Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



	þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended March 30, 2019.



	¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission File Number 000-06217

INTEL CORPORATION

(Exact name of registrant as specified in its charter)



Delaware		94-1672743
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
2200 Mission College Boulevard, Santa Clara, California		95054-1549
(Address of principal executive offices)		(Zip Code)

(408) 765-8080

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer þ	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨	Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

Shares outstanding of the Registrant’s common stock:



Class		Outstanding as of March 30, 2019
Common stock, $0.001 par value		4,477 million

TABLE OF CONTENTS

THE ORGANIZATION OF OUR QUARTERLY REPORT ON FORM 10-Q

The order and presentation of content in our Quarterly Report on Form 10-Q (Form 10-Q) differs from the traditional U.S. Securities and Exchange Commission (SEC) Form 10-Q format. We believe that our format improves readability and better presents how we organize and manage our business. See "Form 10-Q Cross-Reference Index" within Other Key Information for a cross-reference index to the traditional SEC Form 10-Q format.

The preparation of consolidated financial statements is in conformity with U.S. generally accepted accounting principles (GAAP). We have included key metrics that we use to measure our business, some of which are non-GAAP measures. See these "Non-GAAP Financial Measures" within Other Key Information.



		Page
FORWARD-LOOKING STATEMENTS		1
A QUARTER IN REVIEW		2
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AND SUPPLEMENTAL DETAILS
	Consolidated Condensed Statements of Income	3
	Consolidated Condensed Statements of Comprehensive Income	4
	Consolidated Condensed Balance Sheets	5
	Consolidated Condensed Statements of Cash Flows	6
	Consolidated Condensed Statements of Stockholders' Equity	7
	Notes to Consolidated Condensed Financial Statements	8

MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
	Overview	21
	Revenue, Gross Margin, and Operating Expenses	22
	Business Unit Trends and Results	24
	Other Consolidated Results of Operations	29
	Liquidity and Capital Resources	29
	Quantitative and Qualitative Disclosures about Market Risk	30

OTHER KEY INFORMATION
	Risk Factors	31
	Controls and Procedures	31
	Non-GAAP Financial Measures	31
	Issuer Purchases of Equity Securities	32
	Exhibits	33
	Form 10-Q Cross-Reference Index	35

Table of Contents

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. Words such as "anticipates," "expects," "intends," "goals," "plans," "believes," "seeks," "estimates," "continues," "may," "will," "would," "should," "could," and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, projected growth of markets relevant to our businesses, future products and the expected availability and benefits of such products, uncertain events or assumptions, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on management's expectations as of the date of this filing and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include those described throughout this report and our Annual Report on Form 10-K for the year ended December 29, 2018, particularly the "Risk Factors" sections of such reports. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business. The forward-looking statements in this Form 10-Q do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that had not been completed as of the date of this filing. In addition, the forward-looking statements in this Form 10-Q are made as of the date of this filing, including expectations based on third-party information and projections that management believes to be reputable, and Intel does not undertake, and expressly disclaims any duty, to update such statements, whether as a result of new information, new developments, or otherwise, except to the extent that disclosure may be required by law.

INTEL UNIQUE TERMS

We use specific terms throughout this document to describe our business and results. Below are key terms and how we define them:



PLATFORM PRODUCTS		A microprocessor (processor or central processing unit (CPU)) and chipset, a stand-alone System-on-Chip (SoC), or a multichip package, based on Intel^® architecture. Platform products, or platforms, are primarily used in solutions sold through the Client Computing Group (CCG), Data Center Group (DCG), and Internet of Things Group (IOTG) segments.

ADJACENT PRODUCTS		All of our non-platform products, for CCG, DCG, and IOTG, such as modem, Ethernet and silicon photonics, as well as Mobileye, Non-Volatile Memory Solutions Group (NSG), and Programmable Solutions Group (PSG) products. Combined with our platform products, adjacent products form comprehensive platform solutions to meet customer needs.

PC-CENTRIC BUSINESS		Our CCG business, including both platform and adjacent products.

DATA-CENTRIC BUSINESSES		Our DCG, IOTG, Mobileye, NSG, PSG, and all other businesses.

Intel, the Intel logo, Intel Agilex, Intel Optane, Thunderbolt, Xeon and 3D XPoint are trademarks of Intel Corporation or its subsidiaries in the U.S. and/or other countries.



