownership of Certain Beneficial Owners and Management" is incorporated by reference in this section.

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Equity Compensation Plan Information

Information as of December 31, 2011 regarding equity compensation plans approved and not approved by stockholders is summarized in the following table (shares in millions):

			000,000				000,000				000,000
Plan Category		(A) Number of Shares to Be Issued Upon Exercise of Outstanding Options and  Rights				(B) Weighted Average Exercise Price of Outstanding Options 1				(C) Number of  Shares Remaining Available for Future Issuance Under Equity Incentive Plans (Excluding Shares Reflected in Column A)
2006 Equity Incentive Plan											302.2	2
2006 Stock Purchase Plan											254.3
Equity incentive plans approved by stockholders			322.7	3		$	20.09				556.5
Equity incentive plans not approved by stockholders			87.1	4		$	20.19				-
Total			409.8			$	20.12				556.5

1	The weighted average exercise price does not take into account the shares issuable upon outstanding RSUs vesting, which have no exercise price.

2

Assumes shares will be issued at the maximum vesting amount for outstanding outperformance stock units (OSUs). If it is assumed that shares will be issued at the target vesting amount for outstanding OSUs, an additional 4.5 million shares would be included in the shares available for future issuance amount for a total of 307 million shares. A maximum of 394 million shares could be awarded as restricted stock or RSUs under the 2006 Equity Incentive Plan.

3	Includes 107.4 million shares granted under the 2006 Equity Incentive Plan that are issuable upon RSUs vesting, including a maximum of 9.0 million shares that could be issued at the end of the requisite period for outstanding OSUs. The remaining balance consists of outstanding stock option grants.

4

Includes shares available upon exercise of stock options granted under our 1997 Stock Option Plan, which was not required to be approved by stockholders. The 1997 Stock Option Plan was terminated as to future grants in May 2004. In addition, it includes 4.1 million shares issuable upon RSUs vesting that were originally granted under plans that we assumed in connection with acquisitions; and 10.4 million shares issuable under outstanding options, with a weighted average exercise price of $15.86, also assumed in connection with acquisitions.

The 1997 Stock Option Plan (1997 Plan) provided for the grant of stock options to employees other than officers and directors. The 1997 Plan, which was not approved by stockholders, was terminated as to future grants in May 2004. The 1997 Plan is administered by the Board's Compensation Committee, which has the power to determine matters related to outstanding stock option awards under the 1997 Plan, including conditions of vesting and exercise. Stock options granted under the 1997 Plan expire no later than 10 years from the grant date. Stock options granted under the 1997 Plan generally vest in increments over four or five years from the date of grant. Grants to key employees may have delayed vesting, generally beginning six years from the date of grant.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information appearing in our 2012 Proxy Statement under the headings "Corporate Governance" and "Certain Relationships and Related Transactions" is incorporated by reference in this section.

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The information appearing in our 2012 Proxy Statement under the headings "Report of the Audit Committee" and "Proposal 2: Ratification of Selection of Independent Registered Public Accounting Firm" is incorporated by reference in this section.

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PART IV

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

1.	Financial Statements: See "Index to Consolidated Financial Statements" in Part II, Item 8 of this Form 10-K.

2.	Financial Statement Schedule: See "Schedule II-Valuation and Qualifying Accounts" in this section of this Form 10-K.

3.	Exhibits: The exhibits listed in the accompanying index to exhibits are filed, furnished, or incorporated by reference as part of this Form 10-K.

Certain of the agreements filed as exhibits to this Form 10-K contain representations and warranties by the parties to the agreements that have been made solely for the benefit of the parties to the agreement. These representations and warranties:

•

may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosures are not necessarily reflected in the agreements;

•

may apply standards of materiality that differ from those of a reasonable investor; and

•

were made only as of specified dates contained in the agreements and are subject to subsequent developments and changed circumstances.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date that these representations and warranties were made or at any other time. Investors should not rely on them as statements of fact.

Intel, the Intel logo, Celeron, Intel Core, Core Inside, Intel Atom, Intel Atom Inside, Intel Inside, Intel Inside logo, Intel vPro, Intel Xeon, Xeon Inside, Itanium, Pentium, Thunderbolt, and Ultrabook are trademarks of Intel Corporation in the U.S. and/or other countries.

*	Other names and brands may be claimed as the property of others.

