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I N T E L C O R P

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D i s t r i b u t i o n a n d u s e o f t h i s d o c u m e n t r e s t r i c t e d u n d e r E D G A R O n l i n e , I n c . T e r m s o f U s e .
http://www.edgar-online.com/

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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

Mark One)

Or

Commission File Number 000-06217

INTEL CORPORATION(Exact name of registrant as specified in its charter)

(408) 765-8080(Registrants telephone number, including area code)

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

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

ndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, everynteractive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) duhe preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes

No

ndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaeporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 1f the Exchange Act.

ndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes

Shares outstanding of the Registrants common stock:

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934For the quarterly period ended March 30, 2013.

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the transition period from to

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)

Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company

(Do not check if a smaller reporting company)

Class Outstanding as of April 19, 2013

Common stock, $0.001 par value 4,971 million

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PART I FINANCIAL INFORMATION

INTEL CORPORATIONCONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)

See accompanying notes.

2

TEM 1. FINANCIAL STATEMENTS

Three Months Ended

In Millions, Except Per Share Amounts)

Mar 30,

2013

Mar 31,

2012Net revenue $ 12,580 $ 12,90

Cost of sales 5,514 4,64

Gross margin 7,066 8,26

Research and development 2,527 2,40

Marketing, general and administrative 1,947 1,97

Amortization of acquisition-related intangibles 73 8

Operating expenses 4,547 4,45

Operating income 2,519 3,8

Gains (losses) on equity investments, net (26) (

nterest and other, net (50) 2

ncome before taxes 2,443 3,8

Provision for taxes 398 1,07

Net income $ 2,045 $ 2,73

Basic earnings per common share $ 0.41 $ 0.5

Diluted earnings per common share $ 0.40 $ 0.5

Cash dividends declared per common share $ 0.45 $ 0.4

Weighted average common shares outstanding:

Basic 4,948 4,99

Diluted 5,080 5,19

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INTEL CORPORATIONCONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)


3

Three Months Ended

In Millions)Mar 30,

2013Mar 31,

2012

Net income $ 2,045 $ 2,73

Other comprehensive income, net of tax:

Change in net unrealized holding gains (losses) on available-for-sale investments 173 16Change in net unrealized holding gains (losses) on derivatives (156) (3

Change in net prior service costs 1

Change in net actuarial losses 34 1

Change in net foreign currency translation adjustment (63) 2

Other comprehensive income (loss) (11) 17

Total comprehensive income $ 2,034 $ 2,91

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INTEL CORPORATIONCONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)


4

In Millions)Mar 30,

2013Dec 29,

2012

Assets

Current assets:

Cash and cash equivalents $ 5,698 $ 8,47

Short-term investments 4,323 3,99Trading assets 7,052 5,68

Accounts receivable, net 3,536 3,83

Inventories 4,358 4,73

Deferred tax assets 2,109 2,1

Other current assets 1,601 2,5

Total current assets 28,677 31,35

Property, plant and equipment, net of accumulated depreciation of $39,023 ($38,063as of December 29, 2012) 28,418 27,98

Marketable equity securities 4,698 4,42

Other long-term investments 1,309 49Goodwill 9,756 9,7

dentified intangible assets, net 5,807 6,23

Other long-term assets 4,418 4,14

Total assets $ 83,083 $ 84,35

Liabilities and stockholders equity

Current liabilities:

Short-term debt $ 88 $ 3

Accounts payable 2,654 3,02

Accrued compensation and benefits 1,501 2,97

Accrued advertising 987 1,0

Deferred income 1,901 1,93

Other accrued liabilities 4,667 3,64

Total current liabilities 11,798 12,89

Long-term debt 13,143 13,13

Long-term deferred tax liabilities 3,427 3,4

Other long-term liabilities 3,521 3,70

Contingencies (Note 18)

Stockholders equity:

Preferred stock Common stock and capital in excess of par value, 4,948 shares issued and outstanding

(4,944 as of December 29, 2012) 20,098 19,46

Accumulated other comprehensive income (loss) (410) (39

Retained earnings 31,506 32,13

Total stockholders equity 51,194 51,20

Total liabilities and stockholders equity $ 83,083 $ 84,35

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INTEL CORPORATIONCONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

Three Months Ended

In Millions)Mar 30,

2013Mar 31,

2012

Cash and cash equivalents, beginning of period $ 8,478 $ 5,06

Cash flows provided by (used for) operating activities:

Net income 2,045 2,73

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 1,682 1,5

Share-based compensation 295 27

Excess tax benefit from share-based payment arrangements (1) (

Amortization of intangibles 382 26

(Gains) losses on equity investments, net 26

Deferred taxes (56) (4

Changes in assets and liabilities:

Accounts receivable 293 (38

Inventories 372 (38

Accounts payable (17) 3

Accrued compensation and benefits (1,370) (1,45

Income taxes payable and receivable 257 76

Other assets and liabilities 377 (35

Total adjustments 2,240 23

Net cash provided by operating activities 4,285 2,97

Cash flows provided by (used for) investing activities:

Additions to property, plant and equipment (2,174) (2,97

Acquisitions, net of cash acquired (98) (17

Purchases of available-for-sale investments (3,475) (1,52Sales of available-for-sale investments 304 33

Maturities of available-for-sale investments 1,711 1,82

Purchases of trading assets (5,191) (4,30

Maturities and sales of trading assets 3,558 4,56

Collection of loans receivable 8 13

Investments in non-marketable equity investments (35) (1

Return of equity method investments 13 6

Purchases of licensed technology and patents (33)

Other investing 95 6

Net cash used for investing activities (5,317) (2,1

Cash flows provided by (used for) financing activities:

Increase (decrease) in short-term debt, net (224) 1

Excess tax benefit from share-based payment arrangements 1

Proceeds from sales of shares through employee equity incentive plans 465 1,24

Repurchase of common stock (559) (1,5

Payment of dividends to stockholders (1,114) (1,04

Other financing (307) (30

Net cash used for financing activities (1,738) (1,49

Effect of exchange rate fluctuations on cash and cash equivalents (10)

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5

Net increase (decrease) in cash and cash equivalents (2,780) (63

Cash and cash equivalents, end of period $ 5,698 $ 4,42

Supplemental disclosures of cash flow information:

Cash paid during the period for:

Interest, net of capitalized interest $ $

Income taxes, net of refunds $ 200 $ 37

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INTEL CORPORATIONNOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Unaudited

Note 1: Basis of Presentation

We prepared our interim consolidated condensed financial statements that accompany these notes in conformity with U.S.enerally accepted accounting principles, consistent in all material respects with those applied in our Annual Report on Form 1

or the year ended December 29, 2012 .

We have made estimates and judgments affecting the amounts reported in our consolidated condensed financial statements a

he accompanying notes. The actual results that we experience may differ materially from our estimates. The interim financialnformation is unaudited, but reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of reor the interim periods presented. This interim information should be read in conjunction with the consolidated financial statemn our Annual Report on Form 10-K for the year ended December 29, 2012 .

Note 2: 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 betweemarket participants at the measurement date. When determining fair value, we consider the principal or most advantageous mn which we would transact, and we consider assumptions that market participants would use when pricing the asset or liabilitynancial assets are measured and recorded at fair value, except for equity method investments, cost method investments, cos

method loans receivable, and reverse repurchase agreements with original maturities greater than approximately three monthsMost of our liabilities are not measured and recorded at fair value.

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 lessctive markets, or model-derived valuations in which all significant inputs are observable or can be derived principally from ororroborated with observable market data for substantially the full term of the assets or liabilities. Level 2 inputs also include noinding market consensus prices that can be corroborated with observable market data, as well as quoted prices that weredjusted for security-specific restrictions.