		1

Table of Contents

A QUARTER IN REVIEW

Total revenue of $16.1 billion was flat year over year as our PC-centric business grew 4% and our data-centric businesses were down 5%. Compared to a year ago, data-centric revenue was down as data center market growth slowed and NAND pricing remains under pressure. Our PC-centric business was up due to an increase in platform average selling price (ASP) driven by a richer mix of higher performance products. Our continued ramp of the 10 nanometer (nm) process node and further margin compression on memory products resulted in lower gross margins and operating income, which was partially offset by executing the quarter with continued operating margin leverage. In the first three months we generated $5.0 billion of cash flow from operations and returned $3.9 billion to stockholders, including $1.4 billion in dividends and $2.5 billion in buybacks.



REVENUE	OPERATING INCOME	DILUTED EPS
■ PC-CENTRIC $B ■ DATA-CENTRIC $B	■ GAAP $B ■ NON-GAAP $B	■ GAAP ■ NON-GAAP




$16.1B	$4.2B	$4.5B	$0.87	$0.89
GAAP	GAAP	non-GAAP¹	GAAP	non-GAAP¹
flat in comparison to Q1 2018	down $296M or 7% from Q1 2018	down $290M or 6% from Q1 2018	down $0.06 or 6% from Q1 2018	up $0.02 or 2% from Q1 2018

Growth in PC-centric, Internet of Things, and Mobileye, offset by declines in other data-centric businesses	Lower gross margin from ramp of 10nm and sustained ASP pressure on NAND, partially offset by increased spending leverage		Impact from lower gross margin driven by 10nm ramp, offset by positive spending leverage and the receipt of McAfee, Inc. dividend, as well as lower shares outstanding

BUSINESS SUMMARY

•

We have maintained an intense, company-wide focus on improving execution while accelerating innovation. We are on track with 10nm process technology and continue to expect product on shelves for the 2019 holiday season. We are increasing the velocity of our product development while also announcing new 10nm products like the 10nm-based Snow Ridge network SoC for use in 5G base stations and Intel^® Agilex™, our next generation field-programmable gate array (FPGA) product family.

•

At our Data-Centric Innovation Day event, we unveiled a broad portfolio of tools and technologies that underscore our unmatched depth, scale, and ability to move, store, and process data across the most demanding workloads from the data center to the edge, including our newly-released 2nd generation Intel^® Xeon^® Scalable processors which connect directly to another breakthrough innovation—Intel^® Optane™ DC persistent memory.

•

DCG experienced challenges as cloud customers absorb capacity purchased in 2018, inventory consumption in enterprise and government and communication service providers market segments led to a deceleration in spending, and China demand weakened. NSG declined as industry-wide pricing pressure for NAND intensified. However, demand for edge compute drove double digit revenue growth for Mobileye and IOTG (excluding the effects of the Wind River Systems, Inc. (Wind River) divestiture).

•

PC-centric growth was driven by strength in our gaming and large commercial market segments. Platform volumes declined and pricing increased as we prioritized production to server and high-performance PC market segments. We continue to invest in capacity expansion for 14nm production, improving our supply in the second half of 2019, although product mix will continue to be a challenge in the third quarter.


•	We will be exiting the 5G smartphone modem business but will continue to meet current customer commitments for our existing 4G smartphone modem product lines. 5G continues to be a strategic priority and we will continue to invest in our 5G network infrastructure business. We are assessing opportunities for 4G and 5G modems in PCs, Internet of Things and other data-centric devices.

¹See "Non-GAAP Financial Measures" within Other Key Information.



A QUARTER IN REVIEW		2

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CONSOLIDATED CONDENSED STATEMENTS OF INCOME



	Three Months Ended
(In Millions, Except Per Share Amounts; Unaudited)	Mar 30, 2019			Mar 31, 2018
Net revenue	$	16,061		$	16,066
Cost of sales	6,972			6,335
Gross margin	9,089			9,731
Research and development	3,332			3,311
Marketing, general and administrative	1,533			1,900
Amortization of acquisition-related intangibles	50			50
Operating expenses	4,915			5,261
Operating income	4,174			4,470
Gains (losses) on equity investments, net	434			643
Interest and other, net	(61		)	(102		)
Income before taxes	4,547			5,011
Provision for taxes	573			557
Net income	$	3,974		$	4,454
Earnings per share – basic	$	0.88		$	0.95
Earnings per share – diluted	$	0.87		$	0.93
Weighted average shares of common stock outstanding:
Basic	4,492			4,674
Diluted	4,564			4,790

See accompanying notes.



