DEF 14A 1 f37043dedef14a.htm DEFINITIVE PROXY STATEMENT def14a
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SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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  Definitive Proxy Statement       (as permitted by Rule 14a-6(e)(2))
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  Definitive Additional Materials        
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  Soliciting Material under Rule 14a-12        
INTEL CORPORATION
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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INTEL CORPORATION
2200 Mission College Blvd.
Santa Clara, CA 95054-1549
(408) 765-8080
 
(INTEL LOGO)
 
April 2, 2008
 
Dear Stockholder:
 
We look forward to your attendance either in person or by proxy at the 2008 Annual Stockholders’ Meeting. We will hold the meeting at 8:30 a.m. Pacific Time on May 21, 2008 at the Computer History Museum, 1401 N. Shoreline Blvd., Mountain View, California 94043. We are pleased to offer a live webcast of the annual meeting at www.intc.com.
 
We also are pleased to be using the new U.S. Securities and Exchange Commission rule that allows companies to furnish proxy materials to their stockholders primarily over the Internet. We believe that this new process should expedite stockholders’ receipt of proxy materials, lower the costs of our annual meeting, and help to conserve natural resources. On April 2, 2008, we mailed our stockholders a notice containing instructions on how to access our 2008 Proxy Statement and 2007 Annual Report and vote online. The notice also included instructions on how to receive a paper copy of your annual meeting materials, including the notice of annual meeting, proxy statement, and proxy card. If you received your annual meeting materials by mail, the notice of annual meeting, proxy statement, and proxy card from our Board of Directors were enclosed. If you received your annual meeting materials via e-mail, the e-mail contained voting instructions and links to the annual report and the proxy statement on the Internet, which are both available at www.intel.com/intel/annualreports.
 
At this year’s annual meeting, the agenda includes the following items:
 
     
Agenda Item
  Board Recommendation
Election of Directors
  FOR
Ratification of Ernst & Young LLP
  FOR
Stockholder Proposal to Amend Bylaws to Establish
Board Committee on Sustainability
  AGAINST
 
Please refer to the proxy statement for detailed information on each of the proposals and the annual meeting. Your Intel stockholder vote is important, and we strongly urge you to cast your vote.
 
Sincerely yours,
 
Craig R. Barrett
Chairman of the Board


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(INTEL LOGO)
 
INTEL CORPORATION
2200 Mission College Blvd.,
Santa Clara, California 95054-1549
 
 
NOTICE OF 2008 ANNUAL STOCKHOLDERS’ MEETING
 
 
TIME AND DATE 8:30 a.m. Pacific Time on May 21, 2008
 
PLACE Computer History Museum, 1401 N. Shoreline Blvd., Mountain View, California 94043
 
LIVE WEBCAST Listen to annual meeting and ask questions at www.intc.com
 
AGENDA
     •  Elect a Board of Directors
 
     •  Ratify Ernst & Young LLP as independent registered public accounting firm
 
     •  Act on one stockholder proposal to amend the Bylaws to establish a Board committee on sustainability, if properly presented at the meeting
 
     •  Transact other business that may properly come before the annual meeting (including adjournments and postponements)
 
RECORD DATE March 24, 2008
 
VOTING Please vote as soon as possible to record your vote promptly, even if you plan to attend the annual meeting. You have three options for submitting your vote before the annual meeting:
 
     •  Internet
 
     •  Phone
 
     •  Mail
 
By Order of the Board of Directors
 
Cary I. Klafter
Corporate Secretary
 
Santa Clara, California
April 2, 2008


 

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INTERNET AVAILABILITY OF PROXY MATERIALS
 
Under rules recently adopted by the U.S. Securities and Exchange Commission (SEC), we are furnishing proxy materials to our stockholders primarily via the Internet, instead of mailing printed copies of those materials to each stockholder. On April 2, 2008, we mailed to our stockholders (other than those who previously requested electronic or paper delivery) a Notice of Internet Availability containing instructions on how to access our proxy materials, including our proxy statement and our annual report. The Notice of Internet Availability also instructs you on how to access your proxy card to vote through the Internet or by telephone.
 
This new process is designed to expedite stockholders’ receipt of proxy materials, lower the cost of the annual meeting, and help conserve natural resources. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise.
 
ATTENDING THE ANNUAL MEETING
 
     
Attending in Person
  Viewing on the Internet
•  Doors open 8:00 a.m. Pacific Time
       •  www.intc.com
•  Meeting starts at 8:30 a.m. Pacific Time
       •  Webcast starts at 8:30 a.m. Pacific Time
•  No use of cameras
       •  Viewers can submit questions by e-mail
•  Security measures may include bag search, metal detector, and hand-wand search
       •  Replay available until June 20, 2008
•  You do not need to attend the annual meeting to vote if you submitted your proxy in advance of the annual meeting
   
 
QUESTIONS
 
For questions regarding Contact
 
Annual meeting Intel Investor Relations, (408) 765-1480
 
Stock ownership Computershare Investor Services, LLC
www.computershare.com/contactus
(800) 298-0146 (within the U.S. and Canada) or
(312) 360-5123 (outside the U.S. and Canada)
 
Voting D. F. King & Co., Inc.
(800) 967-7858 (within the U.S. and Canada) or
(212) 269-5550 (outside the U.S. and Canada)


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(INTEL LOGO)
INTEL CORPORATION
2200 Mission College Blvd.
Santa Clara, CA 95054-1549
 
 
 
 
Our Board of Directors solicits your proxy for the 2008 Annual Stockholders’ Meeting to be held at 8:30 a.m. Pacific Time on Wednesday, May 21, 2008 at the Computer History Museum, 1401 N. Shoreline Blvd., Mountain View, California 94043, and at any postponement or adjournment of the meeting, for the purposes set forth in “Notice of Annual Stockholders’ Meeting.” We made this proxy statement available to stockholders beginning on April 2, 2008.
 
 
Record Date March 24, 2008
 
Quorum Majority of shares outstanding on the record date must be present in person or by proxy
 
Shares Outstanding 5,744,608,312 shares of common stock outstanding as of March 24, 2008
 
Voting by Proxy Internet, phone, or mail
 
Voting in Person Registered holders can vote in person. Beneficial owners must obtain a proxy from their brokerage firm, bank, or other holder of record and present it to the inspector of elections with their ballot. Voting in person will replace any previous votes submitted by proxy.
 
Polls Close 9:30 a.m. Pacific Time on May 21, 2008
 
Changing Your Vote Registered holders may revoke their proxy at any time before polls close by submitting a later-dated vote in person at the annual meeting, via the Internet, by telephone, by mail, or by delivering instructions to our Corporate Secretary before the annual meeting. If you hold shares through a bank or brokerage firm, you must contact that firm to revoke any prior voting instructions.
 
Votes Required to Adopt Proposals Each share of our common stock outstanding on the record date is entitled to one vote on each of the 11 director nominees and one vote on each other matter. To be elected, directors must receive a majority of the votes cast (the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that nominee). Ratification of the selection of our independent registered public accounting firm and adoption of the stockholder proposal each require the affirmative vote of the majority of the shares of common stock present or represented by proxy.
 
Effect of Abstentions and Broker Non-Votes Shares not present at the meeting and shares voting “abstain” have no effect on the election of directors. For the proposal ratifying the selection of our independent registered public accounting firm and the stockholder proposal, abstentions have the same effect as a negative vote and broker non-votes (shares held by brokers that do not have discretionary authority to vote on a matter and have not received voting instructions from their clients) have no effect.
 
Voting Instructions If you complete and submit your proxy voting instructions, the persons named as proxies will follow your instructions. If you submit proxy voting instructions but do not direct how to vote on each item, the persons named as proxies will vote as the Board recommends on each proposal. The persons named as proxies will vote on any other matters properly presented at the annual meeting in accordance with their best judgment. We have not received notice of other matters that may be properly presented for voting at the annual meeting.
 
Voting Results We will announce preliminary results at the annual meeting. We will report final results at www.intc.com and in our Form 10-Q for the second quarter of 2008.


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PROPOSAL 1: ELECTION OF DIRECTORS
 
Our nominees for the election of directors at the annual meeting include nine independent directors, as defined in the applicable rules for companies traded on The NASDAQ Global Select Market* (NASDAQ), and two members of our senior management. Stockholders elect all directors annually. At the recommendation of our Corporate Governance and Nominating Committee, our Board has selected the nominees to serve as directors for the one-year term beginning at our annual meeting on May 21, 2008 or until their successors, if any, are elected or appointed.
 
Unless you direct otherwise through your proxy voting instructions, the persons named as proxies will vote all proxies received “for” the election of each nominee named in this section. If any director nominee is unable or unwilling to serve as a nominee at the time of the annual meeting, the persons named as proxies may vote for a substitute nominee chosen by the present Board to fill the vacancy or for the balance of the nominees, leaving a vacancy. Alternatively, the Board may reduce the size of the Board. We have no reason to believe that any of the nominees will be unwilling or unable to serve if elected as a director.
 
Intel’s Bylaws require that each director receive a majority of the votes cast with respect to such director in uncontested elections (the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that nominee). In 2008, all director nominees identified in the following list are currently serving on the Board. If stockholders do not elect a nominee who is serving as a director, Delaware law provides that the director would continue to serve on the Board as a “holdover director.” Under our Bylaws and Corporate Governance Guidelines, each director annually submits an advance, contingent, irrevocable resignation that the Board may accept if stockholders do not elect the director. In that situation, our Corporate Governance and Nominating Committee would make a recommendation to the Board about whether to accept or reject the resignation, or whether to take other action. The Board would act on the Corporate Governance and Nominating Committee’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date that the election results were certified.
 
Director Changes in 2007 and 2008. In November 2007, the Board elected Carol A. Bartz to the Board effective January 2008. D. James Guzy is expected to retire in May 2008 in accordance with the Board’s retirement age policy, and the size of the Board will be reduced to 11 at that time.
 
The Board recommends that you vote “FOR” the election of each of the following nominees.
 