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

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INTEL CORPORATIONNOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Unaudited (Continued)

nvestments in Debt Instruments

Debt investments reflected in the following table include investments such as asset-backed securities, bank deposits, commercaper, corporate bonds, government bonds, money market fund deposits, municipal bonds, and reverse repurchase agreemenlassified as cash equivalents. When we use observable market prices for identical securities that are traded in less active mar

we classify our debt investments as Level 2. When observable market prices for identical securities are not available, we price

ebt investments using non-binding market consensus prices that are corroborated with observable market data; quoted markrices for similar instruments; or pricing models, such as a discounted cash flow model, with all significant inputs derived from oorroborated with observable market data. Non-binding market consensus prices are based on the proprietary valuation modericing providers or brokers. These valuation models incorporate a number of inputs, including non-binding and binding brokeruotes; observable market prices for identical or similar securities; and the internal assumptions of pricing providers or brokersse observable market inputs and, to a lesser degree, unobservable market inputs. We corroborate non-binding market conserices with observable market data using statistical models when observable market data exists. The discounted cash flow moses observable market inputs, such as LIBOR-based yield curves, currency spot and forward rates, and credit ratings.

Debt investments that are classified as Level 3 are classified as such due to the lack of observable market data to corroborateither the non-binding market consensus prices or the non-binding broker quotes. When observable market data is not availab

we corroborate our fair value measurements using non-binding market consensus prices and non-binding broker quotes from econd source.

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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 and of each period:

March 30, 2013 December 29, 2012

Fair Value Measured and Recorded atReporting Date Using Fair Value Measured and Recorded atReporting Date Using

In Millions) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 To

Assets

Cash equivalents:

Bank deposits $ $ 1,149 $ $ 1,149 $ $ 822 $ $

Commercial paper 2,172 2,172 2,711 2

Corporate bonds 12 20 32

Government bonds 4 4 400 66

Money market fund deposits 421 421 1,086 1

Reverse repurchase agreements 1,200 1,200 2,800 2

Short-term investments:

Bank deposits 591 591 540

Commercial paper 1,854 1,854 1,474 1

Corporate bonds 161 481 16 658 75 292 21

Government bonds 1,050 170 1,220 1,307 290 1

Trading assets:

Asset-backed securities 171 171 68


Commercial paper 435 435 336

Corporate bonds 1,769 421 2,190 482 1,109 1

Government bonds 2,452 1,287 3,739 1,743 1,479 3

Money market fund deposits 102 102 18 Municipal bonds 149 149 203

Other current assets:

Derivative assets 251 1 252 12 208 1

Loans receivable 197 197 203

Marketable equity securities 4,698 4,698 4,424 4

Other long-term investments:

Asset-backed securities 11 11 11


Corporate bonds 140 400 24 564 10 218 26

Government bonds 224 389 613 59 113

Other long-term assets:Derivative assets 27 20 47 20 18

Loans receivable 567 567 577

Total assets measured andrecorded at fair value $ 11,033 $ 12,147 $ 243 $ 23,423 $ 9,616 $ 13,764 $ 145 $ 23

Liabilities

Other accrued liabilities:

Derivative liabilities $ $ 442 $ $ 442 $ 1 $ 291 $ $

Other long-term liabilities:

Derivative liabilities 33 33 20

Total liabilities measured and

recorded at fair value $ $ 475 $ $ 475 $ 1 $ 311 $ $

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Financial Instruments Not Recorded at Fair Value on a Recurring Basis

On a quarterly basis, we measure the fair value of our non-marketable cost method investments, indebtedness carried at amorost, cost method loans receivable, grants receivable, and reverse repurchase agreements with original maturities greater thanpproximately three months; however, the assets are recorded at fair value only when an impairment charge is recognized. Tharrying amounts and fair values of certain financial instruments not recorded at fair value on a recurring basis at the end of eaeriod were as follows:

As of March 30, 2013 and December 29, 2012 , the unrealized loss position of our non-marketable cost method investments wnsignificant.

Our non-marketable cost method investments are valued using the market and income approaches. The market approach inclhe use of financial metrics and ratios of comparable public companies. The selection of comparable companies requiresmanagement judgment and is based on a number of factors, including comparable companies sizes, growth rates, industries,

evelopment stages. The income approach includes the use of a discounted cash flow model, which requires significant estimaor investees revenue, costs, and discount rates based on the risk profile of comparable companies. Estimates of revenues anosts are developed using available market, historical, and forecast data. The valuation of these non-marketable cost method

nvestments also takes into account variables such as conditions reflected in the capital markets, recent financing activities by

nvestees, the investees capital structure, the terms of the investees issued interests, and the lack of marketability of thenvestments.

The carrying amount and fair value of loans receivable exclude loans measured and recorded at a fair value of $764 million asMarch 30, 2013 ( $780 million as of December 29, 2012 ). The carrying amount and fair value of short-term debt exclude drafts

ayable.

10

March 30, 2013

In Millions)CarryingAmount

Fair Value Measured Using

Fair VLevel 1 Level 2 Level 3

Non-marketable cost method investments $ 1,206 $ $ $ 1,843 $ 1

Loans receivable $ 191 $ $ 150 $ 41 $

Reverse repurchase agreements $ 65 $ $ 65 $ $

Grants receivable $ 321 $ $ 327 $ $

Long-term debt $ 13,143 $ 11,467 $ 2,743 $ $ 14

Short-term debt $ 70 $ $ 70 $ $

NVIDIA Corporation cross-license agreement liability $ 578 $ $ 593 $ $

December 29, 2012

In Millions)CarryingAmount

Fair Value Measured Using

Fair VLevel 1 Level 2 Level 3

Non-marketable cost method investments $ 1,202 $ $ $ 1,766 $ 1

Loans receivable $ 199 $ $ 150 $ 48 $

Reverse repurchase agreements $ 50 $ $ 50 $ $

Grants receivable $ 198 $ $ 205 $ $

Long-term debt $ 13,136 $ 11,442 $ 2,926 $ $ 14

Short-term debt $ 48 $ $ 48 $ $

NVIDIA Corporation cross-license agreement liability $ 875 $ $ 890 $ $

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The fair value of our loans receivable and reverse repurchase agreements, including those held at fair value, is determined usiiscounted cash flow model, with all significant inputs derived from or corroborated with observable market data, such as LIBOased yield curves, currency spot and forward rates, and credit ratings. The credit quality of these assets remains high, with cratings of A/A2 or better for most of our loans receivable and all of our reverse repurchase agreements as of March 30, 2013 . ong-term debt recognized at amortized cost comprises our senior notes and our convertible debentures. The fair value of ourenior notes is determined using active market prices, and it is therefore classified as Level 1. The fair value of our convertible

erm debt is determined using discounted cash flow models with observable market inputs, and it takes into consideration variauch as interest rate changes, comparable securities, subordination discount, and credit-rating changes.

The fair value of our grants receivable is determined using a discounted cash flow model, which discounts future cash flows usn appropriate yield curve. As of March 30, 2013 and December 29, 2012, the carrying amount of our grants receivable waslassified within other current assets and other long-term assets, as applicable.

The NVIDIA Corporation cross-license agreement liability in the preceding table was incurred as result of entering into a long-teatent cross-license agreement with NVIDIA in January 2011. We agreed to make payments to NVIDIA over six years. As of

March 30, 2013 and December 29, 2012 , the carrying amount of the liability arising from the agreement was classified within occrued liabilities and other long-term liabilities, as applicable. The fair value is determined using a discounted cash flow mode

which discounts future cash flows using our incremental borrowing rates.