FINANCIAL STATEMENTS	Consolidated Condensed Statements of Income	3

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CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME



	Three Months Ended
(In Millions; Unaudited)	Mar 30, 2019		Mar 31, 2018
Net income	$	3,974	$	4,454
Changes in other comprehensive income, net of tax:
Net unrealized holding gains (losses) on derivatives	102		119
Actuarial valuation and other pension benefits (expenses), net	9		148
Translation adjustments and other	50		(22		)
Other comprehensive income (loss)	161		245
Total comprehensive income	$	4,135	$	4,699

See accompanying notes.



FINANCIAL STATEMENTS	Consolidated Condensed Statements of Comprehensive Income	4

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CONSOLIDATED CONDENSED BALANCE SHEETS



(In Millions)	Mar 30, 2019			Dec 29, 2018
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	3,154		$	3,019
Short-term investments	2,698			2,788
Trading assets	6,181			5,843
Accounts receivable	6,957			6,722
Inventories	7,765			7,253
Other current assets	2,305			3,162
Total current assets	29,060			28,787
Property, plant and equipment, net of accumulated depreciation of $67,438 ($65,342 as of December 29, 2018)	50,040			48,976
Equity investments	5,254			6,042
Other long-term investments	3,465			3,388
Goodwill	24,521			24,513
Identified intangible assets, net	11,457			11,836
Other long-term assets	5,661			4,421
Total assets	$	129,458		$	127,963

Liabilities, temporary equity, and stockholders’ equity
Current liabilities:
Short-term debt	$	2,750		$	1,261
Accounts payable	4,059			3,824
Accrued compensation and benefits	1,984			3,622
Other accrued liabilities	10,118			7,919
Total current liabilities	18,911			16,626
Debt	25,737			25,098
Contract liabilities	1,775			2,049
Income taxes payable, non-current	4,781			4,897
Deferred income taxes	1,521			1,665
Other long-term liabilities	2,797			2,646
Contingencies (Note 10)
Temporary equity	275			419
Stockholders’ equity:
Preferred stock	—			—
Common stock and capital in excess of par value, 4,477 issued and outstanding (4,516 issued and outstanding as of December 29, 2018)	25,346			25,365
Accumulated other comprehensive income (loss)	(813		)	(974		)
Retained earnings	49,128			50,172
Total stockholders’ equity	73,661			74,563
Total liabilities, temporary equity, and stockholders’ equity	$	129,458		$	127,963

See accompanying notes.



FINANCIAL STATEMENTS	Consolidated Condensed Balance Sheets	5

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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS



	Three Months Ended
(In Millions; Unaudited)	Mar 30, 2019			Mar 31, 2018
Cash and cash equivalents, beginning of period	$	3,019		$	3,433
Cash flows provided by (used for) operating activities:
Net income	3,974			4,454
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	2,229			1,806
Share-based compensation	389			433
Amortization of intangibles	396			390
(Gains) losses on equity investments, net	(274		)	(643		)
Changes in assets and liabilities:
Accounts receivable	(235		)	102
Inventories	(512		)	(96		)
Accounts payable	196			73
Accrued compensation and benefits	(1,620		)	(1,307		)
Customer deposits and prepaid supply agreements	(228		)	1,599
Income taxes	440			295
Other assets and liabilities	204			(822		)
Total adjustments	985			1,830
Net cash provided by operating activities	4,959			6,284
Cash flows provided by (used for) investing activities:
Additions to property, plant and equipment	(3,321		)	(2,910		)
Purchases of available-for-sale debt investments	(872		)	(859		)
Maturities of available-for-sale debt investments	940			893
Purchases of trading assets	(1,869		)	(5,398		)
Maturities and sales of trading assets	1,554			3,760
Sales of equity investments	1,077			163
Other investing	(231		)	(440		)
Net cash used for investing activities	(2,722		)	(4,791		)
Cash flows provided by (used for) financing activities:
Increase (decrease) in short-term debt, net	1,682			2,142
Repayment of debt and debt conversion	(861		)	(327		)
Proceeds from sales of common stock through employee equity incentive plans	290			289
Repurchase of common stock	(2,530		)	(1,914		)
Payment of dividends to stockholders	(1,414		)	(1,400		)
Other financing	731			(162		)
Net cash provided by (used for) financing activities	(2,102		)	(1,372		)
Net increase (decrease) in cash and cash equivalents	135			121
Cash and cash equivalents, end of period	$	3,154		$	3,554

Supplemental disclosures of noncash investing activities and cash flow information:
Acquisition of property, plant, and equipment included in accounts payable and accrued liabilities	$	2,259		$	2,904
Cash paid during the period for:
Interest, net of capitalized interest	$	109		$	60
Income taxes, net of refunds	$	125		$	228

See accompanying notes.