Craig R. Barrett, age 68
   •   Intel Board member since 1992
   •   2005 – present, Chairman of the Board
   •   1998 – 2005, Chief Executive Officer
   •   1997 – 2002, President
   •   Joined Intel 1974
 
Ambassador Charlene Barshefsky, age 57
   •   Intel Board member since 2004
   •   2001 – present, Senior International Partner at the law firm of Wilmer Cutler Pickering Hale and Dorr LLP
   •   1997 – 2001, United States Trade Representative, chief trade negotiator and principal trade policy maker for the United States and a member of the President’s cabinet
   •   Member of American Express Company, Estée Lauder Companies, and Starwood Hotels & Resorts Worldwide Boards of Directors
 
Carol A. Bartz, age 59
   •   Intel Board member since 2008
   •   2006 to present, Executive Chairman of the Board of Directors of Autodesk, Inc.
   •   1992 – 2006, Chairman of the Board, Chief Executive Officer, and President of Autodesk
   •   Member of Cisco Systems, Inc. and Network Appliance, Inc. Boards of Directors
Susan L. Decker, age 45
   •   Intel Board member since 2006
   •   2007 – present, President of Yahoo! Inc.
   •   2006 – 2007, Executive Vice President of the Advertiser and Publisher Group of Yahoo! Inc.
   •   2000 – 2007, Executive Vice President of Finance and Administration, and Chief Financial Officer of Yahoo! Inc.
   •   Member of Berkshire Hathaway Inc. and Costco Wholesale Corporation Boards of Directors
 
Reed E. Hundt, age 60
   •   Intel Board member since 2001
   •   1998 – present, Principal of Charles Ross Partners, LLC
   •   1998 – present, independent adviser to McKinsey & Company, Inc.
   •   1993 – 1997, Chairman of the Federal Communications Commission
   •   Member of Data Domain, Inc. and Infinera Corporation Boards of Directors


 
*Other names and brands may be claimed as the property of others.


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Paul S. Otellini, age 57
   •    Intel Board member since 2002
   •    2005 – present, President and Chief Executive Officer
   •    2002 – 2005, President and Chief Operating Officer
   •    Member of Google, Inc. Board of Directors
   •    Joined Intel 1974
 
James D. Plummer, age 63
   •    Intel Board member since 2005
   •    1999 – present, Dean of the School of Engineering at Stanford University
   •    1978 – present, Professor of Electrical Engineering at Stanford University
   •    Member of National Academy of Engineering
   •    Member of International Rectifier Corporation and Leadis Technology, Inc. Boards of Directors
 
David S. Pottruck, age 59
   •    Intel Board member since 1998
   •    2005 – present, Chairman and Chief Executive Officer of Red Eagle Ventures, Inc.
   •   2005 – present, Chairman of Eos Airlines
   •   2004 – present, Senior Fellow at Wharton School of Business Center for Leadership and Change Management
   •   1984 – 2004, served as President, Chief Executive Officer, and a member of The Charles Schwab Corporation Board of Directors
 
Jane E. Shaw, age 69
   •    Intel Board member since 1993
   •    1998 – 2005, Chairman and Chief Executive Officer of Aerogen, Inc.
   •    Member of McKesson Corporation Board of Directors
 
John L. Thornton, age 54
   •    Intel Board member since 2003
   •    2003 – present, Professor and Director of Global Leadership at Tsinghua University in Beijing
   •    1981 – 2003, President, Co-Chief Operating Officer, and member of the Goldman Sachs Group, Inc. Board of Directors
   •    Member of China Netcom Group Corporation (Hong Kong) Ltd., Ford Motor Company, and News Corporation Boards of Directors
 
David B. Yoffie, age 53
   •    Intel Board member since 1989
   •    1993 – present, Professor of International Business Administration, Harvard Business School
   •    1981 – present, member of Harvard University faculty


 
CORPORATE GOVERNANCE
 
Board Responsibilities and Structure. The Board oversees, counsels, and directs management in the long-term interests of the company and our stockholders. The Board’s responsibilities include:
 
  •   selecting and evaluating the performance of the Chief Executive Officer (CEO) and other senior executives;
 
  •   planning for succession with respect to the position of CEO and monitoring management’s succession planning for other senior executives;
 
  •   reviewing and approving our major financial objectives and strategic and operating plans, business risks, and actions;
 
  •   overseeing the conduct of our business to evaluate whether the business is being properly managed; and
 
  •   overseeing the processes for maintaining our integrity with regard to our financial statements and other public disclosures, and compliance with law and ethics.
 
The Board believes that different people should hold the positions of Chairman of the Board and CEO to aid in the Board’s oversight of management. Under our Bylaws, the Chairman presides over all meetings of the stockholders and the Board when he is present. In addition, the Board has an independent director, currently Dr. Yoffie, designated as the Lead Independent Director. A written charter adopted by the Board establishes the authority and responsibilities of the Lead Independent Director. They include:
 
  •   presiding over all meetings of the Board when the Chairman is not present;
 
  •   serving as a liaison between the Chairman and the independent directors;
 
  •   approving the information, agenda, and meeting schedules sent to the Board;
 
  •   calling meetings of the independent directors; and
 
  •   being available for consultation and communication with stockholders.


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The Board and its committees meet throughout the year on a set schedule, hold special meetings, and act by written consent from time to time as appropriate. The Board holds regularly scheduled sessions for the independent directors to meet without management present, and the Board’s Lead Independent Director leads those sessions, including three sessions in 2007. Board members have access to all of our employees outside of Board meetings, and the Board has a program that encourages each director to visit different Intel sites and events worldwide on a regular basis and meet with local management at those sites and events.
 
Board Committees and Charters. The Board delegates various responsibilities and authority to different Board committees. Committees regularly report on their activities and actions to the full Board. The Board currently has, and appoints the members of, standing Audit, Compensation, Corporate Governance and Nominating, Executive, and Finance Committees. The Board has determined that each member of the Audit, Compensation, Corporate Governance and Nominating, and Finance Committees is an independent director in accordance with NASDAQ standards.
 
Each of the Board committees has a written charter approved by the Board, and each committee conducts an annual evaluation of the committee’s performance. We post each charter and the charter describing the position of Lead Independent Director on our web site at www.intel.com/intel/finance/corp ­ ­ docs.htm. Each committee can engage outside experts, advisers, and counsel to assist the committee in its work. The following table identifies the current committee members.
 
                               
                  Corporate
           
                  Governance
           
Name     Audit     Compensation     and Nominating     Executive     Finance
Craig R. Barrett
                      ü      
Charlene Barshefsky
                            ü
Carol A. Bartz
    ü                       ü
Susan L. Decker
                ü            
D. James Guzy
    ü                       Chair
Reed E. Hundt
          Chair     ü            
Paul S. Otellini
                      ü      
James D. Plummer
    ü                       ü
David S. Pottruck
    ü     ü                 ü
Jane E. Shaw
    Chair                       ü
John L. Thornton
          ü     ü            
David B. Yoffie
          ü     Chair     Chair      
Number of Committee Meetings Held in 2007     8     3     3     2     1
                               
 
Audit Committee. The Audit Committee assists the Board in its general oversight of our financial reporting, internal controls, and audit functions, and is responsible for the appointment, retention, compensation, and oversight of the work of our independent registered public accounting firm. The Board has determined that Ms. Bartz, Mr. Pottruck, and Dr. Shaw each meet the SEC’s qualifications to be an “audit committee financial expert,” including meeting the relevant definition of an “independent director.” The Board determined that each Audit Committee member has sufficient knowledge in reading and understanding the company’s financial statements to serve on the Audit Committee. The responsibilities and activities of the Audit Committee are described in detail in “Report of the Audit Committee” and the Audit Committee’s charter.
 
Compensation Committee. The Compensation Committee has authority for reviewing and determining salaries, performance-based incentives, and other matters related to the compensation of our executive officers, and administering our stock option plans, including reviewing and granting stock options to our executive officers. The Compensation Committee also reviews and determines various other compensation policies and matters, including making recommendations to the Board related to employee compensation and benefit plans generally, making recommendations to the Board on stockholder proposals related to compensation matters, and administering the employee stock purchase plan.
 
While the Compensation Committee is responsible for executive compensation, the Corporate Governance and Nominating Committee recommends the compensation for non-employee directors. The Compensation Committee can delegate to any member of the Board the authority to grant equity awards to employees who are not executive officers.


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The Compensation Committee can also designate one or more of its members to perform duties on its behalf, subject to reporting to or ratification by the Compensation Committee.
 
Since 2005, the Compensation Committee has engaged the services of Professor Brian Hall of the Harvard Business School to advise the committee with respect to executive compensation philosophy, cash incentive design, the amount of cash and equity compensation awarded, and committee process. During 2007, Professor Hall’s work with the Compensation Committee was related to the following:
 
  •   revisions to the committee’s annual cycle of work and agendas;
 
  •   revisions to the lists of peer group and other companies used for benchmarking purposes;
 
  •   recommendations for Chairman and CEO compensation; and
 
  •   revisions to the content and format of data prepared for use by the Compensation Committee.
 
The Compensation Committee will continue to engage Professor Hall in 2008 to advise it with regard to executive compensation programs, data presentations, and related matters. The Compensation Committee selected Professor Hall, and he reports directly to the Compensation Committee and interacts with management at the direction of the Compensation Committee. Professor Hall has not performed work for Intel other than pursuant to his engagement by the committee. For more information on the responsibilities and activities of the Compensation Committee, including the committee’s processes for determining executive compensation, see “Compensation Discussion and Analysis,” “Report of the Compensation Committee,” and “Executive Compensation” in this proxy statement, and the Compensation Committee’s charter.
 
Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee reviews and reports to the Board on a periodic basis with regard to matters of corporate governance and corporate responsibility, such as environmental, sustainability, workplace, and stakeholder issues. The committee also reviews and assesses the effectiveness of the Board’s Corporate Governance Guidelines, makes recommendations to the Board regarding proposed revisions to the Guidelines and committee charters, and makes recommendations to the Board regarding the size and composition of the Board and its committees. In addition, the committee makes recommendations to the Board regarding the agendas for our annual meetings, reviews stockholder proposals, makes recommendations to the Board for action on such proposals, and reviews and makes recommendations concerning compensation for our non-employee directors. The Corporate Governance and Nominating Committee’s charter describes the responsibilities and activities of the committee in detail.
 