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Note 3: Cash and Investments

Cash and investments at the end of each period were as follows:

Available-for-Sale Investments

Available-for-sale investments at the end of each period were as follows:

n the preceding table, government bonds include bonds issued or deemed to be guaranteed by government entities. Governmonds include instruments such as non-U.S. government bonds, U.S. agency securities, and U.S. Treasury securities. Bankeposits were primarily issued by institutions outside the U.S. as of March 30, 2013 and December 29, 2012 .

The amortized cost and fair value of available-for-sale debt investments as of March 30, 2013 , by contractual maturity, were aollows:

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

12

In Millions)Mar 30,

2013Dec 29,

2012

Available-for-sale investments $ 14,108 $ 14,00

Cash 720 59Equity method investments 962 99

Loans receivable 955 97

Non-marketable cost method investments 1,206 1,20

Reverse repurchase agreements 1,265 2,85

Trading assets 7,052 5,68

Total cash and investments $ 26,268 $ 26,30


In Millions)Adjusted

Cost

GrossUnrealized

Gains

GrossUnrealized

LossesFair

ValueAdjusted

Cost

GrossUnrealized

Gains

GrossUnrealized

LossesFair

Value

Asset-backed securities $ 12 $ $ (1) $ 11 $ 14 $ $ (3) $

Bank deposits 1,860 1 1,861 1,417 1 1,4

Commercial paper 4,025 1 4,026 4,184 1 4,1

Corporate bonds 1,250 6 (2) 1,254 635 8 (1) 6

Government bonds 1,838 (1) 1,837 2,235 2,2

Marketable equitysecurities 3,355 1,346 (3) 4,698 3,356 1,069 (1) 4,4

Money market funddeposits 421 421 1,086 1,0

Total available-for-saleinvestments $ 12,761 $ 1,354 $ (7) $ 14,108 $ 12,927 $ 1,079 $ (5) $ 14,0

In Millions) Cost Fair Value

Due in 1 year or less $ 7,678 $ 7,68

Due in 12 years 1,113 1,1

Due in 25 years 182 18

nstruments not due at a single maturity date 433 43

Total $ 9,406 $ 9,4

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We sold available-for-sale investments for proceeds of $304 million in the first three months of 2013 ( $333 million in the first thmonths of 2012 ).

For information on the unrealized holding gains (losses) on available-for-sale investments reclassified out of accumulated otheomprehensive income into the consolidated condensed statements of income, see " Note 17: Comprehensive Income ".

Equity Method Investments

M Flash Technologies, LLC and IM Flash Singapore, LLP

Micron Technology, Inc. and Intel formed IM Flash Technologies, LLC (IMFT) and IM Flash Singapore, LLP (IMFS) to manufacNAND flash memory products for Micron and Intel. During the second quarter of 2012, we entered into agreements with Micronmodified our joint venture relationship including an agreement to sell our ownership interest in IMFS. We received $605 millionhe second quarter of 2012 from the sale of assets of IMFS and certain assets of IMFT to Micron. As of March 30, 2013 , we ow9% interest in the remaining assets held by IMFT. The carrying value of our investment in IMFT was $629 million as of March013 ( $642 million as of December 29, 2012 ) and is classified within other long-term assets.

As part of the agreements to modify our joint venture relationship, we also entered into an amended operating agreement for IMThis amended operating agreement extends the term of IMFT to 2024, unless earlier terminated under certain terms andonditions, and provides that IMFT may manufacture certain emerging memory technologies in addition to NAND flash memor

These agreements include a supply agreement for Micron to supply us with NAND flash memory products. We provided

pproximately $365 million to Micron in the second quarter of 2012, primarily for subsequent product purchases under the supgreement with Micron. The agreements also extend and expand our NAND joint development program with Micron to includemerging memory technologies. Additionally, the amended agreement provides for certain rights that, beginning in 2015, will es to sell to Micron, or enable Micron to purchase from us, our interest in IMFT. If Intel exercises this right, Micron would set thelosing date of the transaction within two years following such election and could elect to receive financing from Intel for one toears.

MFT is a variable interest entity. All costs of the IMFT joint venture will be passed on to Micron and Intel pursuant to our purchgreements. Our portion of IMFT costs, primarily related to product purchases and production-related services, was approxima100 million during the first three months of 2013 (approximately $240 million during the first three months of 2012 for IMFT an

MFS). Subsequent to the sale of our ownership interest in IMFS in the second quarter of 2012, we no longer incur costs relateMFS. The amount due to IMFT for product purchases and services provided was approximately $95 million as of March 30, 20approximately $90 million as of December 29, 2012 ). During the first three months of 2013 , $13 million was returned to Intel

MFT, which is reflected as a return of equity method investment within investing activities on the consolidated condensedtatements of cash flows ( $67 million during the first three months of 2012 ).

MFT depends on Micron and Intel for any additional cash needs. Our known maximum exposure to loss approximated the caralue of our investment balance in IMFT, which was $629 million as of March 30, 2013 . Except for the amount due to IMFT forroduct purchases and services, we did not have any additional liabilities recognized on our consolidated condensed balanceheets in connection with our interests in this joint venture as of March 30, 2013 . In addition, our potential future losses could bigher than the carrying amount of our investment, as Intel and Micron are liable for other future operating costs or obligations

MFT. Future cash calls could also increase our investment balance and the related exposure to loss. In addition, because we urrently committed to purchasing 49% of IMFTs production output and production-related services, we may be required tourchase products at a cost in excess of realizable value.

Under the accounting standards for consolidating variable interest entities, the consolidating investor is the entity with the powe

irect the activities of the venture that most significantly impact the ventures economic performance and with the obligation tobsorb losses or the right to receive benefits from the venture that could potentially be significant to the venture. We haveetermined that we do not have both of these characteristics and, therefore, we account for our interest in IMFT and our prior

nterest in IMFS using the equity method of accounting.

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Trading Assets

As of March 30, 2013 and December 29, 2012 , all of our trading assets were marketable debt instruments. Net losses related rading assets still held at the reporting date were $163 million in the first three months of 2013 (net losses of $20 million in the hree months of 2012 ). Net gains on the related derivatives were $164 million in the first three months of 2013 (net gains of $2million in the first three months of 2012 ).

Note 4: Inventories

nventories at the end of each period were as follows:

Note 5: Derivative Financial Instruments

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

ransactions with high-credit-quality counterparties. We also enter into master netting arrangements with counterparties whenossible to mitigate credit risk in derivative transactions. A master netting arrangement may allow counterparties to net settlemounts owed to each other as a result of multiple, separate derivative transactions. For presentation on our consolidatedondensed balance sheets, we do not offset fair value amounts recognized for derivative instruments under master nettingrrangements.

Currency Exchange Rate Risk

We are exposed to currency exchange rate risk and generally hedge our exposures with currency forward contracts, currency

nterest rate swaps, or currency options. Substantially all of our revenue is transacted in U.S. dollars. However, a significant amf our operating expenditures and capital purchases are incurred in or exposed to other currencies, primarily the euro, theapanese yen, and the Israeli shekel. We have established balance sheet and forecasted transaction currency risk managemerograms to protect against fluctuations in fair value and the volatility of the functional currency equivalent of future cash flowsaused by changes in exchange rates. Our non-U.S.-dollar-denominated investments in debt instruments and loans receivableenerally hedged with offsetting currency forward contracts or currency interest rate swaps. We may also hedge foreign currensk arising from funding foreign currency denominated forecasted investments. These programs reduce, but do not eliminate,

mpact of currency exchange movements.

Our currency risk management programs include:

14

In Millions)Mar 30,

2013Dec 29,

2012

Raw materials $ 451 $ 47

Work in process 2,129 2,2

Finished goods 1,778 2,03

Total inventories $ 4,358 $ 4,73

Currency derivatives with cash flow hedge accounting designationthat utilize currency forward contracts and currency optto hedge exposures to the variability in the U.S.-dollar equivalent of anticipated non-U.S.-dollar-denominated cash flows. Tinstruments 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 we reclassify it into earningthe same period or periods in which the hedged transaction affects earnings, and in the same line item on the consolidatedcondensed statements of income as the impact of the hedged transaction.