FINANCIAL STATEMENTS	Consolidated Condensed Statements of Cash Flows	6

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CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY



	Common Stock and Capital in Excess of Par Value					Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
(In Millions, Except Per Share Amounts)	Shares		Amount			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
Three Months Ended

Balance as of December 29, 2018	4,516		$	25,365		$	(974	)	$	50,172		$	74,563
Net income	—		—			—			3,974			3,974
Other comprehensive income (loss)	—		—			161			—			161
Employee equity incentive plans and other	11		372			—			—			372
Share-based compensation	—		389			—			—			389
Temporary equity reduction	—		145			—			—			145
Convertible debt	—		(592		)	—			—			(592		)
Repurchase of common stock	(49	)	(278		)	—			(2,172		)	(2,450		)
Restricted stock unit withholdings	(1	)	(55		)	—			(17		)	(72		)
Cash dividends declared ($0.63 per share)	—		—			—			(2,829		)	(2,829		)
Balance as of March 30, 2019	4,477		$	25,346		$	(813	)	$	49,128		$	73,661

Balance as of December 30, 2017	4,687		$	26,074		$	862		$	42,083		$	69,019
Adjustment for change in accounting principle	—		—			(1,790		)	2,424			634
Opening balance as of December 31, 2017	4,687		26,074			(928		)	44,507			69,653
Net income	—		—			—			4,454			4,454
Other comprehensive income (loss)	—		—			245			—			245
Employee equity incentive plans and other	15		323			—			—			323
Share-based compensation	—		453			—			—			453
Temporary equity reduction	—		65			—			—			65
Convertible debt	—		(207		)	—			—			(207		)
Repurchase of common stock	(41	)	(225		)	—			(1,730		)	(1,955		)
Restricted stock unit withholdings	(1	)	(53		)	—			(12		)	(65		)
Cash dividends declared ($0.60 per share)	—		—			—			(2,801		)	(2,801		)
Balance as of March 31, 2018	4,660		$	26,430		$	(683	)	$	44,418		$	70,165



FINANCIAL STATEMENTS	Consolidated Condensed Statements of Stockholders' Equity	7

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



NOTE 1 :	BASIS OF PRESENTATION

We prepared our interim consolidated condensed financial statements that accompany these notes in conformity with GAAP, consistent in all material respects with those applied in our Annual Report on Form 10-K for the fiscal year ended December 29, 2018 (2018 Form 10-K), except for changes associated with leases as detailed in "Note 2: Recent Accounting Standards and Accounting Policies." We have reclassified certain prior period amounts to conform to current period presentation.

We have made estimates and judgments affecting the amounts reported in our consolidated condensed financial statements and the accompanying notes. The actual results that we experience may differ materially from our estimates. The interim financial information is unaudited, and reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. This report should be read in conjunction with the consolidated financial statements in our 2018 Form 10-K.



NOTE 2 :	RECENT ACCOUNTING STANDARDS AND ACCOUNTING POLICIES

We assess the adoption impacts of recently issued accounting standards by the Financial Accounting Standards Board on our financial statements and below describe impacts from newly adopted standards, as well as material updates to our previous assessments, if any, from our 2018 Form 10-K.

ACCOUNTING STANDARDS ADOPTED

Leases

Standard/Description: This new lease accounting standard requires that we recognize leased assets and corresponding liabilities on the balance sheet and provide enhanced disclosure of lease activity.

Effective Date and Adoption Considerations: Effective in the first quarter of 2019. The standard was adopted applying the modified retrospective approach at the beginning of the period of adoption. Our leased assets and corresponding liabilities exclude non-lease components.