The Corporate Governance and Nominating Committee is responsible for reviewing with the Board, from time to time, the appropriate skills and characteristics required of Board members in the context of the current makeup of the Board. This assessment includes issues of diversity in numerous factors such as age; understanding of and experience in manufacturing, technology, finance, and marketing; and international experience and culture. The committee reviews these factors, and others considered useful by the committee, in the context of an assessment of the perceived needs of the Board at a particular point in time. As a result, the priorities and emphasis of the committee and of the Board may change from time to time to take into account changes in business and other trends, as well as the portfolio of skills and experience of current and prospective Board members. The committee establishes procedures for the nomination process and recommends candidates for election to the Board.
 
Consideration of new Board candidates typically involves a series of internal discussions, review of information concerning candidates, and interviews with selected candidates. Board members or employees typically suggest candidates for nomination to the Board. In 2007, we employed a search firm in connection with seeking and evaluating Board candidates. Dr. Barrett initially suggested Ms. Bartz as a Board candidate. The committee considers candidates proposed by stockholders and evaluates them using the same criteria as for other candidates. A stockholder seeking to recommend a prospective nominee for the committee’s consideration should submit the candidate’s name and qualifications to our Corporate Secretary.
 
Executive Committee. The Executive Committee may exercise the authority of the Board between Board meetings, except to the extent that the Board has delegated authority to another committee or to other persons, and except as limited by applicable law.
 
Finance Committee. The Finance Committee reviews and recommends matters related to our capital structure, including the issuance of debt and equity securities; banking arrangements, including the investment of corporate cash; and management of the corporate debt structure. In addition, the Finance Committee reviews and approves finance and other cash management transactions. The Finance Committee appoints the members of, and oversees, an Investment Policy


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Committee which sets the investment policy and chooses investment managers for the company’s domestic profit sharing and retirement plans. Mr. Pottruck is chairman of this committee, whose other members are Intel employees.
 
Attendance at Board, Committee, and Annual Stockholders’ Meetings. The Board held six meetings in 2007. We expect each director to attend every meeting of the Board and the committees on which he or she serves as well as the annual meeting. In 2007, each director attended the 2007 Annual Stockholders’ Meeting, with the exception of Mr. Pottruck. All directors attended at least 75% of the meetings of the Board and the committees on which they served in 2007.
 
Director Independence. Each of the non-employee directors qualifies as “independent” in accordance with the published listing requirements of NASDAQ: Ambassador Barshefsky, Ms. Bartz, Ms. Decker, Mr. Guzy, Mr. Hundt, Dr. Plummer, Mr. Pottruck, Dr. Shaw, Mr. Thornton, and Dr. Yoffie. Dr. Barrett and Mr. Otellini do not qualify as independent because they are Intel employees.
 
The NASDAQ rules have objective tests and a subjective test for determining who is an “independent director.” Under the objective tests, a director cannot be considered independent if he or she:
 
  •   is an employee of the company; or
 
  •   is a partner in, or an executive officer of, an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year.
 
The subjective test states that an independent director must be a person who lacks a relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
 
None of the non-employee directors was disqualified from “independent” status under the objective tests. In assessing independence under the subjective test, the Board took into account the standards in the objective tests, and reviewed and discussed additional information provided by the directors and the company with regard to each director’s business and personal activities as they may relate to Intel and Intel’s management. Based on all of the foregoing, as required by NASDAQ rules, the Board made a subjective determination as to each independent director that no relationships exist which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Board has not established categorical standards or guidelines to make these subjective determinations, but considers all relevant facts and circumstances.
 
In addition to the Board-level standards for director independence, the directors who serve on the Audit Committee each satisfy standards established by the SEC providing that to qualify as “independent” for the purposes of membership on that committee, members of audit committees may not accept directly or indirectly any consulting, advisory, or other compensatory fee from the company other than their director compensation.
 
Transactions Considered in Independence Determinations. In making its independence determinations, the Board considered transactions occurring since the beginning of 2005 between Intel and entities associated with the independent directors or members of their immediate family. All identified transactions that appear to relate to Intel and a family member or entity with a known connection to a director are presented to the Board for consideration.
 
In making its subjective determination that each non-employee director is independent, the Board considered the transactions in the context of the NASDAQ objective standards, the special standards established by the SEC for members of audit committees, and the SEC and U.S. Internal Revenue Service (IRS) standards for compensation committee members. In each case, the Board determined that, because of the nature of the director’s relationship with the entity and/or the amount involved, the relationship did not impair the director’s independence. The Board’s independence determinations included reviewing the following transactions.
 
Ambassador Barshefsky is a partner at the law firm of Wilmer Cutler Pickering Hale and Dorr LLP. Intel paid this firm less than 1% of this firm’s revenue in 2007, 2006, and 2005 for professional services. Ambassador Barshefsky does not provide any legal services to Intel, and she does not receive any compensation related to our payments to this firm. Ambassador Barshefsky’s husband is an officer of American Honda Motor Company, Inc. (which is wholly owned by Honda Motor Co., Ltd.). Intel and the Intel Foundation participated in a loan to Honda Finance Corp., a subsidiary of Honda Motor Co., Ltd., in 2006 and 2007 by purchasing a short-term debt instrument as part of our investment portfolio.
 
Ms. Bartz and Ms. Decker are executive officers of companies with which Intel does business. Mr. Hundt and Dr. Plummer were outside advisers to companies with which Intel does business, but in such capacity did not provide advice or services to Intel. Family members of Ambassador Barshefsky, Ms. Bartz, Ms. Decker, and Mr. Thornton are


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directors or employees of companies with which Intel does business. The amount that Intel paid in each fiscal year to each of these companies for goods and services represented less than 1% of the other company’s annual revenue, and the amount received in each fiscal year by Intel for goods and services from each company represented less than 1% of Intel’s annual revenue.
 
Ms. Decker, Mr. Hundt, Dr. Plummer, Mr. Pottruck, Dr. Shaw, Mr. Thornton, Dr. Yoffie, or one of their immediate family members have each served as a trustee, director, employee, or advisory board member for one or more colleges and universities. Intel has a variety of dealings with these institutions, including:
 
  •   sponsored research and technology licenses;
 
  •   charitable contributions (matching and discretionary);
 
  •   fellowships and scholarships;
 
  •   facility, engineering, and equipment fees; and
 
  •   payments for training, event hosting, and organizational participation or membership dues.
 
Payments to each of these institutions (including discretionary contributions by Intel and the Intel Foundation) constituted less than the greater of $200,000 or 1% of that institution’s 2007 annual revenue.
 
Each of our non-employee directors is, or was during the previous three fiscal years, a non-management director of another company that did business with Intel at some time during those years. These business relationships were, variously, as a supplier or purchaser of goods or services, licensing or research arrangements, or financing arrangements in which Intel or the Intel Foundation participated as a creditor.
 
Code of Conduct and Principles for Responsible Business. It is our policy that all employees must avoid any activity that is or has the appearance of being hostile, adverse, or competitive with Intel, or that interferes with the proper performance of their duties, responsibilities, or loyalty to Intel. Our Code of Conduct contains these policies and applies to our directors (with respect to their Intel-related activities), executive officers, and other employees.
 
Each director and executive officer must inform our Board when confronted with any situation that may be perceived as a conflict of interest with Intel, even if the person does not believe that the situation would violate our Code of Conduct. If in a particular circumstance the Board concludes that there is or may be a perceived conflict of interest, the Board will instruct our Legal department to work with our relevant business units to determine if there is a conflict of interest and, if there is, how the conflict should be resolved.
 
Any waivers of these conflict rules with regard to a director or an executive officer require the prior approval of the Board or the Audit Committee. Our Code of Conduct is our code-of-ethics document. Our Principles for Responsible Business express our commitment to ethical and legal practices on a worldwide basis. We have posted our Code of Conduct and our Principles for Responsible Business on our web site at www.intc.com under the “Corporate Governance & Responsibility” section.
 
Communications from Stockholders to Directors. The Board recommends that stockholders initiate communications with the Board, the Chairman, the Lead Independent Director, or any committee of the Board in writing to the attention of our Corporate Secretary at the address set forth in “Other Matters.” This process will assist the Board in reviewing and responding to stockholder communications in an appropriate manner. The Board has instructed our Corporate Secretary to review such correspondence and, in his discretion, not to forward items if he deems them to be of a commercial or frivolous nature or otherwise inappropriate for the Board’s consideration.
 
Corporate Governance Guidelines. The Board has adopted a set of Corporate Governance Guidelines. The Corporate Governance and Nominating Committee is responsible for overseeing the Guidelines and annually reviews them and makes recommendations to the Board concerning corporate governance matters. The Board may amend, waive, suspend, or repeal any of the Guidelines at any time, with or without public notice, as it determines necessary or appropriate in the exercise of the Board’s judgment or fiduciary duties.
 
We have posted the Guidelines on our web site at www.intc.com under the “Corporate Governance & Responsibility” section. Among other matters, the Guidelines include the following items concerning the Board:
 
  •   Independent directors may not stand for reelection after age 72, and management directors, other than former CEOs, may not stand for reelection after age 65. Corporate officers may continue as such no later than age 65.


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  •   Directors are limited to service on four public company boards, including Intel’s but excluding not-for-profit and mutual fund boards. If the director serves as an active CEO of a public company, the director is limited to service on three public company boards, including Intel’s.
 
  •   The CEO reports at least annually to the Board on succession planning and management development.
 
  •   The Chairman of the Board manages a process whereby the Board and its members are subject to annual evaluation and self-assessment.
 
