Annual report pursuant to Section 13 and 15(d)

Operating Segments and Geographic Information

v2.4.1.9
Operating Segments and Geographic Information
 12 Months Ended
Dec. 27, 2014
Segment Reporting [Abstract]  
Operating Segments and Geographic Information [Text Block]
Note 26: Operating Segments and Geographic Information
Our operating segments in effect as of December 27, 2014 include:
•    PC Client Group
  
•    All other
•    Data Center Group
  
•    Non-Volatile Memory Solutions Group
•    Internet of Things Group
  
•    Netbook Group
•    Mobile and Communications Group
  
•    New Devices Group
•    Software and services operating segments
  
 
•    McAfee
  
 
•    Software and Services Group
  
 
In the first three months of 2014, we formed the Internet of Things Group, which includes platforms and software optimized for the Internet of Things market segment. Additionally, we changed our organizational structure to align with our critical objectives, which changed information that our Chief Operating Decision Maker (CODM) reviews for purposes of allocating resources and assessing performance. After the reorganization, we have nine operating segments: PC Client Group (PCCG), Data Center Group (DCG), Internet of Things Group (IOTG), Mobile and Communication Group (MCG), McAfee, Software and Services Group, Non-Volatile Memory Solutions Group, Netbook Group, and New Devices Group. All prior-period amounts have been adjusted retrospectively to reflect these operating segment changes, as well as other minor reorganizations.
The CODM is our CEO. The CODM allocates resources to and assesses the performance of each operating segment using information about its revenue and operating income (loss).
We manage our business activities primarily based on a product segmentation basis. PCCG, DCG, and MCG are our reportable operating segments. IOTG and the aggregated "software and services operating segments," as shown in the preceding operating segment list, 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. Our Non-Volatile Memory Solutions Group, Netbook Group, and New Devices Group operating segments do not meet the quantitative thresholds to qualify as reportable segments and their combined results are included within the "all other" category.
In November 2014, we announced the implementation of a new operating structure. Our new structure reflects our strategy to address all aspects of the client computing market segment and utilize our intellectual property to offer compelling solutions. The new operating structure ensures that we are able to respond to market demand, while reducing costs through efficiencies and products targeted for the client computing market segment. As a result of the implementation of our new operating structure, all prior-period amounts will be adjusted retrospectively to reflect the new organizational structure expected to become effective in the first quarter of 2015.
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 (including Ultrabook™ devices), 2 in 1 systems, the desktop (including all-in-ones and high-end enthusiast PCs), and tablets; wireless and wired connectivity products; as well as home gateway and set-top box components.
•
Data Center Group. Includes server, network, and storage platforms designed for the enterprise, cloud, communications infrastructure, and technical computing segments.
•
Internet of Things Group. Includes platforms designed for embedded market segments, including retail, transportation, industrial, and buildings and home, along with a broad range of other market segments.
•
Mobile and Communications Group. Includes platforms designed for the tablet and smartphone market segments; and mobile communications components such as baseband processors, radio frequency transceivers, Wi-Fi, Bluetooth® technology, global navigation satellite systems, and power management chips.
•
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, and software products and services that promote Intel architecture as the platform of choice for software development.
We have sales and marketing, manufacturing, engineering, finance, and administration groups. Expenses for these groups are generally allocated to the operating segments, and the expenses are included in the following operating results.
The "all other" category includes revenue, expenses, and charges such as:
•
results of operations from our Non-Volatile Memory Solutions Group, Netbook Group, and New Devices Group;
•
amounts included within restructuring and asset impairment charges;
•
a portion of profit-dependent compensation and other expenses not allocated to the operating segments;
•
divested businesses for which discrete operating results are not regularly reviewed by our CODM;
•
results of operations of start-up businesses that support our initiatives, including our foundry business; 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. Based on the interchangeable nature of our manufacturing and assembly and test assets, most of the related depreciation expense is not directly identifiable within our operating segments, as it is included in overhead cost pools and subsequently absorbed into inventory as each product passes through our manufacturing process. As our products are then sold across multiple operating segments, it is impracticable to determine the total depreciation expense included as a component of each operating segment’s operating income (loss) results. 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.

 Net revenue and operating income (loss) for each period were as follows:
(In Millions)
 
2014
 
2013
 
2012
Net revenue:
 
 
 
 
 
 
PC Client Group
 
$
34,669

 
$
33,270

 
$
34,688

Data Center Group
 
14,387

 
12,161

 
11,219

Internet of Things Group
 
2,142

 
1,801

 
1,600

Mobile and Communications Group
 
202

 
1,375

 
1,791

Software and services operating segments
 
2,216

 
2,190

 
2,072

All other
 
2,254

 
1,911

 
1,971

Total net revenue
 
55,870

 
52,708

 
53,341

 
 
 
 
 
 
 
Operating income (loss):
 
 
 
 
 
 
PC Client Group
 
14,635

 
11,751

 
13,008

Data Center Group
 
7,279

 
5,569

 
5,231

Internet of Things Group
 
616

 
550

 
278

Mobile and Communications Group
 
(4,206
)
 
(3,148
)
 
(1,776
)
Software and services operating segments
 
55

 
24

 
12

All other
 
(3,032
)
 
(2,455
)
 
(2,115
)
Total operating income
 
$
15,347

 
$
12,291

 
$
14,638


In 2014, Hewlett-Packard Company accounted for 18% of our net revenue (17% in 2013 and 18% in 2012), Dell Inc. accounted for 16% of our net revenue (15% in 2013 and 14% in 2012), and Lenovo Group Limited accounted for 12% of our net revenue (12% in 2013 and 11% in 2012). The majority of the revenue from these customers was from the sale of platforms and other components by the PCCG and DCG operating segments.
A substantial majority of our revenue in the PCCG and DCG operating segments is generated from the sale of platforms.
Net revenue by country for the three years ended December 27, 2014 is based on the billing location of the customer. Revenue from unaffiliated customers for each period was as follows:
(In Millions)
 
2014
 
2013
 
2012
Singapore
 
$
11,573

 
$
10,997

 
$
12,622

China (including Hong Kong)
 
11,197

 
9,890

 
8,299

United States
 
9,828

 
9,091

 
8,348

Taiwan
 
8,955

 
8,888

 
9,327

Japan
 
2,776

 
3,725

 
4,303

Other countries
 
11,541

 
10,117

 
10,442

Total net revenue
 
$
55,870

 
$
52,708

 
$
53,341


Revenue from unaffiliated customers outside the U.S. totaled $46.0 billion in 2014 ($43.6 billion in 2013 and $45.0 billion in 2012).
Net property, plant and equipment by country at the end of each period was as follows:
(In Millions)
 
Dec 27,
2014
 
Dec 28,
2013
 
Dec 29,
2012
United States
 
$
24,020

 
$
23,624

 
$
20,542

Ireland
 
5,433

 
2,986

 
1,523

Israel
 
1,957

 
2,667

 
3,389

Other countries
 
1,828

 
2,151

 
2,529

Total property, plant and equipment, net
 
$
33,238

 
$
31,428

 
$
27,983


Net property, plant and equipment outside the U.S. totaled $9.2 billion as of December 27, 2014 ($7.8 billion as of December 28, 2013 and $7.4 billion as of December 29, 2012).