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INTEL CORPORATION

SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS

December 31, 2011, December 25, 2010, and December 26, 2009

(In Millions)

			000,000				000,000				000,000				000,000
		Balance at Beginning of Year				Additions Charged to Expenses/ Other Accounts				Net (Deductions) Recoveries				Balance at End  of Year
Allowance for doubtful receivables
2011		$	28			$	8			$	-			$	36
2010		$	19			$	9			$	-			$	28
2009		$	17			$	3			$	(1	)		$	19
Valuation allowance for deferred tax assets
2011		$	252			$	121			$	-			$	373
2010		$	329			$	14			$	(91	)		$	252
2009		$	358			$	91			$	(120	)		$	329

Deductions in allowance for doubtful receivables represent uncollectible accounts written off, net of recoveries.

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INDEX TO EXHIBITS

Exhibit Number

Exhibit Description

Incorporated by Reference

Filed or Furnished Herewith

Form

File Number

Exhibit

Filing Date

3.1

Intel Corporation Third Restated Certificate of Incorporation of Intel Corporation dated May 17, 2006

8-K

000-06217

3.1

5/22/2006

3.2

Intel Corporation Bylaws, as amended and restated on July 26, 2011

8-K

000-06217

3.1

7/27/2011

4.2.1

Indenture for the Registrant's 2.95% Junior Subordinated Convertible Debentures due 2035 between Intel Corporation and Wells Fargo Bank, National Association (as successor to Citibank N.A.), dated as of December 16, 2005 (the "Convertible Note Indenture")

10-K

000-06217

4.2

2/27/2006

4.2.2

Indenture dated as of March 29, 2006 between Intel Corporation and Wells Fargo Bank, National Association (as successor to Citibank N.A.) (the "Open-Ended Indenture")

S-3ASR

333-132865

4.4

3/30/2006

4.2.3

First Supplemental Indenture to Convertible Note Indenture, dated as of July 25, 2007

10-K

000-06217

4.2.3

2/20/2008

4.2.4

First Supplemental Indenture to Open-Ended Indenture, dated as of December 3, 2007

10-K

000-06217

4.2.4

2/20/2008

4.2.5

Indenture for the Registrant's 3.25% Junior Subordinated Convertible Debentures due 2039 between Intel Corporation and Wells Fargo Bank, National Association, dated as of July 27, 2009

10-Q

000-06217

4.1

11/2/2009

4.2.6

Second Supplemental Indenture to Open-Ended Indenture for the Registrant's 1.95% Senior Notes due 2016, 3.30% Senior Notes due 2021, and 4.80% Senior Notes due 2041, dated as of September 19, 2011

8-K

000-06217

4.01

9/19/2011

10.1**

Intel Corporation 1984 Stock Option Plan, as amended and restated effective July 16, 1997

10-Q

333-45395

10.1

8/11/1998

10.2

Intel Corporation 1997 Stock Option Plan, as amended and restated effective July 16, 1997

10-K

000-06217

10.7

3/11/2003

10.3**

Intel Corporation 2004 Equity Incentive Plan, effective May 19, 2004

10-Q

000-06217

10.3

8/2/2004

10.4**

Notice of Grant of Non-Qualified Stock Option under the Intel Corporation 2004 Equity Incentive Plan

10-Q

000-06217

10.7

8/2/2004

10.5**

Standard Terms and Conditions Relating to Non-Qualified Stock Options granted to U.S. employees on and after May 19, 2004 under the Intel Corporation 2004 Equity Incentive Plan

10-Q

000-06217

10.5

8/2/2004

10.6**

Standard International Non-Qualified Stock Option Agreement under the Intel Corporation 2004 Equity Incentive Plan

10-Q

000-06217

10.6

8/2/2004

10.7**

Intel Corporation Non-Employee Director Non-Qualified Stock Option Agreement under the Intel Corporation 2004 Equity Incentive Plan

10-Q

000-06217

10.4

8/2/2004

10.8**

Form of ELTSOP Non-Qualified Stock Option Agreement under the Intel Corporation 2004 Equity Incentive Plan

8-K

000-06217

10.1

10/12/2004

10.9**

Intel Corporation 2004 Equity Incentive Plan, as amended and restated, effective May 18, 2005