  •   The Board will obtain stockholder approval before adopting any “poison pill.” If the Board later repeals this policy and adopts a poison pill without prior stockholder approval, the Board will submit the poison pill to an advisory vote by Intel’s stockholders within 12 months from the date that the Board adopts the pill. If the company’s stockholders fail to approve the poison pill, the Board may elect to terminate, retain, or modify the poison pill in the exercise of its fiduciary responsibilities.
 
In addition, the Board has adopted a policy committing not to issue shares of preferred stock to prevent an unsolicited merger or acquisition.
 
DIRECTOR COMPENSATION
 
The general policy of the Board is that compensation for independent directors should be a mix of cash and equity-based compensation. Intel does not pay management directors for Board service in addition to their regular employee compensation. The Corporate Governance and Nominating Committee, which consists solely of independent directors, has the primary responsibility for reviewing and considering any revisions to director compensation. The Board reviews the committee’s recommendations and determines the amount of director compensation.
 
Intel’s Legal department, Corporate Secretary, and Compensation and Benefits Group in the Human Resources department support the committee in setting director compensation and creating director compensation programs. In addition, the committee can engage the services of outside advisers, experts, and others to assist the committee. During 2007, the committee did not use an outside adviser to aid in setting director compensation.
 
To assist the committee in its annual review of director compensation, Intel’s Compensation and Benefits Group provides director compensation data compiled from the annual reports and proxy statements of companies that the Board uses as its “peer group” for determining director compensation. The director peer group consists of companies within the S&P 100 and technology companies generally considered comparable to Intel. The committee targets cash and equity compensation at the median of the peer group. The director peer group consists of the following companies:
 
                                         
                        Market
                        Capitalization on
      Reported
    Revenue
    Net Income
    February 20, 2008
Company     Fiscal Year     (in billions) ($)     (in billions) ($)     (in billions) ($)
American International Group Inc. 
      12/31/07         110.1         6.2         121.5  
Bank of America Corporation
      12/31/07         66.3         15.0         190.9  
Chevron Corporation
      12/31/07         220.9         18.7         180.3  
Cisco Systems Inc. 
      7/28/07         34.9         7.3         139.4  
Dell Inc. 
      2/2/07         57.4         2.6         44.3  
Hewlett-Packard Company
      10/31/07         104.3         7.3         122.1  
International Business Machines Corporation
      12/31/07         98.8         10.4         149.9  
Johnson & Johnson
      12/30/07         61.1         10.6         182.7  
JP Morgan Chase & Co. 
      12/31/07         71.4         15.4         145.3  
Microsoft Corporation
      6/30/07         51.1         14.1         262.6  
Motorola, Inc. 
      12/31/07         36.6                 26.1  
The Proctor and Gamble Company
      6/30/07         76.5         10.3         203.6  
Texas Instruments Incorporated
      12/31/07         13.8         2.7         40.7  
Wal-Mart Stores, Inc. 
      1/31/07         345.0         11.3         199.0  
Intel 2007
      12/29/07         38.3         7.0         119.0  
Intel 2007 Percentile Rank
                16th         23rd         23rd  
                                         


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After reviewing peer group director compensation data in 2007, the committee did not recommend any changes to director compensation, as the current level of compensation was deemed competitive. The Board followed the recommendation of the committee and determined that no changes would be made to non-employee director compensation in 2007. Non-employee director compensation consists of the following elements:
 
  •   annual cash retainer of $75,000
 
  •   annual restricted stock unit (RSU) grant with a market value of approximately $145,000
 
  •   Audit Committee chair annual fee of $20,000
 
  •   all other committee chair annual fees of $10,000
 
  •   non-chair Audit Committee member annual fee of $10,000
 
  •   Lead Independent Director annual RSU grant with a market value of approximately $30,000
 
The following table details the total compensation of Intel’s non-employee directors for the year ended December 29, 2007.
 
Director Summary Compensation
 
                                         
                  Change in Pension Value
     
      Fees Earned
          and Non-Qualified
     
      or Paid
    Stock
    Deferred Compensation
     
      in Cash
    Awards
    Earnings
    Total
Name     ($)     ($)(1)     ($)     ($)
Charlene Barshefsky
      75,000 (2)       66,200                 141,200  
                                         
Susan L. Decker
      75,000         42,000                 117,000  
                                         
D. James Guzy
      95,000         140,200                 235,200  
                                         
Reed E. Hundt
      85,000         124,100                 209,100  
                                         
James D. Plummer
      85,000         66,200                 151,200  
                                         
David S. Pottruck
      95,000         140,200                 235,200  
                                         
Jane E. Shaw
      95,000         140,200                 235,200  
                                         
John L. Thornton
      75,000         66,200                 141,200  
                                         
David B. Yoffie
      95,000         169,200         10,000         274,200  
                                         
Total
      775,000         954,500         10,000         1,739,500  
                                         
(1)  Grant date fair value of RSUs granted in 2007: $140,200 for each director other than Ms. Decker ($209,900), who received a prorated grant for the 2007 compensation cycle upon joining the Board in 2006, and Dr. Yoffie ($169,200), who received an additional grant as Lead Independent Director. Because awards to Mr. Guzy, Mr. Pottruck, Dr. Shaw, and Dr. Yoffie would accelerate in full upon their retirement under the terms of the awards, we recognized all of the compensation expense associated with their 2007 RSUs at the time of grant.
 
(2)  Ambassador Barshefsky received 1,485 RSUs on July 19, 2007 in lieu of one-half of her annual cash retainer. She will receive her remaining RSUs in July 2008 for the other half of her retainer. These shares vest in equal annual installments over three years.


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Fees Earned or Paid in Cash. Directors receive cash fees in quarterly installments so that adjustments can be made during the year. Directors forfeit unpaid portions of cash retainers upon termination, retirement, disability, or death. The following table provides a breakdown of fees earned or paid in cash.
 
                                         
            Committee Chair
    Audit Committee
     
      Annual Retainers
    Fees
    Member Fees
    Total
Name     ($)     ($)     ($)     ($)
Charlene Barshefsky
      75,000                         75,000  
                                         
Susan L. Decker
      75,000                         75,000  
                                         
D. James Guzy
      75,000         10,000         10,000         95,000  
                                         
Reed E. Hundt
      75,000         10,000                 85,000  
                                         
James D. Plummer
      75,000                 10,000         85,000  
                                         
David S. Pottruck
      75,000         10,000 (1)       10,000         95,000  
                                         
Jane E. Shaw
      75,000         20,000                 95,000  
                                         
John L. Thornton
      75,000                         75,000  
                                         
David B. Yoffie
      75,000         20,000                 95,000  
                                         
  (1)  Mr. Pottruck chairs the Retirement Plans Investment Policy Committee. The Finance Committee appoints the members of that committee, which includes company officers. This committee is responsible for adopting and amending investment policies for our U.S. employee retirement plans.
 
Under the RSU in Lieu of Cash Election program, directors can elect annually to receive all of their cash compensation in the form of RSUs. This election must be 100% or 0%, and must be made in the tax year prior to receiving compensation. The Board grants RSUs elected in lieu of cash on the same grant date and with the same vesting terms as the annual RSU grant to directors. Ambassador Barshefsky participated in this program in 2007.
 
Equity Awards. In accordance with Intel’s 2006 Equity Incentive Plan, equity grants to non-employee directors may not exceed 30,000 shares per director per year. The current practice is to grant each non-employee director RSUs each July with a market value of the underlying shares on the grant date of approximately $145,000 and which vest in equal annual installments over a three-year period from the grant date. On July 19, 2007, Intel granted each independent director 5,755 RSUs; the closing price of Intel’s common stock was $25.26 on that date. The Board awarded Dr. Yoffie an additional 1,190 RSUs for his service as Lead Independent Director. In addition, Ms. Decker received a prorated award of 3,505 RSUs on January 18, 2007 following her election to the Board. Vesting of all shares accelerates upon retirement from the Board if a director is 72 years of age or has at least seven years of service on Intel’s Board. Directors do not receive dividends on unvested RSUs.
 
The amounts included in the “Stock Awards” column in the Director Summary Compensation table reflect the dollar amounts recognized for financial statement reporting purposes for the fiscal year ended December 29, 2007 in accordance with Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123(R)), excluding forfeitures. The “Stock Awards” column generally includes amounts from awards granted in 2007 and 2006. However, because Mr. Guzy, Mr. Pottruck, Dr. Shaw, and Dr. Yoffie are retirement-eligible under the 2006 Equity Incentive Plan, their 2007 RSU awards would accelerate in full upon their retirement from the Board. As a result, at the time of grant we recognized all of the compensation expense associated with their 2007 RSUs. The following table includes the assumptions used in the calculation of these amounts.
 
             
      Assumptions
      Risk-Free
     
      Interest
    Dividend
Grant
    Rate
    Yield
Date     (%)     (%)
7/21/06
    5.2     2.3
1/18/07
    5.0     2.2
7/19/07
    5.0     1.8
             
 
The following table provides information on the outstanding equity awards at fiscal year-end for non-employee directors. Market value for option awards is calculated by taking the difference between the closing price of Intel common stock on NASDAQ on the last trading day of the fiscal year ($26.76 on December 28, 2007) and the option exercise price and multiplying it by the number of exercisable options. Market value for stock awards (consisting solely of RSUs) is


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determined by multiplying the number of shares by the closing price of Intel common stock on NASDAQ on the last trading day of the fiscal year.
 