Effect on Financial Statements or Other Significant Matters: Within the opening balances for the fiscal year beginning December 30, 2018, we recognized leased assets and corresponding liabilities in other long-term assets of $706 million, which includes $81 million of previously recognized prepaid land use rights, as well as corresponding accrued liabilities of $180 million and other long-term liabilities of $445 million.

Accounting Policy Updates and Disclosures: We determine if an arrangement is a lease at inception, and classify it as finance or operating. Leased assets and corresponding liabilities are recognized based on the present value of the lease payments over the lease term. Our lease terms may include options to extend when it is reasonably certain that we will exercise that option. We have lease agreements with lease and non-lease components, and the non-lease components are accounted for separately and, not included in our leased assets and corresponding liabilities. Leases primarily consist of real property, and, to a lesser extent, certain machinery and equipment.

We recognized leased assets in other long-term assets of $696 million and corresponding accrued liabilities of $177 million, and other long-term liabilities of $438 million as of March 30, 2019. Our leases have remaining lease terms of 1 to 10 years, some of which may include options to extend the leases for up to 40 years. The weighted average remaining lease term was 5.2 years, and the weighted average discount rate was 3.7% as of March 30, 2019.

For the three months ended March 30, 2019, lease expense was $47 million. In accordance with the new leases standard, discounted and undiscounted lease payments under non-cancelable leases as of March 30, 2019, excluding non-lease components, are as follows:



(In Millions)	Remainder of 2019		2020		2021		2022		2023		2024 and Thereafter		Total
Lease payments	$	138	$	160	$	116	$	91	$	65	$	106	$	676
Present value of lease payments													$	615



FINANCIAL STATEMENTS	Notes to Financial Statements	8

Table of Contents

Lease expense was $231 million in 2018 ($264 million in 2017). Prior to our adoption of the new leases standard, future minimum lease payments as of December 29, 2018, which were undiscounted and included lease and non-lease components, were as follows:



(In Millions)	2019		2020		2021		2022		2023		2024 and Thereafter		Total
Minimum rental commitments under all non-cancelable leases	$	229	$	181	$	133	$	101	$	70	$	121	$	835



NOTE 3 :	OPERATING SEGMENTS

We manage our business through the following operating segments:


•	Client Computing Group (CCG)


•	Data Center Group (DCG)


•	Internet of Things Group (IOTG)


•	Mobileye


•	Non-Volatile Memory Solutions Group (NSG)


•	Programmable Solutions Group (PSG)


•	All Other

We offer platform products that incorporate various components and technologies, including a microprocessor and chipset, a stand-alone SoC, or a multichip package. A platform product may be enhanced by additional hardware, software, and services offered by Intel. Platform products are used in various form factors across our CCG, DCG, and IOTG operating segments. We derive a substantial majority of our revenue from platform products, which are our principal products and considered as one class of product.

CCG and DCG are our reportable operating segments. IOTG, Mobileye, NSG, and PSG do not meet the quantitative thresholds to qualify as reportable operating segments; however, we have elected to disclose the results of these non-reportable operating segments.

The “all other” category includes revenue, expenses, and charges such as:


•	results of operations from non-reportable segments not otherwise presented;


•	historical results of operations from divested businesses;


•	results of operations of start-up businesses that support our initiatives, including our foundry business;


•	amounts included within restructuring and other charges;


•	a portion of employee benefits, compensation, and other expenses not allocated to the operating segments; and


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

The Chief Operating Decision Maker (CODM), which is our Chief Executive Officer, 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 for these differences, the accounting policies for segment reporting are the same as for Intel as a whole.



FINANCIAL STATEMENTS	Notes to Financial Statements	9

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Net revenue and operating income (loss) for each period were as follows:



	Three Months Ended
(In Millions)	Mar 30, 2019			Mar 31, 2018
Net revenue:
Client Computing Group
Platform	$	7,824		$	7,615
Adjacent	762			605
	8,586			8,220
Data Center Group
Platform	4,482			4,824
Adjacent	420			410
	4,902			5,234
Internet of Things Group
Platform	825			719
Adjacent	85			121
	910			840

Mobileye	209			151
Non-Volatile Memory Solutions Group	915			1,040
Programmable Solutions Group	486			498
All other	53			83
Total net revenue	$	16,061		$	16,066

Operating income (loss):
Client Computing Group	$	3,072		$	2,791
Data Center Group	1,841			2,602
Internet of Things Group	251			227
Mobileye	68			10
Non-Volatile Memory Solutions Group	(297		)	(81		)
Programmable Solutions Group	89			97
All other	(850		)	(1,176		)
Total operating income	$	4,174		$	4,470

Disaggregated net revenue for each period was as follows:



	Three Months Ended
(In Millions)	Mar 30, 2019		Mar 31, 2018
Platform revenue
Desktop platform	$	2,886	$	2,907
Notebook platform	4,926		4,689
DCG platform	4,482		4,824
Other platform¹	837		738
	13,131		13,158

Adjacent revenue²	2,930		2,908
Total revenue	$	16,061	$	16,066


¹	Includes our tablet, service provider, and IOTG platform revenue.