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

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nterest Rate Risk

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

aving quarterly payments.

Our interest rate risk management programs include:

Equity Market Risk

Our investments include marketable equity securities and equity derivative instruments. We typically do not attempt to reduce oliminate our equity market exposure through hedging activities. Before we enter into hedge arrangements, we evaluate legal,

market, and economic factors, as well as the expected timing of disposal to determine whether hedging is appropriate. Our equmarket risk management program may include equity derivatives with or without hedge accounting designation that utilize warr

quity options, or other equity derivatives. We recognize changes in the fair value of such derivatives in gains (losses) on equitnvestments, net.

We also utilize total return swaps to offset changes in liabilities related to the equity market risks of certain deferred compensatrrangements. Gains and losses from changes in fair value of these total return swaps are generally offset by the gains and losn the related liabilities, both of which are recorded in cost of sales and operating expenses.

Commodity Price Risk

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

Our commodity price risk management program includes commodity derivatives with cash flow hedge accounting designation ttilize commodity swap contracts to hedge future cash flow exposures to the variability in commodity prices. These instrumentsenerally mature within 12 months. For these derivatives, we report the after-tax gain (loss) from the effective portion of the hes a component of accumulated other comprehensive income (loss) and reclassify it into earnings in the same period or period

which the hedged transaction affects earnings, and in the same line item on the consolidated condensed statements of income

he impact of the hedged transaction.

15

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

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

are recorded in interest and other, net.

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Volume of Derivative Activity

Total gross notional amounts for outstanding derivatives (recorded at fair value) at the end of each period were as follows:

The gross notional amounts for currency forwards and currency interest rate swaps (presented by currency) at the end of eacheriod were as follows:

16

In Millions)Mar 30,

2013Dec 29,

2012Mar 31,

2012

Currency forwards $ 13,141 $ 13,117 $ 11,1

Currency interest rate swaps 3,464 2,711 1,8

Embedded debt derivatives 3,600 3,600 3,60

nterest rate swaps 1,041 1,101 1,68

Total return swaps 859 807 82

Other 82 127 15

Total $ 22,187 $ 21,463 $ 19,18

In Millions)Mar 30,

2013Dec 29,

2012Mar 31,

2012

British pound sterling $ 422 $ 308 $ 52

Chinese yuan 572 647 80

Euro 6,800 5,994 3,55

sraeli shekel 1,974 2,256 1,82

Japanese yen 3,854 4,389 4,04

Malaysian ringgit 520 442 9

Swiss franc 1,312 657 23

Other 1,151 1,135 1,03

Total $ 16,605 $ 15,828 $ 12,92

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Fair Values of Derivative Instruments in the Consolidated Condensed Balance Sheets

The fair values of our derivative instruments at the end of each period were as follows:

Derivatives in Cash Flow Hedging Relationships

The before-tax gains (losses), attributed to the effective portion of cash flow hedges, recognized in other comprehensive incomuring each period were as follows:

Gains and losses on derivative instruments in cash flow hedging relationships related to hedge ineffectiveness, as well as amoxcluded from effectiveness testing, were insignificant during all periods presented in the preceding tables. Additionally, for all

eriods presented, there was an insignificant impact on results of operations from discontinued cash flow hedges, which ariseswhen forecasted transactions are probable of not occurring.

For information on the unrealized holding gains (losses) on derivatives reclassified out of accumulated other comprehensive innto the consolidated condensed statements of income, see " Note 17: Comprehensive Income ".

17


In Millions)

OtherCurrentAssets

OtherLong-Term

Assets

OtherAccrued

Liabilities

OtherLong-TermLiabilities

OtherCurrentAssets

OtherLong-Term

Assets

OtherAccrued

Liabilities

OtheLong-TeLiabilit

Derivatives designated ashedging instruments

Currency forwards $ 62 $ 1 $ 261 $ 12 $ 91 $ 2 $ 127 $

Other 1

Total derivatives designated ashedging instruments $ 63 $ 1 $ 261 $ 12 $ 91 $ 2 $ 127 $

Derivatives not designated ashedging instruments

Currency forwards $ 96 $ $ 70 $ $ 85 $ $ 58 $

Currency interest rate swaps 92 25 74 9 33 18 72

Embedded debt derivatives 12

nterest rate swaps 37 34

Total return swaps 11

Other 1 21 1 18 1

Total derivatives not designatedas hedging instruments $ 189 $ 46 $ 181 $ 21 $ 130 $ 36 $ 165 $ 2

Total derivatives $ 252 $ 47 $ 442 $ 33 $ 221 $ 38 $ 292 $ 2

Three Months Ended

In Millions)Mar 30,

2013Mar 31,

2012

Currency forwards $ (236) $ (7

Other 1

Total $ (235) $ (7

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Derivatives Not Designated as Hedging Instruments

The effects of derivative instruments not designated as hedging instruments on the consolidated condensed statements of incouring each period were as follows:

Note 6: Acquisitions

During the first three months of 2013 , we completed two acquisitions qualifying as business combinations in exchange forggregate net cash consideration of $98 million , most of which was allocated to goodwill. For information on the assignment ooodwill by operating segment related to these acquisitions, see Note 7: Goodwill . The completed acquisitions in the first thr

months of 2013 , both individually and in the aggregate, were not significant to our results of operations.

Note 7: Goodwill

Goodwill activity in the first three months of 2013 was as follows:

n the first three months of 2013, we completed a reorganization that transferred a portion of our wired connectivity businessormerly included within the Data Center Group (DCG) to the PC Client Group (PCCG), as the technology from that portion of tusiness is primarily used for client connectivity. Due to this reorganization, goodwill was transferred from DCG to PCCG. For

urther information see " Note 19: Operating Segments Information ."

18

Three Months Ended

In Millions)Location of Gains (Losses)

Recognized in Income on DerivativesMar 30,

2013Mar 31,

2012

Currency forwards Interest and other, net $ 56 $

Currency interest rate swaps Interest and other, net 100 (5

nterest rate swaps Interest and other, net 3

Total return swaps Various 48 5

Other Gains (losses) on equity investments, net 2

Total $ 206 $ 4

In Millions)PC Client

GroupData Center

Group

Other IntelArchitecture

OperatingSegments

Software andServices

OperatingSegments Total

December 29, 2012 $ 2,962 $ 1,839 $ 916 $ 3,993 $ 9,71

Additions due to acquisitions 75 13 8

Transfers 22 (22)

Effect of exchange rate fluctuations (42) (4

March 30, 2013 $ 2,984 $ 1,817 $ 991 $ 3,964 $ 9,75

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Note 8: Identified Intangible Assets

dentified intangible assets at the end of each period were as follows:

For identified intangible assets that are subject to amortization, we recorded amortization expense on the consolidated condentatements of income as follows: amortization of acquisition-related developed technology and licensed technology and patent

ncluded in cost of sales, amortization of acquisition-related customer relationships and trade names is included in amortizationcquisition-related intangibles, and amortization of other intangible assets is recorded as a reduction of revenue.