Outstanding Equity Awards for Directors at Fiscal Year-End 2007
 
 
                                                                                 
      Option Awards     Stock Awards
            Number of
                            Number of
    Market Value of
            Securities
                            Shares or
    Shares or
            Underlying
    Option
          Market
          Units of Stock
    Units of Stock
            Unexercised
    Exercise
    Option
    Value of
          That Have
    That Have
      Grant
    Options
    Price
    Expiration
    Unexercised
    Grant
    Not Vested
    Not Vested
Name     Date     (#) Exercisable     ($)     Date     Options ($)     Date     (#)     ($)
Charlene Barshefsky
      5/19/04         15,000         27.53         5/19/11                 7/21/06         5,647         151,100  
        7/20/05         19,000         27.15         7/20/12                 7/19/07         7,240         193,700  
        1/21/04         5,000         32.06         1/21/14                                        
                                                                                 
Total
                39,000                                               12,887         344,800  
                                                                                 
Susan L. Decker
                                                    1/18/07         3,505         93,800  
                                                          7/19/07         5,755         154,000  
                                                                                 
Total
                                                              9,260         247,800  
                                                                                 
D. James Guzy
      5/20/98         20,000         19.48         5/20/08         145,600         7/21/06         5,647         151,100  
        5/19/99         15,000         29.39         5/19/09                 7/19/07         5,755         154,000  
        5/17/00         15,000         61.45         5/17/10                                        
        5/19/04         15,000         27.53         5/19/11                                        
        5/23/01         15,000         29.41         5/23/11                                        
        5/22/02         15,000         29.19         5/22/12                                        
        7/20/05         19,000         27.15         7/20/12                                        
        5/21/03         15,000         18.73         5/21/13         120,500                                
                                                                                 
Total
                129,000                             266,100                   11,402         305,100  
                                                                                 
Reed E. Hundt
      5/19/04         15,000         27.53         5/19/11                 7/21/06         5,647         151,100  
        5/24/01         35,000         28.76         5/24/11                 7/19/07         5,755         154,000  
        5/22/02         15,000         29.19         5/22/12                                        
        7/20/05         19,000         27.15         7/20/12                                        
        5/21/03         15,000         18.73         5/21/13         120,500                                
                                                                                 
Total
                99,000                             120,500                   11,402         305,100  
                                                                                 
James D. Plummer
      7/20/05         15,000         27.15         7/20/12                 7/21/06         5,647         151,100  
                                                          7/19/07         5,755         154,000  
                                                                                 
Total
                15,000                                               11,402         305,100  
                                                                                 
David S. Pottruck
      1/26/99         20,000         33.58         1/26/09                 7/21/06         5,647         151,100  
        5/19/99         15,000         29.39         5/19/09                 7/19/07         5,755         154,000  
        5/17/00         15,000         61.45         5/17/10                                        
        5/19/04         15,000         27.53         5/19/11                                        
        5/23/01         15,000         29.41         5/23/11                                        
        5/22/02         15,000         29.19         5/22/12                                        
        7/20/05         19,000         27.15         7/20/12                                        
        5/21/03         15,000         18.73         5/21/13         120,500                                
                                                                                 
Total
                129,000                             120,500                   11,402         305,100  
                                                                                 
Jane E. Shaw
      5/20/98         20,000         19.48         5/20/08         145,600         7/21/06         5,647         151,100  
        5/19/99         15,000         29.39         5/19/09                 7/19/07         5,755         154,000  
        5/17/00         15,000         61.45         5/17/10                                        
        5/19/04         15,000         27.53         5/19/11                                        
        5/23/01         15,000         29.41         5/23/11                                        
        5/22/02         15,000         29.19         5/22/12                                        
        7/20/05         19,000         27.15         7/20/12                                        
        5/21/03         15,000         18.73         5/21/13         120,500                                
                                                                                 
Total
                129,000                             266,100                   11,402         305,100  
                                                                                 


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      Option Awards     Stock Awards
            Number of
                            Number of
    Market Value of
            Securities
                            Shares or
    Shares or
            Underlying
    Option
          Market
          Units of Stock
    Units of Stock
            Unexercised
    Exercise
    Option
    Value of
          That Have
    That Have
      Grant
    Options
    Price
    Expiration
    Unexercised
    Grant
    Not Vested
    Not Vested
Name     Date     (#) Exercisable     ($)     Date     Options ($)     Date     (#)     ($)
John L. Thornton
      5/19/04         15,000         27.53         5/19/11                 7/21/06         5,647         151,100  
        7/20/05         19,000         27.15         7/20/12                 7/19/07         5,755         154,000  
        7/23/03         12,500         24.58         7/23/13         27,300                                
                                                                                 
Total
                46,500                             27,300                   11,402         305,100  
                                                                                 
David B. Yoffie
      5/19/99         15,000         29.39         5/19/09                 7/21/06         6,814         182,300  
        5/17/00         15,000         61.45         5/17/10                 7/19/07         6,945         185,900  
        5/19/04         15,000         27.53         5/19/11                                        
        5/23/01         15,000         29.41         5/23/11                                        
        5/22/02         15,000         29.19         5/22/12                                        
        7/20/05         19,000         27.15         7/20/12                                        
        5/21/03         15,000         18.73         5/21/13         120,500                                
                                                                                 
Total
                109,000                             120,500                   13,759         368,200  
                                                                                 
 
Director Stock Ownership Guidelines. The Board has established stock ownership guidelines for the non-employee directors. Within five years of joining the Board, the director must acquire and hold at least 15,000 shares of Intel common stock. After each succeeding five years of Board service, non-employee directors must own an additional 5,000 shares (for example, 20,000 shares after 10 years of service). Unexercised stock options and unvested RSUs do not count toward this requirement. As of December 29, 2007, each director had either satisfied these ownership guidelines or had time remaining to do so.
 
Retirement. Intel has a deferred compensation plan that allows non-employee directors to defer their cash and equity compensation. The Cash Deferral Election allows participants to defer up to 100% of their cash compensation and receive an investment return on the deferred funds as if the funds were invested in Intel common stock. Participants receive credit for reinvestment of dividends under this option. Plan participants must elect irrevocably to receive the deferred funds either in a lump sum or in equal annual installments over five or 10 years, and to begin receiving distributions either at retirement or at a future date not less than 24 months from the election date. This deferred cash compensation is an unsecured obligation for Intel. None of the directors chose the Cash Deferral Election with respect to their 2007 fees. The RSU Deferral Election allows directors to defer their RSUs until termination of service. This election must be 100% or 0% and applies to all RSUs granted during the year. Deferred RSUs count toward Intel’s stock ownership guidelines once they vest. Directors do not receive dividends on deferred RSUs. Ambassador Barshefsky and Dr. Shaw participated in the RSU Deferral Election program in 2007.
 
In 1998, the Board ended its retirement program for independent directors. Non-employee directors serving at that time were vested with the number of years served. They will receive an annual benefit equal to the annual retainer fee in effect at the time of payment, to be paid beginning upon the director’s departure from the Board. The payments will continue for the lesser of the number of years served as a non-employee director or the life of the director. The amounts in the “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” column in the Director Summary Compensation table represent the actuarial increase in pension value accrued under this program. Assumptions used in determining these increases include a discount rate of 5.6%, a retirement age of 65 or current age if older, RP2000 Mortality Table projected to 2007, and an annual benefit amount of $75,000.
 
Travel Expenses. Intel does not pay meeting fees. We reimburse the directors for their travel and related expenses in connection with attending Board meetings and Board-related activities, such as Intel site visits and sponsored events, as well as continuing education programs.
 
Charitable Matching. Directors’ charitable contributions to schools and universities that meet the guidelines of Intel’s employee charitable matching gift program are eligible for matching funds of up to $10,000 per director per year, which is the same limit for employees generally.


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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The following table presents the beneficial ownership of our common stock by each of our directors and listed officers and all of our directors and executive officers as a group as of February 21, 2008. Amounts reported under “Number of Shares of Common Stock Beneficially Owned at February 21, 2008” include the number of shares subject to stock options and RSUs that become exercisable or vest within 60 days of February 21, 2008 (which are shown in the columns to the right). Our listed officers are the CEO, Chief Financial Officer (CFO), and three other most highly compensated executive officers in a particular year. In October 2007, Stacy J. Smith succeeded Andy D. Bryant as CFO; therefore, we have six listed officers. To our knowledge, none of our stockholders owns more than 5% of our common stock. Except as otherwise indicated and subject to applicable community property laws, each owner has sole voting and investment power with respect to the securities listed.
 
                                         
                  Number of Shares
     
                  Subject to Options
     
                  Exercisable as of
     
      Number of Shares of
          February 21, 2008 or
     
      Common Stock
          Which Become
    Number of RSUs That
      Beneficially Owned at
    Percent
    Exercisable Within 60
    Vest Within 60 Days
Stockholder     February 21, 2008     of Class     Days of This Date     of February 21, 2008
D. James Guzy, Director
      10,369,175         **         129,000          
                                         
Craig R. Barrett, Director and Chairman of the Board
      6,108,834 (1)       **         2,795,196         5,641  
                                         
Paul S. Otellini, Director, President, and Chief Executive Officer
      3,488,008 (2)       **         2,742,586         22,500  
                                         
Sean M. Maloney, Executive Vice President, General Manager, Sales and Marketing Group, and Chief Sales and Marketing Officer
      2,153,203 (3)       **         1,998,487         12,125  
                                         
Andy D. Bryant, Executive Vice President, Finance and Enterprise Services, and Chief Administrative Officer
      1,806,018 (4)       **         1,586,454         12,125  
                                         
David Perlmutter, Executive Vice President and General Manager, Mobility Group
      551,591         **         505,390         11,375  
                                         
Jane E. Shaw, Director
      298,179 (5)       **         129,000          
                                         
David B. Yoffie, Director
      258,206 (6)       **         109,000          
                                         
Stacy J. Smith, Vice President and Chief Financial Officer
      235,781         **         219,990         7,500  
                                         
David S. Pottruck, Director
      154,468 (7)       **         129,000          
                                         
Reed E. Hundt, Director
      111,823         **         99,000          
                                         
Charlene Barshefsky, Director
      54,000 (8)       **         39,000          
                                         
John L. Thornton, Director
      49,323         **         46,500          
                                         
James D. Plummer, Director
      20,823         **         15,000          
                                         
Carol A. Bartz, Director
      6,766 (9)       **                  
                                         
Susan L. Decker, Director
      1,168         **                  
                                         
All directors and executive officers as a group (22 individuals)
      30,956,077         **         14,849,985         123,516  
                                         
 **  Less than 1%.
 
(1)  Includes 150,000 shares owned by a private charitable foundation for which Dr. Barrett shares voting authority.
 