²	Includes all of our non-platform products for CCG, DCG, and IOTG such as modem, Ethernet, and silicon photonics, as well as Mobileye, NSG, and PSG products.



FINANCIAL STATEMENTS	Notes to Financial Statements	10

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NOTE 4 :	EARNINGS PER SHARE

We computed basic earnings per share of common stock based on the weighted average number of shares of common stock outstanding during the period. We computed diluted earnings per share of common stock based on the weighted average number of shares of common stock outstanding plus potentially dilutive shares of common stock outstanding during the period.



	Three Months Ended
(In Millions, Except Per Share Amounts)	Mar 30, 2019		Mar 31, 2018
Net income available to common stockholders	$	3,974	$	4,454
Weighted average shares of common stock outstanding – basic	4,492		4,674
Dilutive effect of employee equity incentive plans	53		65
Dilutive effect of convertible debt	19		51
Weighted average shares of common stock outstanding – diluted	4,564		4,790
Earnings per share – basic	$	0.88	$	0.95
Earnings per share – diluted	$	0.87	$	0.93

Potentially dilutive shares of common stock from employee equity 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 (RSUs), and the assumed issuance of common stock under the stock purchase plan. Our convertible debentures due 2039 (2009 debentures) require settlement of the principal amount of the debt in cash upon conversion. Since the conversion premium is paid in cash or stock at our option, we determined the potentially dilutive shares of common stock by applying the treasury stock method.

In all periods presented, securities which would have been anti-dilutive are insignificant and are excluded from the computation of diluted earnings per share. In all periods presented, we included our 2009 debentures in the calculation of diluted earnings per share of common stock because the average market price was above the conversion price. We could potentially exclude the 2009 debentures in the future if the average market price is below the conversion price.



NOTE 5 :	CONTRACT LIABILITIES



(In Millions)	Mar 30, 2019		Dec 29, 2018
Prepaid supply agreements	$	2,359	$	2,587
Other	129		122
Total contract liabilities	$	2,488	$	2,709

Contract liabilities are primarily related to partial prepayments received from customers on long-term supply agreements towards future NSG product delivery. As new prepaid supply agreements are entered into and performance obligations are negotiated, this component of the contract liability balance will increase, and as customers purchase product and utilize their prepaid balances, the balance will decrease. The short-term portion of prepayments from supply agreements is reported on the consolidated condensed balance sheets within other accrued liabilities.

The following table shows the changes in contract liability balances relating to prepaid supply agreements during the first three months of 2019:



(In Millions)
Prepaid supply agreements balance as of December 29, 2018	$	2,587
Prepaids utilized	(228		)
Prepaid supply agreements balance as of March 30, 2019	$	2,359



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NOTE 6 :	OTHER FINANCIAL STATEMENT DETAILS

INVENTORIES



(In Millions)	Mar 30, 2019		Dec 29, 2018
Raw materials	$	789	$	813
Work in process	4,758		4,511
Finished goods	2,218		1,929
Total inventories	$	7,765	$	7,253

INTEREST AND OTHER, NET

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



	Three Months Ended
(In Millions)	Mar 30, 2019			Mar 31, 2018
Interest income	$	135		$	91
Interest expense	(138		)	(112		)
Other, net	(58		)	(81		)
Total interest and other, net	$	(61	)	$	(102	)

Interest expense in the preceding table is net of $125 million of interest capitalized in the first quarter of 2019 ($113 million in the first quarter of 2018).



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NOTE 7 :	INVESTMENTS

DEBT INVESTMENTS

Trading Assets

Net gains related to trading assets still held at the reporting date were $16 million in the first three months of 2019 ($175 million of net gains in the first three months of 2018). Net gains on the related derivatives were $2 million in the first three months of 2019 (net losses of $149 million in the first three months of 2018).