Amortization expenses during each period were as follows:

19

March 30, 2013

In Millions) Gross Assets

Accumulated

Amortization Net

Acquisition-related developed technology $ 2,769 $ (1,250) $ 1,5

Acquisition-related customer relationships 1,691 (614) 1,07

Acquisition-related trade names 68 (36) 3

Licensed technology and patents 3,013 (766) 2,24

Other intangible assets 189 (189)

dentified intangible assets subject to amortization 7,730 (2,855) 4,87

Acquisition-related trade names 803 80

Other intangible assets 129 12

dentified intangible assets not subject to amortization 932 93

Total identified intangible assets $ 8,662 $ (2,855) $ 5,80

December 29, 2012

In Millions) Gross AssetsAccumulatedAmortization Net

Acquisition-related developed technology $ 2,778 $ (1,116) $ 1,66

Acquisition-related customer relationships 1,712 (551) 1,16

Acquisition-related trade names 68 (33) 3

Licensed technology and patents 2,986 (699) 2,28

Other intangible assets 238 (86) 15

dentified intangible assets subject to amortization 7,782 (2,485) 5,29

Acquisition-related trade names 809 80Other intangible assets 129 12

dentified intangible assets not subject to amortization 938 93

Total identified intangible assets $ 8,720 $ (2,485) $ 6,23

Three Months Ended

In Millions)Mar 30,

2013Mar 31,

2012

Acquisition-related developed technology $ 140 $ 13

Acquisition-related customer relationships $ 70 $ 7

Acquisition-related trade names $ 3 $

Licensed technology and patents $ 66 $ 4

Other intangible assets $ 103 $

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Based on the identified intangible assets that are subject to amortization as of March 30, 2013 , we expect future amortizationxpense to be as follows:

Note 9: Other Long-Term Assets

Other long-term assets at the end of each period were as follows:

Note 10: Deferred Income

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

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

Note 11: Employee Equity Incentive Plans

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

Under the 2006 Equity Incentive Plan (the 2006 Plan), we made 596 million shares of common stock available for issuance asquity awards to employees and non-employee directors. A maximum of 394 million of these shares can be awarded as non-vhares (restricted stock) or non-vested share units (restricted stock units). As of March 30, 2013 , 240 million shares remainedvailable for future grant under the 2006 Plan.

The 2006 Stock Purchase Plan allows eligible employees to purchase shares of our common stock at 85% of the value of ourommon stock on specific dates. Rights to purchase shares are granted during the first and third quarters of each year. Under 006 Stock Purchase Plan, we made 373 million shares of common stock available for issuance through August 2016. As of

March 30, 2013 , 226 million shares were available for issuance under the 2006 Stock Purchase Plan.

20

In Millions)Remainder of

2013 2014 2015 2016 2017

Acquisition-related developed technology $ 411 $ 527 $ 254 $ 167 $ 4

Acquisition-related customer relationships $ 202 $ 258 $ 241 $ 223 $ 13

Acquisition-related trade names $ 8 $ 10 $ 9 $ 4 $

Licensed technology and patents $ 205 $ 263 $ 247 $ 233 $ 19

In Millions)Mar 30,

2013Dec 29,

2012

Equity method investments $ 962 $ 99

Non-marketable cost method investments 1,206 1,20

Non-current deferred tax assets 367 35

Loans receivable 626 64

Other 1,257 95

Total other long-term assets $ 4,418 $ 4,14

In Millions)Mar 30,

2013Dec 29,

2012

Deferred income on shipments of components to distributors $ 705 $ 69Deferred income from software and services operating segments 1,196 1,23

Current deferred income 1,901 1,93

Non-current deferred income from software and services operating segments 423 47

Total deferred income $ 2,324 $ 2,40

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Restricted Stock Unit Awards

Activity with respect to outstanding restricted stock units (RSUs) in the first three months of 2013 was as follows:

As of March 30, 2013 , 3.3 million of the outstanding restricted stock units were market-based restricted stock units.

Stock Option Awards

Activity with respect to outstanding stock options in the first three months of 2013 was as follows:

Stock Purchase Plan

Employees purchased 11.1 million shares in the first three months of 2013 for $200 million ( 10.3 million shares in the first thremonths of 2012 for $197 million ) under the 2006 Stock Purchase Plan.

Note 12: 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 billihares of our common stock in open market purchases or negotiated transactions. As of March 30, 2013 , $4.8 billion remainevailable for repurchase under the existing repurchase authorization limit. During the first three months of 2013 , we repurchas5.2 million shares of common stock at a cost of $533 million ( 56.9 million shares of common stock at a cost of $1.5 billion in trst three months of 2012 ). We have repurchased 4.3 billion shares at a cost of $89 billion since the program began in 1990.

21

Number ofRSUs

(In Millions)

Weighted AveraGrant-DateFair Value(Per RSU)

December 29, 2012 109.3 $ 22.0

Granted 3.4 $ 21.5

Vested (3.0) $ 23.6

Forfeited (1.3) $ 22.

March 30, 2013 108.4 $ 21.9

Number ofOptions

(In Millions)

Weighted AveraExercise Pric(Per Option)

December 29, 2012 202.8 $ 20.2

Granted 4.9 $ 21.0

Exercised (15.2) $ 18.6

Cancelled and forfeited (0.7) $ 22.

Expired (0.9) $ 22.

March 30, 2013 190.9 $ 20.3

Options exercisable as of:

December 29, 2012 139.8 $ 19.7March 30, 2013 127.2 $ 19.9

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Note 13: Gains (Losses) on Equity Investments, Net

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

Note 14: Interest and Other, Net

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

nterest expense in the preceding table is net of $54 million of interest capitalized in the first three months of 2013 ( $50 million he first three months of 2012 ).

Note 15: Earnings Per Share

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

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

22

Three Months Ended

In Millions)

Mar 30,

2013

Mar 31,

2012

Share of equity method investee losses, net $ (23) $ (

mpairment charges (17) (5

Gains on sales, net 4 3

Other, net 10 2

Total gains (losses) on equity investments, net $ (26) $ (

Three Months Ended

In Millions)Mar 30,

2013Mar 31,

2012

nterest income $ 23 $ 2

nterest expense (73) (3

Other, net 2

Total interest and other, net $ (50) $ 2

Three Months Ended

In Millions, Except Per Share Amounts)Mar 30,

2013Mar 31,

2012

Net income available to common stockholders $ 2,045 $ 2,73

Weighted average common shares outstandingbasic 4,948 4,99

Dilutive effect of employee equity incentive plans 78 12

Dilutive effect of convertible debt 54 6

Weighted average common shares outstandingdiluted 5,080 5,19

Basic earnings per common share $ 0.41 $ 0.5

Diluted earnings per common share $ 0.40 $ 0.5

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Potentially dilutive common shares from employee incentive plans are determined by applying the treasury stock method to thessumed exercise of outstanding stock options, the assumed vesting of outstanding restricted stock units, and the assumed

ssuance of common stock under the stock purchase plan. Potentially dilutive common shares are determined by applying the onverted method for our 2005 debentures. However, as our 2009 debentures require settlement of the principal amount of theebt in cash upon conversion, with the conversion premium paid in cash or stock at our option, potentially dilutive common share determined by applying the treasury stock method.

n the first three months of 2013 , we excluded 62 million outstanding weighted average stock options ( 19 million in the first thrmonths of 2012 ) from the calculation of diluted earnings per common share because the exercise prices of these stock optionwere greater than or equal to the average market value of the common shares. These options could be included in the calculatn the future if the average market value of the common shares increases and is greater than the exercise price of these optionhe first three months of 2013 , we excluded the 2009 debentures from the calculation of diluted earnings per common shareecause the conversion option of the debentures was anti-dilutive. We could potentially include the 2009 debentures again in t

uture if the average market price is above the conversion price. In the first three months of 2012, we included our 2009 debenn the calculation of diluted earnings per common share because the average market price was above the conversion price.

Note 16: Income Taxes

Provision for Taxes

Our effective income tax rate was 16.3% in the first three months of 2013 compared to 28.2% in the first three months of 2012.ffective rate was positively impacted by the U.S. R&D credit reenacted in January 2013 retroactive to the beginning of 2012. Tnactment date occurred after our fiscal year end of December 29, 2012 so the impact of the R&D credit was not recognized in012 financial statements. The estimated full year 2012 and first quarter 2013 impact of the U.S. research and development taredit has been recognized in the first three months 2013 financial statements.