8-K

000-06217

10.1

5/20/2005

103

Table of Contents

Exhibit Number

Exhibit Description

Incorporated by Reference

Filed or Furnished Herewith

Form

File Number

Exhibit

Filing Date

10.10**

Form of Notice of Grant of Restricted Stock Units

8-K

000-06217

10.5

2/9/2006

10.11**

Form of Intel Corporation Nonqualified Stock Option Agreement under the 2004 Equity Incentive Plan

10-K

000-06217

10.16

2/27/2006

10.12**

Standard Terms and Conditions relating to Non-Qualified Stock Options granted to U.S. employees on and after February 1, 2006 under the Intel Corporation 2004 Equity Incentive Plan (other than grants made under the SOP Plus or ELTSOP programs)

10-Q

000-06217

10.6

5/8/2006

10.13**

Terms and Conditions relating to Nonqualified Stock Options granted to U.S. employees on and after February 1, 2006 under the Intel Corporation 2004 Equity Incentive Plan for grants formerly known as ELTSOP Grants

10-Q

000-06217

10.13

5/8/2006

10.14**

Standard International Nonqualified Stock Option Agreement under the 2004 Equity Incentive Plan (for grants after February 1, 2006 under the ELTSOP Program)

10-Q

000-06217

10.15

5/8/2006

10.15**

Amendment of Stock Option and Restricted Stock Unit Agreements with the Elimination of Leave of Absence Provisions

10-Q

000-06217

10.5

5/2/2008

10.16**

Intel Corporation 2006 Equity Incentive Plan, as amended and restated, effective May 17, 2006

8-K

000-06217

10.1

5/22/2006

10.17**

Form of Notice of Grant-Restricted Stock Units

8-K

000-06217

10.13

7/6/2006

10.18**

Form of Notice of Grant-Nonqualified Stock Options

8-K

000-06217

10.24

7/6/2006

10.19**

Terms and Conditions relating to Restricted Stock Units granted on and after May 17, 2006 to U.S. employees under the Intel Corporation 2006 Equity Incentive Plan (for grants under the ELTSOP Program)

8-K

000-06217

10.7

7/6/2006

10.20**

International Restricted Stock Unit Agreement under the 2006 Equity Incentive Plan (for grants under the ELTSOP program after May 17, 2006)

8-K

000-06217

10.8

7/6/2006

10.21**

Intel Corporation 2006 Equity Incentive Plan Terms and Conditions Relating to Restricted Stock Units Granted to Paul S. Otellini on April 17, 2008 under the Intel Corporation 2006 Equity Incentive Plan (under the ELTSOP RSU Program)

8-K

000-06217

99.1

4/17/2008

10.22**

Standard Terms and Conditions relating to Non-Qualified Stock Options granted to U.S. employees on and after May 17, 2006 under the Intel Corporation 2006 Equity Incentive Plan (for grants under the standard program)

8-K

000-06217

10.14

7/6/2006

10.23**

Standard International Nonqualified Stock Option Agreement under the 2006 Equity Incentive Plan (for grants under the standard program after May 17, 2006)

8-K

000-06217

10.15

7/6/2006

10.24**

Form of Stock Option Agreement with Continued Post-Retirement Exercisability

10-Q

000-06217

10.3

5/2/2008

104

Table of Contents

Exhibit Number

Exhibit Description

Incorporated by Reference

Filed or Furnished Herewith

Form

File Number

Exhibit

Filing Date

10.25**

Terms and Conditions relating to Nonqualified Stock Options granted to U.S. employees on and after May 17, 2006 under the Intel Corporation 2006 Equity Incentive Plan (for grants under the ELTSOP Program)

8-K

000-06217

10.19

7/6/2006

10.26**

International Nonqualified Stock Option Agreement under the 2006 Equity Incentive Plan (for grants after May 17, 2006 under the ELTSOP Program)

8-K

000-06217

10.2

7/6/2006

10.27**

Amendment of Stock Option and Restricted Stock Unit Agreements with the Elimination of Leave of Absence Provisions and the Addition of the Ability to Change the Grant Agreement as Laws Change

10-Q

000-06217

10.6

5/2/2008

10.28**

Terms and Conditions Relating to Nonqualified Options Granted to Paul Otellini on January 18, 2007 under the Intel Corporation 2006 Equity Incentive Plan

10-K

000-06217

10.42

2/26/2007

10.29**

Intel Corporation 2006 Equity Incentive Plan As Amended and Restated effective May 16, 2007

