Letter From Your CEO

Paul S. Otellini In 2012, Intel delivered revenue of $53.3 billion, net income of $11.0 billion, and earnings per share of $2.13. We generated approximately $18.9 billion in cash from operations, and our gross margin of 62.1% was at the top end of our historical gross margin range for the third year in a row. We increased R&D spending as we made investments across smartphones, tablets, UltrabookTM systems, the data center, and manufacturing. Worldwide economic growth in 2012 was significantly lower than we had anticipated entering the year, and the PC market segment was impacted by the growth of tablets. Although our financial results were below our initial expectations, we launched cutting-edge products in every major business segment and extended our manufacturing leadership.

Fulfilling our vision

Intel has an ambitious vision: Create and extend computing technology to connect and enrich the life of every person on Earth. We made tremendous progress toward achieving that vision in 2012 by delivering the world’s most advanced silicon technology. We ramped shipments of 22-nanometer (nm) processors with Intel’s breakthrough 3-D Tri-Gate transistor technology while building our next-generation 14nm factory network and developing 10nm and smaller technologies. We estimate that we have about a 2-year process technology lead and about a 3.5-year lead in introducing revolutionary transistor technologies such as strained silicon, High-K Metal Gate, and Tri-Gate into high-volume manufacturing, compared to our nearest competitor.

No-compromise computing

The computing market is undergoing a radical transformation, with a blurring of form factors and the adoption of new user interfaces. Convertible and detachable Ultrabook systems provide a two-for-one, no-compromise computing experience that eliminates the need to choose between a notebook and a tablet. The first Ultrabook systems were launched in 2011, and 100 were on the market by year-end 2012, with dozens more in the pipeline. We’re seeing unparalleled creativity in systems that combine our newest microprocessors with the touch-enabled Microsoft Windows* 8 operating system.

We expect to see a new wave of Ultrabook system innovation with the 2013 launch of Intel’s first 22nm Tri-Gate processor designed from the ground up for Ultrabook systems. This processor, code-named “Haswell,” is designed to enable higher performance, the largest generation-to-generation increase in battery life in Intel’s history, thinner form factors, instant-on, and more lifelike interaction through touch, gesture, voice, and facial recognition.

Our mobile edge

We are moving Intel® AtomTM processors to our leading-edge manufacturing technologies at twice our normal cadence. We shipped 32nm versions in 2012, and we expect to launch the 22nm generation in 2013, and 14nm versions in 2014. With each new generation of technology, we can boost performance while reducing costs and power consumption—great attributes for any market, but particularly for mobile computing.

Six major mobile providers launched Intel Atom processor-based smartphones in 2012. Intel Atom processor-based tablets and tablet convertibles running Windows 8 are also shipping worldwide, offering thin and light designs, up to 10 hours of battery life in typical active usages, and compatibility with more than 4 million Intel® architecture applications.

Data storage and high-performance computing

Demand for transistors in servers, storage, and networking continues to grow. Between 2009 and 2012, the total available market for cloud computing processors tripled, and by 2015 we expect that more than 3 billion connected users and 15 billion connected devices will be driving more than 1,500 exabytes of cloud traffic per year. Working with our McAfee subsidiary, we are helping to build confidence in private and public clouds through security solutions for the data center, network connections, and devices that connect to the cloud.

In 2012, we introduced the first Intel® Xeon PhiTM coprocessor, a 60-core teraflop product designed for climate research, genomics, and other high-performance, highly parallel computing applications. We also launched an Intel® Xeon® processor family designed for leadership performance, security, and energy-efficiency demands in next-generation data centers. For the data storage market segment, the Intel Atom processor powers microservers that offer significant performance, software compatibility, and low-power advantages.

Our commitment to corporate responsibility

In addition to enriching people’s lives through technology, we do so through our corporate responsibility leadership, which creates value for Intel, our stockholders, and society. In 2012, Intel was included on the Dow Jones Sustainability Indexes for the 14th consecutive year, and we ranked number seven on Newsweek’s annual Green Rankings U.S. 500 list. Our company also ranked number seven on the global Gartner Supply Chain Top 25 list for 2012, and we continued to lead the industry in addressing the issue of “conflict minerals” in the electronics supply chain. We helped empower our employees to donate more than 1 million hours of service to their communities through our Intel Involved volunteer program. Intel also continued to expand education opportunities for millions of students around the world, and partnered on the launch of the “Girl Rising” film and 10x10 social action campaign to help highlight the importance of investing in the education of girls and women to advance economic opportunity.

I will retire from Intel in May 2013 after almost 40 years at the company. Throughout my time here, I have marveled at Intel’s ability to move technology forward, empower people, and transform our world in ways we had never imagined. Intel employees are the best of the best. I can’t wait to see what they come up with next.

Paul S. Otellini, President and Chief Executive Officer