(2)  Includes 1,364 shares held by Mr. Otellini’s spouse, and Mr. Otellini disclaims beneficial ownership of these shares.
 
(3)  Includes 4,085 shares held by Mr. Maloney’s spouse.
 
(4)  Includes 1,600 shares held by Mr. Bryant’s son and 1,000 shares held by Mr. Bryant’s daughter, and Mr. Bryant disclaims beneficial ownership of these shares.
 
(5)  Includes 166,356 shares held by a family trust for which Dr. Shaw shares voting and disposition authority.


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(6)  Includes 4,400 shares held by Dr. Yoffie’s mother. Dr. Yoffie had a power of attorney for his mother’s finances, which has subsequently been cancelled. Dr. Yoffie disclaims any economic interest in these shares.
 
(7)  Includes 800 shares held by Mr. Pottruck’s daughter. Includes a total of 13,400 shares held in two separate annuity trusts for the benefit of Mr. Pottruck’s brother for which Mr. Pottruck shares voting and disposition authority.
 
(8)  Includes 3,977 shares held jointly with Ambassador Barshefsky’s spouse for which Ambassador Barshefsky shares voting and disposition authority.
 
(9)  Includes shares held by a family trust for which Ms. Bartz has sole voting and disposition authority.
 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
The Board’s Audit Committee is responsible for review, approval, or ratification of “related-person transactions” involving Intel or its subsidiaries and related persons. Under SEC rules, a related person is a director, officer, nominee for director, or 5% stockholder of the company since the beginning of the previous fiscal year, and their immediate family members. Intel has adopted written policies and procedures that apply to any transaction or series of transactions in which the company or a subsidiary is a participant, the amount involved exceeds $120,000, and a related person has a direct or indirect material interest.
 
The Audit Committee has determined that, barring additional facts or circumstances, a related person does not have a direct or indirect material interest in the following categories of transactions:
 
  •   any transaction with another company for which a related person’s only relationship is as an employee (other than an executive officer), director, or beneficial owner of less than 10% of that company’s shares, if the amount involved does not exceed the greater of $1 million or 2% of that company’s total annual revenue;
 
  •   any charitable contribution, grant, or endowment by Intel or the Intel Foundation to a charitable organization, foundation, or university for which a related person’s only relationship is as an employee (other than an executive officer) or a director, if the amount involved does not exceed the lesser of $1 million or 2% of the charitable organization’s total annual receipts, or any matching contribution, grant, or endowment by the Intel Foundation;
 
  •   compensation to executive officers determined by the Compensation Committee;
 
  •   compensation to directors determined by the Board;
 
  •   transactions in which all security holders receive proportional benefits; and
 
  •   banking-related services involving a bank depository of funds, transfer agent, registrar, trustee under a trust indenture, or similar service.
 
Intel personnel in the Legal and Finance departments review transactions involving related persons that are not included in one of the above categories. If they determine that a related person could have a significant interest in such a transaction, the transaction is forwarded to the Audit Committee for review. The Audit Committee determines whether the related person has a material interest in a transaction and may approve, ratify, rescind, or take other action with respect to the transaction in its discretion.
 
In 2007, there was one related-person transaction under the relevant standards: Intel employed the brother-in-law of Robert J. Baker, an executive officer, as an industrial engineer. Mr. Baker’s brother-in-law received total compensation of $149,300, which was calculated in the same manner as total compensation in the Summary Compensation table. The Audit Committee reviewed and ratified this transaction.
 
COMPENSATION DISCUSSION AND ANALYSIS
 
The Compensation Committee of the Board of Directors determines the compensation for our executive officers. The committee considers, adopts, reviews, and revises executive officer compensation plans, programs, and guidelines and reviews and determines all components of each individual executive officer’s compensation. The committee also consults with management regarding non-executive employee compensation plans and programs, including administering our equity incentive plans.
 
This section of the proxy statement explains how our executive compensation programs are designed and operate with respect to our listed officers (the CEO, CFO, and three other most highly compensated executive officers in a particular year). In October 2007, Stacy J. Smith succeeded Andy D. Bryant as CFO; therefore, in 2008 we have six listed officers. Because Mr. Smith was not an executive officer at the beginning of the year, the committee did not determine his base


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salary, annual incentive cash baseline, or equity awards for 2007, but the committee did set these amounts for 2008. The “Executive Compensation” section presents compensation earned by the listed officers in 2007, 2006, and 2005.
 
Executive Summary
 
Intel’s compensation programs are designed to support our business goals and promote the short- and long-term profitable growth of the company. Intel’s equity plans are designed to ensure that executive compensation programs and practices are aligned with the long-term interests of Intel’s stockholders. Total compensation of each individual varies with individual performance and Intel’s performance in achieving financial and non-financial objectives.
 
The committee and Intel’s management believe that compensation should help to recruit, retain, and motivate the employees that the company will depend on for current and future success. The committee and Intel’s management also believe that the proportion of at-risk, performance-based compensation should rise as an employee’s level of responsibility increases. Intel’s compensation philosophy is reflected in the following key design priorities that govern compensation decisions:
 
  •   alignment with stockholders’ interests;
 
  •   pay for performance;
 
  •   employee recruitment, retention, and motivation;
 
  •   cost and dilution management; and
 
  •   egalitarianism.
 
Intel employees, including executive officers, are employed at will, without employment agreements, severance payment arrangements (except as required by local law), or payment arrangements that would be triggered by a “change in control” of Intel. Retirement plan programs are broad-based; Intel does not provide special retirement plans or benefits solely for executive officers.
 
The committee believes that the majority of the executive officers’ total compensation should consist of equity awards, which are longer term incentive compensation, rather than cash, which is typically tied to shorter term performance. This view aligns the interests of executive officers with the interests of stockholders. We use the following descriptive categories in this “Compensation Discussion and Analysis” section:
 
  •   Total cash compensation refers to base salary plus performance-based cash compensation.
 
  •   Performance-based cash compensation includes annual and semiannual incentive cash payments.
 
  •   Equity awards include stock options and RSUs, both of which may be granted as annual or long-term awards with time-based vesting.
 
  •   Performance-based compensation refers to performance-based cash compensation and equity awards (with time-based vesting).
 
  •   Total compensation refers to base salary, performance-based cash compensation, and equity awards (note that this formulation differs from that in the Summary Compensation table).
 
Compensation for the majority of Intel’s employees located in the United States, including executive officers, consists of the elements identified in the following table.
 
 
             
Compensation Element     Objective     Key Features
Base Salaries
    To provide a minimum, fixed level of cash compensation for the executive officers     Targeted at the 25th percentile of our peer group on average, since we strive to have the majority of executive officer pay at-risk and tied to company performance

Adjustments are based on an individual’s current and expected future performance and pay relative to the market
             


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Compensation Element     Objective     Key Features
Performance-Based Cash Compensation     To encourage and reward executive officers’ contributions in producing strong financial and operational results     Annual incentive cash payments are based on a formula that includes relative and absolute net income growth, company performance to operational goals, and an individual performance adjustment

Semiannual incentive cash payments are based on pretax margin or net income, plus customer satisfaction goals

Total cash compensation (base salary plus performance-based cash compensation) is targeted at the 65th percentile of the peer group on average (actual percentile will vary based on annual performance)
             
Equity Awards
    To retain executive officers and align their interests with those of stockholders     Targeted at the 65th percentile of our peer group on average when an executive officer receives annual and long-term stock options and RSU grants

Majority of listed officers’ total compensation comes in the form of stock options that return value to the executive officer only if our stock price appreciates

Annual equity awards generally vest in 25% annual installments over four years

Long-term equity awards generally vest in full on the fifth anniversary of the grant date
             
Stock Purchase Plan
    To encourage executive officer stock ownership, further aligning their interests with those of stockholders     Broad-based program under which employees, including executive officers, can purchase up to $25,000 in market value of Intel stock at a 15% discount to the market price
             
Profit Sharing Retirement Plan     To provide a minimum level of retirement income for the executive officers     Broad-based plan under which Intel makes profit sharing contributions (a percentage of eligible salary and performance-based cash compensation) up to the tax code limit

Intel’s contributions vest in 20% annual increments after two years of service, completely vesting after six years
             
Deferred Compensation Plan     To provide retirement savings in a tax-efficient manner     Any profit sharing contributions exceeding the tax code limit are added to the executive officer’s deferred compensation account

Executive officers can elect to defer their base salaries and annual incentive cash payments
             
 
History of Executive Compensation at Intel
 
Historically, compensation for executive officers has consisted of base salary, annual and semiannual incentive cash payments linked to earnings and other performance factors, equity grants, employee stock purchase program, and retirement contributions.
 
Base salaries for executive officers have traditionally been below the median compared to our peer group. To offset these lower than market base salaries and tie total compensation to company performance, Intel has offered higher than market performance-based compensation in the form of annual and semiannual incentive cash payments and equity awards. As a result, executive officer compensation fluctuates significantly with company performance, aligning executive officers with

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the long-term interests of our stockholders. In addition, Intel’s egalitarian culture, inspired by Intel’s founders, discourages the committee from offering employment agreements, severance payment arrangements, change in control agreements, or perquisites to our executive officers.
 
Although our core philosophy and the main elements of executive compensation have remained consistent over time, the committee has sought ways to improve Intel’s compensation programs. Recent examples include:
 
  •   In 2006, Intel began granting RSUs in addition to stock options to manage dilution and promote retention.
 
  •   In 2007, the Executive Officer Incentive Plan was redesigned to provide greater clarity and alignment with performance by adopting a formula that includes relative and absolute financial components based on net income growth, an operational component based on achievement of business goals, and an individual performance adjustment.
 
The committee periodically reviews Intel’s programs and philosophy to ensure that they are consistent with our goal of attracting, retaining, and motivating our executive officers to deliver outstanding results for our stockholders.
 