Note 17: Comprehensive Income

The changes in accumulated other comprehensive income (loss) by component and related tax effects in the first three months013 were as follows:

23

In Millions)

Unrealized

HoldingGains

(Losses) onAvailable-for-

SaleInvestments

Deferred TaxAsset

ValuationAllowance

UnrealizedHoldingGains

(Losses) onDerivatives

Prior ServiceCredits(Costs)

ActuarialGains

(Losses)

ForeignCurrency

TranslationAdjustment Total

December 29, 2012 $ 701 $ 93 $ 93 $ (32) $ (1,122 ) $ (132) $ (39

Other comprehensiveincome beforereclassifications 273 (235) 29 (68)

Amounts reclassified outof accumulated othercomprehensive income (4 ) (2 ) 1 25 2

Tax effects (96 ) 81 (20) 5 (3

Other comprehensivencome (loss) 173 (156) 1 34 (63) (1

March 30, 2013 $ 874 $ 93 $ (63 ) $ (31) $ (1,088 ) $ (195) $ (41

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The amounts reclassified out of accumulated other comprehensive income into the consolidated condensed statements of incowith presentation location, during each period were as follows:

The amortization of pension and postretirement benefit components are included in the computation of net periodic benefit cosurther information, see the "Retirement Benefit Plans" note in Part II, Item 8 of our Annual Report on Form 10-K for the year enDecember 29, 2012 .

We estimate that we will reclassify approximately $69 million (before taxes) of net derivative losses included in accumulated otomprehensive income (loss) into earnings within the next 12 months.

Note 18: Contingencies

Legal Proceedings

We are a party to various legal proceedings, including those noted in this section. Although management at present believes thhe ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, resf operations, cash flows, or overall trends, legal proceedings and related government investigations are subject to inherentncertainties, and unfavorable rulings or other events could occur. Unfavorable resolutions could include substantial monetary

amages. In addition, in matters for which injunctive relief or other conduct remedies are sought, unfavorable resolutions couldnclude an injunction or other order prohibiting us from selling one or more products at all or in particular ways, precluding partiusiness practices, or requiring other remedies. Were unfavorable outcomes to occur, the possibility exists for a material adve

mpact on our business, results of operations, financial position, and overall trends. We might also conclude that settling one ormore such matters is in the best interests of our stockholders, employees, and customers, and any such settlement could incluubstantial payments. However, we have not reached this conclusion with respect to any particular matter at this time.

24

Three Months Ended

Mar 30,2013

Mar 31,2012

Comprehensive Income ComponentsIncome Before Taxes Impact (In

Millions) Location

Unrealized holding gains (losses) on available-for-salenvestments

$ 3 $ (11) Interest and other, net

1 6Gains (losses) on equityinvestments, net

4 (5)

Unrealized holding gains (losses) on derivatives

Currency forwards 15 Cost of sales

3 (21) Research and development

(1) (5)Marketing, general andadministrative

Other instruments (1) Cost of sales2 (12)

Amortization of pension and postretirement benefitcomponents

Prior service credits (costs) (1) (1)

Actuarial gains (losses) (25) (23)

(26) (24)

Total amounts reclassified out of accumulated othercomprehensive income $ (20) $ (41)

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A number of proceedings generally have challenged and continue to challenge certain of our competitive practices. The allegan these proceedings vary and are described in more detail in the following paragraphs. In general, they contend that we improondition price rebates and other discounts on our microprocessors on exclusive or near-exclusive dealing by some of ourustomers; and they allege that our software compiler business unfairly prefers Intel microprocessors over competing

microprocessors and that, through the use of our compilers and other means, we have caused the dissemination of inaccuratemisleading benchmark results concerning our microprocessors. Based on the procedural posture of the various remaining

ompetition matters, which we describe in subsequent paragraphs, our investment of resources to explain and defend our posas declined as compared to the period 2005-2011. Nonetheless, certain of the matters remain active, and these challenges continue for a number of years, potentially requiring us to invest additional resources. We believe that we compete lawfully andur marketing, business, intellectual property, and other challenged practices benefit our customers and our stockholders, and

will continue to conduct a vigorous defense in the remaining proceedings.

Government Competition Matters and Related Consumer Class Actions

n 2001, the European Commission (EC) commenced an investigation regarding claims by Advanced Micro Devices, Inc. (AMDhat we used unfair business practices to persuade customers to buy our microprocessors. We received numerous requests fonformation and documents from the EC and we responded to each of those requests. The EC issued a Statement of Objectionuly 2007 and held a hearing on that Statement in March 2008. The EC issued a Supplemental Statement of Objections in July008.

n May 2009, the EC issued a decision finding that we had violated Article 82 of the EC Treaty and Article 54 of the EuropeanEconomic Area Agreement. In general, the EC found that we violated Article 82 (later renumbered as Article 102 by a new trea

y offering alleged conditional rebates and payments that required our customers to purchase all or most of their x86microprocessors from us. The EC also found that we violated Article 82 by making alleged payments to prevent sales of speci

val products. The EC imposed a fine in the amount of 1.06 billion ( $1.447 billion as of May 2009), which we subsequently uring the third quarter of 2009, and ordered us to immediately bring to an end the infringement referred to in the EC decision

he second quarter of 2009, we recorded the related charge within marketing, general and administrative. We strongly disagreehe ECs decision, and we appealed the decision to the Court of First Instance (which has been renamed the General Court) in009. The hearing of our appeal took place on July 3 through July 6, 2012. The courts decision is expected in mid- to late 201

The EC decision exceeds 500 pages but contains no specific direction on whether or how we should modify our business pracnstead, the decision states that we should cease and desist from further conduct that, in the ECs opinion, would violatepplicable law. We have taken steps, which are subject to the ECs ongoing review, to comply with that decision pending appe

We opened discussions with the EC to better understand the decision and to explain changes to our business practices. Basedur current understanding and expectations, we do not believe that any such changes will be material to our financial position,esults, or cash flows.

n June 2005, we received an inquiry from the Korea Fair Trade Commission (KFTC) requesting documents from our Koreanubsidiary related to marketing and rebate programs that we entered into with Korean PC manufacturers. In February 2006, th

KFTC initiated an inspection of documents at our offices in Korea. In September 2007, the KFTC served on us an ExaminationReport alleging that sales to two customers during parts of 20022005 violated Koreas Monopoly Regulation and Fair Trade ADecember 2007, we submitted our written response to the KFTC. In February 2008, the KFTCs examiner submitted a written o our response. In March 2008, we submitted a further response. In April 2008, we participated in a pre-hearing conference behe KFTC, and we participated in formal hearings in May and June 2008. In June 2008, the KFTC announced its intent to fine upproximately $25 million for providing discounts to Samsung Electronics Co., Ltd. and TriGem Computer Inc. In November 2

he KFTC issued a final written decision concluding that our discounts had violated Korean antitrust law and imposing a fine onf approximately $20 million , which we paid in January 2009. In December 2008, we appealed this decision by filing a lawsuit

he Seoul High Court seeking to overturn the KFTCs decision. We expect a decision from the court in 2013.