Available-for-Sale Debt Investments



	March 30, 2019									December 29, 2018
(In Millions)	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Corporate debt	$	3,033	$	26	$	(11	)	$	3,048	$	3,068	$	2	$	(28	)	$	3,042
Financial institution instruments	3,172		11		(5		)	3,178		3,076		3		(11		)	3,068
Government debt	930		2		(3		)	929		1,069		1		(9		)	1,061
Total available-for-sale debt investments	$	7,135	$	39	$	(19	)	$	7,155	$	7,213	$	6	$	(48	)	$	7,171

Government debt includes instruments such as non-U.S. government bonds and U.S. agency securities. Financial institution instruments include instruments issued or managed by financial institutions in various forms such as commercial paper, fixed and floating rate bonds, money market fund deposits, and time deposits. Substantially all time deposits were issued by institutions outside the U.S. as of March 30, 2019 and December 29, 2018.

The fair value of available-for-sale debt investments, by contractual maturity, as of March 30, 2019, was as follows:



(In Millions)	Fair Value
Due in 1 year or less	$	3,210
Due in 1–2 years	427
Due in 2–5 years	2,934
Due after 5 years	102
Instruments not due at a single maturity date	482
Total	$	7,155

EQUITY INVESTMENTS



(In Millions)	Mar 30, 2019		Dec 29, 2018
Marketable equity securities	$	568	$	1,440
Non-marketable equity securities	3,117		2,978
Equity method investments	1,569		1,624
Total	$	5,254	$	6,042



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The components of gains (losses) on equity investments, net for each period were as follows:



	Three Months Ended
(In Millions)	Mar 30, 2019			Mar 31, 2018
Ongoing mark-to-market adjustments on marketable equity securities	$	253		$	606
Observable price adjustments on non-marketable equity securities	8			124
Impairments	(23		)	(17		)
Sale of equity investments and other¹	196			(70		)
Total gains (losses) on equity investments, net	$	434		$	643

¹ Sale of equity investments and other includes realized gains (losses) on sales of non-marketable equity investments, our share of equity method investee gains (losses), and initial fair value adjustments recorded upon a security becoming marketable.

Gains and losses for our marketable and non-marketable equity securities during the period were as follows:



	Three Months Ended
(In Millions)	Mar 30, 2019			Mar 31, 2018
Net gains (losses) recognized during the period on equity securities	$	263		$	724
Less: Net (gains) losses recognized during the period on equity securities sold during the period	(190		)	(11		)
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date	$	73		$	713

IM Flash Technologies, LLC

IM Flash Technologies, LLC (IMFT) was formed in 2006 by Micron Technology, Inc. (Micron) and Intel to jointly develop NAND flash memory and 3D XPoint™ technology products. IMFT is an unconsolidated variable interest entity and all costs of IMFT are passed on to Micron and Intel through sale of products or services in proportional share of ownership. As of March 30, 2019, we own a 49% interest in IMFT. Our portion of IMFT costs was approximately $132 million in the first three months of 2019 (approximately $83 million in the first three months of 2018).

IMFT depends on Micron and Intel for any additional cash needs to be provided in the form of cash calls or member debt financing (MDF). Extensions of MDF may be converted to a capital contribution at the lender's request, or may be repaid upon availability of funds.

In January 2019, Micron exercised its right to call our interest in IMFT. The call transaction will close between six and twelve months from the date Micron exercised the call option. We will continue to purchase product manufactured at the IMFT facility for a period of up to one year following the close date. The carrying balance of our equity method investment in IMFT as of March 30, 2019 was $1.5 billion.

ASML Holding N.V.

As of December 29, 2018, Intel owned $1.1 billion in ASML Holding N.V. (ASML). We have fully sold our equity investment in ASML.



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NOTE 8 :	FAIR VALUE

For information about our fair value policies, and methods and assumptions used in estimating the fair value of our financial assets and liabilities, see "Note 2: Accounting Policies" and "Note 16: Fair Value" in our 2018 Form 10-K.

ASSETS AND LIABILITIES MEASURED AND RECORDED AT FAIR VALUE ON A RECURRING BASIS

March 30, 2019

December 29, 2018

Fair Value Measured and

Recorded at Reporting Date Using

Fair Value Measured and

Recorded at Reporting Date Using

(In Millions)

Level 1