Determining Executive Compensation
 
In determining base salary, annual incentive cash baselines, and equity awards, the committee uses the executive officers’ current level of compensation as the starting point. The committee then makes adjustments to those levels primarily using benchmarking to peer companies and the individual’s performance. Secondary considerations in determining the new level of compensation include internal pay equity and wealth accumulation. The committee has discretion to set compensation at levels that differ from the target levels.
 
Benchmarking
 
To assist the committee in its review of executive compensation, Intel’s Compensation and Benefits Group provides compensation data compiled from executive compensation surveys, as well as data gathered from annual reports and proxy statements from companies that the committee selects as a “peer group” for executive compensation analysis purposes. This historical compensation data is then adjusted in order to arrive at current-year estimates for the peer group. The committee uses this data to compare the compensation of our executive officers to the peer group, targeting the 25th percentile for base salaries and the 65th percentile for total cash compensation on average. The committee’s goal for equity compensation is that the combination of annual and long-term equity awards will approximate the 65th percentile of the peer group on average. Since the executive officers have the highest levels of responsibility for the company’s overall performance, the committee believes these officers are in the best positions to influence the company’s performance, and accordingly should have a significant portion of their cash compensation at risk. Professor Hall, the committee’s independent adviser, and Intel’s Compensation and Benefits Group review this data with the committee.
 
For 2007, the peer group consisted of technology companies generally considered comparable to Intel as well as non-technology companies within the Fortune 100. For the peer group used in 2007, the committee’s intent was to choose companies that had one or more attributes similar to Intel’s, including semiconductor or computer design, manufacturing and integration, and large enterprises with global operations. The peer group consisted of the following companies:
 
 
                                         
      Reported Fiscal
    Revenue (in
    Net Income (in
    Market Capitalization on
Company     Year     billions) ($)     billions) ($)     February 20, 2008 (in billions) ($)
Advanced Micro Devices, Inc. 
      12/29/07         6.0         (3.4 )       4.0  
                                         
Apple, Inc. 
      9/29/07         24.0         3.5         108.8  
                                         
Applied Materials, Inc. 
      10/28/07         9.7         1.7         26.7  
                                         
Bank of America Corporation
      12/31/07         66.3         15.0         190.9  
                                         
Chevron Corporation
      12/31/07         220.9         18.7         180.3  
                                         
Cisco Systems Inc. 
      7/28/07         34.9         7.3         139.4  
                                         
Citigroup Inc. 
      12/31/07         81.7         3.6         127.3  
                                         
The Coca-Cola Company
      12/31/07         28.9         6.0         135.0  
                                         
Dell Inc. 
      2/2/07         57.4         2.6         44.3  
                                         
EMC Corporation
      12/31/07         13.2         1.7         32.4  
                                         
Exxon Mobil Corporation
      12/31/07         404.6         40.6         474.2  
                                         


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      Reported Fiscal
    Revenue (in
    Net Income (in
    Market Capitalization on
Company     Year     billions) ($)     billions) ($)     February 20, 2008 (in billions) ($)
Ford Motor Company
      12/31/07         172.5         (2.7 )       13.5  
                                         
General Electric Company
      12/31/07         172.7         22.2         345.3  
                                         
General Motors Corporation
      12/31/07         181.1         (38.7 )       14.5  
                                         
Hewlett-Packard Company
      10/31/07         104.3         7.3         122.1  
                                         
Honeywell International Inc. 
      12/31/07         34.6         2.4         42.1  
                                         
International Business Machines Corporation
      12/31/07         98.8         10.4         149.9  
                                         
Johnson & Johnson
      12/30/07         61.1         10.6         182.7  
                                         
Lockheed Martin Corporation
      12/31/07         41.9         3.0         43.8  
                                         
Microsoft Corporation
      6/30/07         51.1         14.1         262.6  
                                         
Motorola, Inc. 
      12/31/07         36.6                 26.1  
                                         
National Semiconductor Corporation
      5/27/07         1.9         0.4         4.4  
                                         
Nortel Networks Corporation
      12/31/07         10.9         (1.0 )       5.0  
                                         
PepsiCo, Inc. 
      12/29/07         39.5         5.7         114.2  
                                         
Pfizer Inc. 
      12/31/07         48.4         8.1         152.2  
                                         
Qualcomm Incorporated
      9/30/07         8.9         3.3         69.9  
                                         
Safeway Inc. 
      12/29/07         42.3         0.9         14.1  
                                         
Sony Corporation
      3/31/07         70.3         1.1         46.9  
                                         
Sun Microsystems, Inc. 
      6/30/07         13.9         0.5         15.6  
                                         
Target Corporation
      2/3/07         59.5         2.8         44.4  
                                         
Texas Instruments Incorporated
      12/31/07         13.8         2.7         40.7  
                                         
Time Warner Inc. 
      12/31/07         46.5         4.4         59.3  
                                         
United Parcel Service, Inc. 
      12/31/07         49.7         0.4         76.1  
                                         
The Walt Disney Company
      9/29/07         35.5         4.7         61.4  
                                         
Intel 2007
      12/29/07         38.3         7.0         119.0  
                                         
Intel 2007 Percentile Rank
                41st         71st         65th  
                                         
 
Peer Group Changes for 2008
 
Based on the recommendation of Professor Hall and Intel’s Compensation and Benefits Group, the committee revised the peer group that Intel will use for making compensation decisions in 2008. The size of the peer group was reduced to 25 companies with the goal of more accurately reflecting the companies with which Intel competes for talent and to resemble more closely the peer group that Intel uses for measuring relative financial performance for annual incentive cash payments. The new peer group includes 15 technology companies and 10 companies outside the technology industry from the S&P 100. The committee chose companies that resemble Intel in various respects, such as making large investments in research and development and having significant manufacturing and global operations. In addition, the committee selected companies whose three-year averages for revenue, net income, and market capitalization approximated Intel’s. Based on the review of market data by Professor Hall and Intel’s Compensation and Benefits Group, the committee does not expect changes in the peer group to have a significant impact on aggregate compensation for 2008. The new peer group is as follows:
 
 
                                         
      Reported Fiscal
    Revenue (in
    Net Income (in
    Market Capitalization on
Company     Year     billions) ($)     billions) ($)     February 20, 2008 (in billions) ($)
Advanced Micro Devices, Inc. 
      12/29/07         6.0         (3.4 )       4.0  
                                         
Apple, Inc. 
      9/29/07         24.0         3.5         108.8  
                                         
Applied Materials, Inc. 
      10/28/07         9.7         1.7         26.7  
                                         
AT&T Corporation
      12/31/07         118.9         12.0         207.7  
                                         
Cisco Systems Inc. 
      7/28/07         34.9         7.3         139.4  
                                         

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      Reported Fiscal
    Revenue (in
    Net Income (in
    Market Capitalization on
Company     Year     billions) ($)     billions) ($)     February 20, 2008 (in billions) ($)
Dell Inc. 
      2/2/07         57.4         2.6         44.3  
                                         
The Dow Chemical Company
      12/31/07         53.5         2.9         36.8  
                                         
EMC Corporation
      12/31/07         13.2         1.7         32.4  
                                         
General Electric Company
      12/31/07         172.7         22.2         345.3  
                                         
Google Inc. 
      12/31/07         16.6         4.2         158.9  
                                         
Hewlett-Packard Company
      10/31/07         104.3         7.3         122.1  
                                         
International Business Machines Corporation
      12/31/07         98.8         10.4         149.9  
                                         
Johnson & Johnson
      12/30/07         61.1         10.6         182.7  
                                         
Merck & Co., Inc. 
      12/31/07         24.2         3.3         102.4  
                                         
Microsoft Corporation
      6/30/07         51.1         14.1         262.6  
                                         
Motorola, Inc. 
      12/31/07         36.6                 26.1  
                                         
Oracle Corporation
      5/31/07         18.0         4.3         99.8  
                                         
Pfizer Inc. 
      12/31/07         48.4         8.1         152.2  
                                         
Qualcomm Incorporated
      9/30/07         8.9         3.3         69.9  
                                         
Texas Instruments Incorporated
      12/31/07         13.8         2.7         40.7  
                                         
Tyco International Ltd. 
      9/28/07         18.8         (1.7 )       19.5  
                                         
United Parcel Service, Inc. 
      12/31/07         49.7         0.4         76.1  
                                         
United Technologies Corporation
      12/31/07         54.8         4.2         70.7  
                                         
Verizon Communications Inc. 
      12/31/07         93.5         5.5         101.4  
                                         
Yahoo! Inc. 
      12/31/07         7.0         0.7         40.2  
                                         
Intel 2007
      12/29/07         38.3         7.0         119.0  
                                         
Intel 2007 Percentile Rank
                51st         69th         66th  
                                         
 
Individual Performance Reviews
 
The CEO documents each executive officer’s performance during the year, detailing accomplishments, areas of strength, and areas for development. The CEO bases his evaluation on his knowledge of each executive officer’s performance, an individual self-assessment completed by each executive officer, and feedback provided by each executive officer’s peers and direct reports. The CEO also reviews the compensation data gathered from the compensation surveys and makes a recommendation to the committee on each executive officer’s base salary, annual incentive cash baselines, and equity awards. The CEO does not propose compensation for himself or the Chairman. Intel’s Director of Human Resources and the Compensation and Benefits Group assist the CEO in developing the executive officers’ performance reviews and reviewing the market compensation data to determine the compensation recommendations. Executive officers do not propose or seek approval for their own compensation.
 
The Chairman and the CEO’s annual performance reviews are developed by the independent directors acting as a committee of the whole Board, chaired by the Lead Independent Director. For the CEO’s review, formal input is received from the independent directors, the Chairman, and senior management. For the Chairman’s review, input is received from the independent directors and the CEO. The Chairman and the CEO also submit self-assessments. The independent directors meet as a group in executive session to prepare the reviews, which are completed and presented to the Chairman and the CEO. These evaluations are used by the committee to determine the Chairman and CEO’s base salaries, annual incentive cash baselines, and equity awards.
 