8-K

000-06217

10.1

5/16/2007

10.30**

Intel Corporation 2007 Executive Officer Incentive Plan, effective as of January 1, 2007

8-K

000-06217

10.2

5/16/2007

10.31**

Amendment to the Intel Corporation 2007 Executive Officer Incentive Plan, effective as of January 1, 2012

X

10.32**

Intel Corporation Deferral Plan for Outside Directors, effective July 1, 1998

10-K

333-45395

10.6

3/26/1999

10.33**

Intel Corporation Sheltered Employee Retirement Plan Plus, as amended and restated effective January 1, 2009

S-8

333-172024

99.1

2/2/2011

10.34**

Form of Indemnification Agreement with Directors and Executive Officers

10-K

000-06217

10.15

2/22/2005

10.35**

Listed Officer Compensation

10-Q

000-06217

10.1

5/3/2007

10.36**

Intel Corporation 2006 Stock Purchase Plan, effective May 17, 2006

S-8

333-135178

99.1

6/21/2006

10.37**

Amendment to the Intel Corporation 2006 Stock Purchase Plan, effective February 20, 2009

10-K

000-06217

10.45

2/23/2009

10.38**

Summary of Intel Corporation Non-Employee Director Compensation

8-K

000-06217

10.1

7/14/2006

10.39**

Intel Corporation 2006 Deferral Plan for Outside Directors, effective November 15, 2006

10-K

000-06217

10.41

2/26/2007

10.40**

Standard Terms and Conditions relating to Restricted Stock Units granted on and after March 27, 2009 under the Intel Corporation 2006 Equity Incentive Plan (standard OSU program)

10-Q

000-06217

10.1

4/30/2009

10.41**

Standard International Restricted Stock Unit Agreement under the Intel Corporation 2006 Equity Incentive Plan (for RSUs granted after March 27, 2009 under the standard OSU program)

10-Q

000-06217

10.2

4/30/2009

10.42**

Form of Terms and Conditions Relating to Nonqualified Options Granted to Paul Otellini under the Intel Corporation 2006 Equity Incentive Plan

10-Q

000-06217

10.3

4/30/2009

10.43**

Intel Corporation 2006 Equity Incentive Plan, as amended and restated effective May 20, 2009

8-K

000-06217

10.1

5/22/2009

105

Table of Contents

Exhibit Number

Exhibit Description

Incorporated by Reference

Filed or Furnished Herewith

Form

File Number

Exhibit

Filing Date

10.44**

Intel Corporation Non-Employee Director Restricted Stock Unit Agreement under the 2006 Equity Incentive Plan (for RSUs granted after January 17, 2008)

10-Q

000-06217

10.1

8/3/2009

10.45**

Intel Corporation Non-Employee Director Restricted Stock Unit Agreement under the 2006 Equity Incentive Plan (for RSUs granted after March 27, 2009 under the OSU program)

10-Q

000-06217

10.2

8/3/2009

10.46**

Form of Notice of Grant – Restricted Stock Units

10-Q

000-06217

10.3

8/3/2009

10.47**

Standard Terms and Conditions relating to Restricted Stock Units granted on and after January 22, 2010 under the Intel Corporation Equity Incentive Plan (standard OSU program)

10-K

000-06217

10.48

2/22/2010

10.48**

Intel Corporation Restricted Stock Unit Agreement under the Intel Corporation 2006 Equity Incentive Plan (for RSUs granted after January 22, 2010 under the standard OSU program)

10-K

000-06217

10.49

2/22/2010

10.49**

Standard Terms and Conditions relating to Non-Qualified Stock Options granted to A. Douglas Melamed on January 22, 2010 under the Intel Corporation 2006 Equity Incentive Plan (standard option program)

10-K

000-06217

10.5

2/22/2010

10.50**

Intel Corporation Non-Employee Director Restricted Stock Unit Agreement under the 2006 Equity Incentive Plan (for RSUs granted after July 1, 2010 under the OSU program)

10-Q

000-06217

10.1

7/30/2010

10.51**

Restricted Stock Unit Agreement under the 2006 Equity Incentive Plan (for RSUs granted after January 20, 2011 under the standard MCM-RSU program)

8-K

000-06217

99.1

1/26/2011

10.52**

Restricted Stock Unit Agreement under the 2006 Equity Incentive Plan (for RSUs granted after January 20, 2011 under the standard OSU program)