25

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At least 82 separate class-action lawsuits have been filed in the U.S. District Courts for the Northern District of California, SoutDistrict of California, District of Idaho, District of Nebraska, District of New Mexico, District of Maine, and District of Delaware, awell as in various California, Kansas, and Tennessee state courts. These actions generally repeat the allegations made in a noettled lawsuit filed against us by AMD in June 2005 in the U.S. District Court for the District of Delaware (AMD litigation). Like

AMD litigation, these class-action lawsuits allege that we engaged in various actions in violation of the Sherman Act and other y, among other things: providing discounts and rebates to our manufacturer and distributor customers conditioned on exclusiv

ear-exclusive dealing that allegedly unfairly interfered with AMDs ability to sell its microprocessors; interfering with certain AMroduct launches; and interfering with AMDs participation in certain industry standards-setting groups. The class actions allegearious consumer injuries, including that consumers in various states have been injured by paying higher prices for computersontaining our microprocessors. We dispute these 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 Multidistritigation Panel to the U.S. District Court in Delaware for all pre-trial proceedings and discovery (MDL proceedings). The Delawistrict court appointed a Special Master to address issues in the MDL proceedings, as assigned by the court. In January 2010laintiffs in the Delaware action filed a motion for sanctions for our alleged failure to preserve evidence. This motion largely cop

motion previously filed by AMD in the AMD litigation, which has settled. The plaintiffs in the MDL proceedings also moved forertification of a class of members who purchased certain PCs containing products sold by us. In July 2010, the Special Maste

ssued a Report and Recommendation (Report) denying the motion to certify a class. The MDL plaintiffs filed objections to theSpecial Masters Report, and a hearing on those objections was held in March 2011. In September 2012, the court ruled that a

videntiary hearing will be necessary to enable the court to rule on the objections to the Special Masters Report, to resolve themotion to certify the class, and to resolve a separate motion to exclude certain testimony and evidence from the MDL plaintiffsxpert. The hearing is scheduled to occur in July 2013.

All California class actions have been consolidated in the Superior Court of California in Santa Clara County. The plaintiffs in thCalifornia actions have moved for class certification, which we are in the process of opposing. At our request, the court in theCalifornia actions has agreed to delay ruling on this motion until after the Delaware district court rules on the similar motion in tMDL proceedings. Based on the procedural posture and the nature of these cases, including, but not limited to, the fact that theDelaware district court has requested an evidentiary hearing and has not yet ruled on class certification issues, we cannot makeasonable estimate of the potential loss or range of losses, if any, arising from these matters.

Lehman Matter

n November 2009, representatives of the Lehman Brothers OTC Derivatives Inc. (LOTC) bankruptcy estate advised us inform

hat the estate was considering a claim against us arising from a 2008 contract between Intel and LOTC. Under the terms of th008 contract, we prepaid $1.0 billion to LOTC, in exchange for which LOTC was required to purchase and deliver to us theumber of shares of Intel common stock that could be purchased for $1.0 billion at the discounted volume-weighted average ppecified in the contract for the period September 2, 2008 to September 26, 2008. LOTCs performance under the contract wasecured by $1.0 billion of cash collateral. Under the terms of the contract, LOTC was obligated to deliver approximately 50 mihares of our common stock to us on September 29, 2008. LOTC failed to deliver any shares of our common stock, and wexercised our right to set-off 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 weat least $417 million , consisting principally of $312 million of alleged excess collateral posted by LOTC and $103 million of

nterest on that amount calculated by LOTC at a 13.5% annual interest rate. In September 2010, we entered into an agreemenOTC that tolled any applicable statutes of limitations for 90 days and precluded the parties from commencing any formalroceedings to prosecute any claims against each other in any forum during that period. The tolling agreement with LOTC wasxtended several times, but lapsed in June 2011. We continue to believe that we acted appropriately under our agreement withOTC, and we intend to defend any claim to the contrary. No complaint has been filed, and we cannot make a reasonable estimf the potential loss or range of losses, if any, that might arise from any such complaint.

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McAfee, Inc. Shareholder Litigation

On August 19, 2010, we announced that we had agreed to acquire all of McAfees common stock for $48.00 per share. FourMcAfee shareholders filed putative class-action lawsuits in Santa Clara County, California Superior Court challenging the proporansaction. The cases were ordered consolidated in September 2010. Plaintiffs filed an amended complaint that named formeMcAfee board members, McAfee and Intel as defendants, and alleged that the McAfee board members breached their fiduciar

uties and that McAfee and Intel aided and abetted those breaches of duty. The complaint requested rescission of the mergergreement, such other equitable relief as the court may deem proper, and an award of damages in an unspecified amount. In J012, the plaintiffs damages expert asserted that the value of a McAfee share for the purposes of assessing damages should 62.08 .

n January 2012, the court certified the action as a class action, appointed the Central Pension Laborers Fund to act as the claepresentative, and scheduled trial to begin in January 2013. In March 2012, defendants filed a petition with the California Cou

Appeal for a writ of mandate to reverse the class certification order; the petition was denied in June 2012. In March 2012, atefendants request, the court held that plaintiffs were not entitled to a jury trial, and ordered a bench trial. In April 2012, plaintifled a petition with the California Court of Appeal for a writ of mandate to reverse that order, which the court of appeal denied iuly 2012.

n August 2012, defendants filed a motion for summary judgment. The trial court granted that motion in November 2012, andntered final judgment in the case in February 2013. In April 2013, plaintiffs filed a notice of appeal. Because the resolution of t

ppeal may materially impact the scope and nature of the proceeding, we cannot make a reasonable estimate of the potential r range of losses, if any, arising from this matter. We dispute the class-action claims and intend to continue to defend the lawsigorously.

X2Y Attenuators, LLC v. Intel et al

n May 2011, X2Y Attenuators, LLC (X2Y) filed a patent infringement lawsuit in the U.S. District Court for the Western District oPennsylvania and a complaint with the U.S. International Trade Commission (ITC) pursuant to Section 337 of the Tariff Act of 1

gainst us and two of our customers, Apple Inc. and Hewlett-Packard Company, alleging infringement of five patents. X2Yubsequently added a sixth patent to both actions. The district court action is stayed pending resolution of the ITC proceeding. lleges that at least Intel Core and Intel Xeon processor families infringe the asserted patents. X2Y also requests that

TC issue permanent exclusion and cease-and-desist orders to, among other things, prohibit us from importing thesemicroprocessors and Apple and Hewlett-Packard Company products that incorporate these microprocessors into the United S

n the district court action, X2Y seeks unspecified damages, including enhanced damages for alleged willful infringement, andnjunctive relief. On June 13, 2012, the Administrative Law Judge issued an initial determination granting X2Ys motion to partierminate the ITC investigation with respect to three of the asserted patents. The Administrative Law Judge held a hearing on temaining three patents in August 2012 and issued an initial determination in December 2012. In the initial determination, the

Administrative Law Judge found that Intel, Apple, and Hewlett-Packard Company have not violated Section 337 of the Tariff A930 because they have not infringed any of the asserted claims of the three patents, and ruled that the asserted claims of two

he patents were invalid. In December 2012, the parties filed petitions for review of the initial determination by the ITC. OnFebruary 15, 2013, the ITC determined to review in part the initial determination. On review, the Commission determined to rev

r vacate certain findings, and to terminate the investigation with a finding of no violation. On April 12, 2013, X2Y filed a NoticeAppeal with the United States Court of Appeals for the Federal Circuit. Based on the procedural posture and nature of the casencluding, but not limited to, the fact that monetary damages are not an available remedy in the ITC, and because discoveryegarding X2Ys claimed damages has not commenced in the stayed district court action, we cannot make a reasonable estimhe potential loss or range of losses, if any, arising from these matters. We dispute the claims and intend to defend the lawsuits

igorously.

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Note 19: Operating Segments Information

Our operating segments in effect as of March 30, 2013 include:

n the first three months of 2013, we completed a reorganization that transferred a portion of our wired connectivity businessormerly included within the DCG to the PCCG, as the technology from that portion of the business is primarily used for clientonnectivity. Prior period amounts have been adjusted retrospectively to reflect this new organization structure.

