Performance-Based Cash Compensation

Annual Incentive Cash Payments

Net income is the key financial component of Intel's incentive cash programs, and in 2008 net income decreased 24% compared to 2007. Primarily because of this result, annual incentive cash payments to listed officers decreased 12% in 2008.

Annual incentive cash payments are made under the Executive Officer Incentive Plan. This plan mirrors the broad-based plan for employees, with the added feature of an individual performance adjustment. The annual incentive cash payment cannot be increased beyond the maximum limits calculated each year under the formula and cannot in any event exceed $10 million for any individual. The following illustration shows the Executive Officer Incentive Plan formula.

As shown above, the sum of the three corporate performance components determines the Executive Officer Incentive Plan multiplier; the details of each component are described in the narrative following the Grants of Plan-Based Awards table in "Executive Compensation." We expect the multiplier calculated under the plan to typically range between 2 and 4 (but it may be higher or lower depending on the output of the formula), with a target multiplier of approximately 3. The committee has the ability to apply subjective, discretionary criteria to determine the individual performance adjustment percentage. The committee elected to use net income as the financial performance metric to reward executive officers for growing absolute and relative financial performance, as it is independent of factors such as stock price movements and stock buybacks that affect earnings per share. For more information on corporate performance components, see the Grants of Plan-Based Awards table in "Executive Compensation."

Following the end of 2008, the committee determined the annual incentive cash payments in accordance with the plan's formula. The 2008 financial results yielded a multiplier of 2.66, calculated as follows:

Absolute Financial Component ($ in millions)	Relative Financial Component	Operational Component	Points	EOIP Multiplier

$ 5,292	(1 + (–24.1%))	Architecture/Platforms	23.75
$ 6,557⁽¹⁾	(1 + (–10.5%))	Manufacturing/Technology	29.00
		Customer Orientation	27.25
		Growth and Execution	20.50
		Total	100.5/100
0.807	0.848		1.005	2.66

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With the requirement in 2006 to include the impact of stock-based compensation in generally accepted accounting principles, the 2005 net income number includes the impact of stock-based compensation to ensure consistency in measuring net income growth. Additionally, the 2005 net income number excludes the additional tax expense of $250 million related to the decision to repatriate non-U.S. earnings under the American Jobs Creation Act of 2004.

In 2008, Intel's net income decreased more than the market average, Intel's net income was 19.3% lower than the trailing three-year average, and Intel scored 100.5% on operational goals, down from 107.1% in 2007. No individual performance adjustments were made under the Executive Officer Incentive Plan in 2008.

The following graph illustrates how the amount of the average annual and semiannual incentive cash payments to listed officers varies with changes to Intel's net income.

Semiannual Incentive Cash Payments.

Intel's executive officers participate in a company-wide, semiannual incentive cash plan that calculates payouts based on Intel's corporate profitability, which links compensation to financial performance. Payouts are communicated as a number of extra days of compensation, with executive officers receiving the same number of extra days as other employees. Plan payments earned in 2008 totaled 15.2 days of compensation per employee, down from 17.3 days in 2007. This total included two days of compensation resulting from Intel's achievement of its customer satisfaction goals in 2008. In 2008, 2007, and 2006, semiannual incentive cash payments represented 5% or less of listed officers' total performance-based cash compensation.