8-K

000-06217

99.2

1/26/2011

10.53**

Standard Terms and Conditions Relating to Restricted Stock Units Granted on and after January 20, 2011 under the Intel Corporation 2006 Equity Incentive Plan (standard OSU program)

8-K

000-06217

99.3

1/26/2011

10.54**

Standard Terms and Conditions Relating to Restricted Stock Units Granted on and after January 20, 2011 under the Intel Corporation 2006 Equity Incentive Plan (standard MCM-RSU program)

8-K

000-06217

99.4

1/26/2011

10.55**

Intel Corporation 2006 Equity Incentive Plan as Amended and Restated Effective May 19, 2011

S-8

333-175123

99.1

6/24/2011

10.56**

Restricted Stock Unit Agreement under the 2006 Equity Incentive Plan (for RSUs granted on or after January 24, 2012 with Year 2 to Year 5 Vesting)

X

10.57**

Standard Terms and Conditions Relating to Restricted Stock Units Granted on and after January 24, 2012 under the Intel Corporation 2006 Equity Incentive Plan (Year 2 to 5 Vesting)

X

106

Table of Contents

Exhibit Number

Exhibit Description

Incorporated by Reference

Filed or Furnished Herewith

Form

File Number

Exhibit

Filing Date

10.58**

Intel Corporation 2006 Stock Purchase Plan

S-8

333-175123

99.2

6/24/2011

10.59**

Intel Corporation 2006 Stock Purchase Plan as Amended and Restated Effective July 19, 2011

10-Q

000-06217

10.3

8/8/2011

10.60**

Offer Letter from Intel Corporation to Doug Melamed dated November 10, 2009

10-Q

000-06217

10.1

5/9/2011

10.61

Settlement Agreement Between Advanced Micro Devices, Inc. and Intel Corporation, dated November 11, 2009

8-K

000-06217

10.1

11/12/2009

10.62

Agreement and Plan of Merger Among Intel Corporation, Jefferson Acquisition Corporation and McAfee, Inc. dated August 18, 2010

8-K

000-06217

2.1

8/19/2010

10.63

Patent Cross License Agreement between NVIDIA Corporation and Intel Corporation, dated January 10, 2011. Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

8-K

000-06217

10.1

1/10/2011

12.1

Statement Setting Forth the Computation of Ratios of Earnings to Fixed Charges

X

21.1

Intel Corporation Subsidiaries

X

23.1

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm

X

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act)

X

31.2

Certification of Chief Financial Officer and Principal Accounting Officer pursuant to Rule 13a-14(a) of the Exchange Act

X

32.1

Certification of the Chief Executive Officer and the Chief Financial Officer and Principal Accounting Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X

101.INS

XBRL Instance Document

X

101.SCH

XBRL Taxonomy Extension Schema Document

X

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

X

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

X

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

X

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

X

**	Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.

107

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

INTEL CORPORATION Registrant
By:		/ S /    S TACY J. S MITH
		Stacy J. Smith Senior Vice President, Chief Financial Officer, and Principal Accounting Officer February 23, 2012

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/ S /    C HARLENE B ARSHEFSKY				/ S /    J AMES D. P LUMMER
Charlene Barshefsky				James D. Plummer
Director				Director
February 23, 2012				February 23, 2012
/ S /    A NDY D. B RYANT				/ S /    D AVID S. P OTTRUCK
Andy D. Bryant				David S. Pottruck
Vice Chairman of the Board and Director				Director
February 23, 2012				February 23, 2012
/ S /    S USAN L. D ECKER				/ S /    J ANE E. S HAW
Susan L. Decker				Jane E. Shaw
Director				Chairman of the Board and Director
February 23, 2012				February 23, 2012
/ S /    J OHN J. D ONAHOE				/ S /    S TACY J. S MITH
John J. Donahoe				Stacy J. Smith
Director				Senior Vice President, Chief Financial Officer, and
February 23, 2012				Principal Accounting Officer
				February 23, 2012
/ S /    R EED E. H UNDT				/ S /    F RANK D. Y EARY
Reed E. Hundt				Frank D. Yeary
Director				Director
February 23, 2012				February 23, 2012
/ S /    P AUL S. O TELLINI				/ S /    D AVID B. Y OFFIE
Paul S. Otellini				David B. Yoffie
President, Chief Executive Officer, Director, and				Director
Principal Executive Officer				February 23, 2012
February 23, 2012

108