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

Our PCCG and our DCG are reportable operating segments. We also aggregate and disclose the financial results of our non-eportable operating segments within other Intel architecture operating segments and software and services operating segms shown in the above operating segments list. Each of these aggregated operating segments does not meet the quantitative

hresholds to qualify as reportable operating segments; however, we have elected to disclose the aggregation of these non-eportable operating segments. Revenue for our reportable and aggregated non-reportable operating segments is primarily relo the following product lines:

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

The All other category includes revenue, expenses, and charges such as:

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PC Client Group Software and services operating segments

Data Center Group McAfee

Other Intel architecture operating segments Wind River Software Group Intelligent Systems Group Software and Services Group

Intel Mobile Communications All Other

Tablet Group Non-Volatile Memory Solutions Group

Phone Group

Service Provider Group

Netbook Group

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

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

Other Intel architecture operating segments. Includes platforms designed for embedded applications; mobile phonecomponents such as baseband processors, radio frequency transceivers, and power management chips; platforms designfor the tablet market segment; platforms designed for the smartphone market segment; gateway and set-top box componeand platforms designed for the netbook market segment.

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

architecture as the platform of choicsoftware development.

results of operations from our Non-Volatile Memory Solutions Group that includes NAND flash memory products for use invariety 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 start-up businesses, including our foundry business, that support our initiatives; and

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

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

whole.

Segment information during each period was as follows:

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Three Months Ended

In Millions)Mar 30,

2013Mar 31,

2012

Net revenue

PC Client Group $ 7,992 $ 8,49

Data Center Group 2,585 2,40

Other Intel architecture operating segments 978 1,0

Software and services operating segments 588 57

All other 437 35

Total net revenue$ 12,580 $ 12,90

Operating income (loss)

PC Client Group $ 2,513 $ 3,49

Data Center Group 1,079 1,13

Other Intel architecture operating segments (611) (3

Software and services operating segments (24)

All other (438) (5

Total operating income $ 2,519 $ 3,8

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Our Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition toccompanying consolidated condensed financial statements and notes to assist readers in understanding our results of operatnancial condition, and cash flows. MD&A is organized as follows:

This interim MD&A should be read in conjunction with the MD&A in our Annual Report on Form 10-K for the year endedDecember 29, 2012 . The various sections of this MD&A contain a number of forward-looking statements that involve a numbe

sks and uncertainties. Words such as anticipates, expects, intends, goals, plans, believes, seeks, estimates,continues, may, will, should, and variations of such words and similar expressions are intended to identify such forward-ooking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated grond trends in our businesses, uncertain events or assumptions, and other characterizations of future events or circumstances

orward-looking statements. Such statements are based on our current expectations and could be affected by the uncertaintiessk factors described throughout this filing and particularly in Risk Factors in Part I, Item 1A of our Form 10-K, and as may bepdated in our Forms 10-Q. Our actual results may differ materially, and these forward-looking statements do not reflect the

otential impact of any divestitures, mergers, acquisitions, or other business combinations that had not been completed as ofApril 29, 2013 .

Overview

Our results of operations for each period were as follows :

Our Q1 2013 revenue of $12.6 billion was down 7% from Q4 2012, in line with the average seasonal decline in Q1 and in line wur expectations that we provided in January. We saw a reduction of inventory levels in the traditional PC supply chain as OEMeduced inventory on older-generation products. In addition, our inventories decreased by approximately $400 million during Q013. For Q2 2013, we are forecasting a 3% increase in revenue from Q1 2013, which is slightly above normal seasonal trend

The Q2 2013 revenue forecast reflects expected inventory replenishment within the PC supply chain due to the expected launcur next-generation microarchitecture platforms, code-named Haswell, in Q2 2013. We qualified for sale our first platforms on oext-generation microarchitecture late in Q1 2013 and we expect to qualify addition platforms in Q2 2013.

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TEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIO

Overview. Discussion of our business and overall analysis of financial and other highlights affecting the company in order provide context for the remainder of MD&A.

Results of Operations. An analysis of our financial results comparing the three months ended March 30, 2013 to the threemonths ended March 31, 2012.

Liquidity and Capital Resources. An analysis of changes in our balance sheets and cash flows, and discussion of our finacondition and potential sources of liquidity.

Fair Value of Financial Instruments. Discussion of the methodologies used in the valuation of our financial instruments.

Dollars in Millions, Except Per Share Amounts) Q1 2013 Q4 2012 Change Q1 2013 Q1 2012 Chan

Net revenue $ 12,580 $ 13,477 $ (897) $ 12,580 $ 12,906 $ (3

Gross margin $ 7,066 $ 7,817 $ (751) $ 7,066 $ 8,265 $ (1,1

Gross margin percentage 56.2% 58.0% (1.8)% 56.2% 64.0% (7

Operating income $ 2,519 $ 3,155 $ (636) $ 2,519 $ 3,810 $ (1,2

Net income $ 2,045 $ 2,468 $ (423) $ 2,045 $ 2,738 $ (6

Diluted earnings per common share $ 0.40 $ 0.48 $ (0.08) $ 0.40 $ 0.53 $ (0

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

Our gross margin percentage in Q1 2013 declined from Q4 2012 as higher factory start-up costs and lower platform volume weartially offset by lower excess capacity charges and lower platform inventory write-offs. Lower than expected factory loadings lder-generation process technologies in Q1 2013 allowed us to reuse and redirect equipment and space from older technolog

o our future process technologies, including 14nm. These actions have allowed us to reduce our forecasted capital expenditur013 by $1.0 billion. Q2 2013 gross margin percentage is expected to be approximately two percentage points higher whenompared to Q1 2013 as additional platform variations of our next-generation microarchitecture are expected to qualify for saleesulting in lower platform inventory write-offs as well as sales of previously written-off inventory. In addition, we expect lower

xcess capacity charges in Q2 2013 to be offset by higher start-up costs.

The strength of our product portfolio is expected to increase as we launch new platforms designed for use in the data center ancross devices that compute and connect to the Internet. In Q2 2013, we expect to ship new platforms which we anticipate willnable a new wave of ultra-sleek designs across multiple form factors including devices in the traditional PC, convertible,etachable, tablet, and smartphone market segments. These additions to our product portfolio include new platforms designedse in smartphones and tablets, code-named Clover Trail+, and our next-generation microarchitecture platforms, code-named

Haswell, designed for use across traditional PCs, convertibles, and detachables. In the second half of 2013, we expect to launcur next-generation Intel Atom microarchitecture platforms designed for use in a variety of ultra-mobile form factors includin

Ultrabook systems, convertibles, and tablets, code-named Bay Trail, and smartphones, code-named Merrifield. In the data cmarket segment, we expect that our next-generation Intel Atom microarchitecture platforms designed for use in the microservemarket segment, code-named Avoton, as well as our Intel Xeon processors manufactured using our 22nm process technolwill both be shipping in the second half of 2013.

We continue to extend our process technology leadership as we expect to begin manufacturing platforms using our next-gener4nm process technology in the second half of 2013. In Q1 2013, we shipped our first silicon to a foundry customer on our 22nrocess technology and we announced an agreement with Altera Corporation in which they will manufacture their future next-eneration products on our 14nm process technology.

Our business continues to produce significant cash from operations, generating $4.3 billion in Q1 2013. From a financial conditerspective, we ended Q1 2013 with an investment portfolio of $17.1 billion, which consisted of cash and cash equivalents, sho

erm investments, and trading assets. During Q1 2013, we purchased $2.2 billion in capital assets, and returned cash tohareholders by both paying $1.1 billion in dividends and repurchasing $533 million of common stock through our common stoepurchase program. In March 2013, the Board of Directors declared a dividend of $0.225 per common share to be paid in Jun013.

Our Business Outlook for Q2 2013 and full-yea

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