Internal Pay Equity
 
The committee compares the compensation of executive officers with the compensation of the top 100 highest paid employees at Intel to monitor internal pay equity. The committee does not use fixed ratios when conducting this analysis, but our CEO’s total compensation has typically been 1.5 – 3x the total compensation paid to each of our executive vice presidents.

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Wealth Accumulation Analysis
 
The committee’s process for determining compensation also includes a review of Intel’s executive compensation programs and practices, and an analysis of all elements of compensation. The committee also reviews the value of each element of compensation that the executive officer could potentially receive in the next 10 years, under scenarios of continuing employment, termination, and retirement. For this review, total remuneration includes all aspects of the executive officer’s total cash compensation from continuing employment, the future value of equity awards under varying stock price assumptions (and including, as applicable, the impact of accelerated vesting upon retirement), the value of any deferred compensation, and profit sharing retirement benefits. The goal of the analysis is to allow the committee to see how each element of compensation interacts with the other elements and to see how current compensation decisions may affect future wealth accumulation. To date, the amount of past compensation, including amounts realized or realizable from prior equity awards, has generally not been a significant factor in the committee’s considerations.
 
Final Compensation Determinations
 
In the first quarter of 2007, the committee established base salaries, set the annual incentive cash baselines and operational goals under the Executive Officer Incentive Plan, and determined the equity awards for executive officers. When setting the annual incentive baseline amount, the committee takes into account that these amounts are subject to a multiplier under the Executive Officer Incentive Plan formula. Thus, even when the baseline amount was lower than an executive officer’s base salary, the multiplier resulted in a higher percentage of total cash compensation being performance-based. Following the end of the year, the committee approved the calculation of the multiplier to be used in making annual incentive cash payments based on the Executive Officer Incentive Plan formula and determined any individual performance adjustments under the plan. These determinations are discussed below, after which we provide more details on the different elements of compensation.
 
With respect to adjustments based on market data, 2007 was the second year of a three-year program to increase cash and equity compensation levels to reach the target percentiles set by the committee, and mirrors an effort to increase compensation for employees generally. However, the target percentiles for base salary, total cash compensation, equity compensation, and total compensation are guidelines for the committee. The committee’s subjective consideration of the other factors discussed above results in individual determinations that differ, at times significantly, from the target percentiles. In addition, actual cash compensation for each of the listed officers also increased due to higher annual incentive cash payments under the Executive Officer Incentive Plan that reflect stronger corporate performance compared to 2006.
 
Considerations Specific to Dr. Barrett
 
Dr. Barrett has served as Intel’s Chairman since May 15, 2005, following his transition from serving as Intel’s CEO, and he has been an Intel employee since 1974. In 2007, as in 2006, the committee elected to reduce Dr. Barrett’s base salary by 23% and annual incentive cash baseline by 30%, primarily to reflect the differences in job scope between the role of Chairman and CEO. However, Intel’s strong financial performance in 2007 resulted in an increase in his performance-based cash compensation. Accordingly, Dr. Barrett’s total cash compensation increased 11% in 2007. Dr. Barrett received a higher proportion of RSUs in 2007, reflecting the committee’s decision to provide executive officers with an equity mix of approximately 70% stock options and 30% RSUs. Primarily because of the increase in performance-based cash compensation, Dr. Barrett’s total compensation increased 10% for 2007. The committee compensated Dr. Barrett at levels significantly below the target percentiles, primarily due to differences in the scope of his job compared to other chairman of the board positions in the peer group.
 
                               
      2007
    2006
    Change 
      ($)     ($)     (%)
                               
Base Salary
      358,300         463,000         (23 )
                               
Total Cash Compensation
      1,752,400         1,573,400         11  
                               
Annual Equity Awards (based on grant date fair value)
      1,134,700         1,062,300         7  
                               
Long-Term Equity Awards (based on grant date fair value)
                       
                               
Total Compensation
      2,887,100         2,635,700         10  
                               


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Considerations Specific to Mr. Otellini
 
Mr. Otellini has served as Intel’s CEO since May 15, 2005 and has been an Intel employee since 1974. In 2007, the Committee elected to increase Mr. Otellini’s base salary by 10% and annual incentive cash baseline by 25%. Both elements were increased in light of peer data indicating that his cash compensation was significantly below the committee’s compensation goals. Mr. Otellini’s base salary was increased less than his annual incentive cash baseline in an effort to increase the proportion of at-risk, performance-based compensation. Based on market data, the committee believes that Mr. Otellini’s base salary for 2007 was below the 25th percentile. Although his base salary and annual incentive cash baseline increases, along with the effect of Intel’s strong financial performance on annual incentive cash payments, resulted in Mr. Otellini’s total cash compensation increasing 91% in 2007, the committee believes that his total cash compensation remained below the 65th percentile. Based on grant date fair value, Mr. Otellini received a 4% increase in the value of his annual equity awards in 2007 compared to 2006. In 2007, Mr. Otellini was also granted a long-term stock option to purchase 700,000 shares. In order to reinforce the at-risk, performance-based nature of Mr. Otellini’s total compensation package and reward long-term stock price appreciation, this long-term stock option award was granted in a single year instead of being spread over a number of years. Primarily because of Mr. Otellini’s increased performance-based cash compensation and his long-term stock option, Mr. Otellini’s total compensation increased 104% for 2007. However, the committee believes that his total compensation was still significantly below the 65th percentile. In 2007, the committee compensated Mr. Otellini at levels below the target percentiles because of his relatively short tenure as CEO.
 
                               
      2007
      2006
      Change
 
      ($)       ($)       (%)  
                               
Base Salary
      770,000         700,000         10  
                               
Total Cash Compensation
      4,734,200         2,472,700         91  
                               
Annual Equity Awards (based on grant date fair value)
      3,614,400         3,475,000         4  
                               
Long-Term Equity Awards (based on grant date fair value)
      3,793,500                  
                               
Total Compensation
      12,142,100         5,947,700         104  
                               
 
Considerations Specific to Mr. Bryant
 
Mr. Bryant, an Executive Vice President, served as Intel’s CFO for 13 years before transitioning in October 2007 to Intel’s Chief Administrative Officer. He has been an Intel employee since 1981. In 2007, the committee elected to increase Mr. Bryant’s base salary by 28% and annual incentive cash baseline by 22% in an effort to provide more market competitive pay. Based on market data, the committee believes that Mr. Bryant’s base salary for 2007 was close to the 25th percentile. Mr. Bryant’s total cash compensation increased 39% in 2007, resulting in his total cash compensation being above the 65th percentile. In 2007, the committee compensated Mr. Bryant above the 65th percentile for total cash compensation because of Intel’s strong financial performance and his tenure as an Executive Vice President. Based on grant date fair value, Mr. Bryant received a 60% increase in the value of his annual equity awards in 2007 compared to 2006, in line with our target for market competitiveness and with grants to other Executive Vice Presidents. Primarily because of the increases in his annual equity awards and performance-based cash compensation, Mr. Bryant’s total compensation increased 48% for 2007. The committee believes that his total compensation was close to the 65th percentile.
 
                               
      2007
    2006
    Change
      ($)     ($)     (%)
                               
Base Salary
      455,000         355,000         28  
                               
Total Cash Compensation
      2,128,400         1,533,500         39  
                               
Annual Equity Awards (based on grant date fair value)
      1,903,200         1,192,200         60  
                               
Long-Term Equity Awards (based on grant date fair value)
                       
                               
Total Compensation
      4,031,600         2,725,700         48  
                               
 
Considerations Specific to Mr. Maloney
 
Mr. Maloney has been an Executive Vice President at Intel for six years and an Intel employee since 1982. In 2007, the committee elected to increase Mr. Maloney’s base salary by 34% and annual incentive cash baseline by 27%. Based on market data, the committee believes that Mr. Maloney’s base salary for 2007 was above the 25th percentile. Mr. Maloney’s total cash compensation increased 44% in 2007. The committee believes that his total cash compensation was above the 65th percentile. In 2007, the committee compensated Mr. Maloney above the 65th percentile for total cash


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compensation because of Intel’s strong financial performance and in an effort to maintain internal equity with other Executive Vice Presidents. Based on grant date fair value, Mr. Maloney received a 60% increase in the value of his annual equity awards in 2007 compared to 2006, in line with our target for market competitiveness and with grants to other Executive Vice Presidents. In 2007, Mr. Maloney was also granted a long-term stock option to purchase 82,500 shares and 11,750 long-term RSUs. Primarily because of these long-term equity awards and increases in annual equity awards and performance-based cash compensation, Mr. Maloney’s total compensation increased 81% for 2007. The committee believes that his total compensation was close to the 65th percentile.
 
                               
      2007
    2006
    Change
      ($)     ($)     (%)
                               
Base Salary
      390,000         290,000         34  
                               
Total Cash Compensation
      1,883,900         1,309,000         44  
                               
Annual Equity Awards (based on grant date fair value)
      1,903,200         1,192,200         60  
                               
Long-Term Equity Awards (based on grant date fair value)
      729,300                  
                               
Total Compensation
      4,516,400         2,501,200         81  
                               
 
Considerations Specific to Mr. Perlmutter
 
Mr. Perlmutter has been an Executive Vice President at Intel since November 15, 2007 and an Intel employee since 1980. In 2007, the committee elected to increase Mr. Perlmutter’s base salary by 38% and annual incentive cash baseline by 78%. In addition to individual performance and market-based reasons, Mr. Perlmutter’s total cash compensation was increased because he was no longer participating in some Intel Israel site-specific compensation programs. The committee elected to remove Mr. Perlmutter from these compensation programs (other than retirement programs) in order to more closely align his compensation programs with those of Intel’s other executive officers. Based on market data, the committee believes that Mr. Perlmutter’s base salary for 2007 was below the 25th percentile. These factors, as well as Intel’s strong financial performance, resulted in Mr. Perlmutter’s total cash compensation increasing 72% in 2007. The committee believes that his total cash compensation was below the 65th percentile. Based on grant date fair value, Mr. Perlmutter received a 104% increase in the value of his annual equity awards in 2007 compared to 2006, in line with our target for market competitiveness and with grants to other Executive Vice Presidents. In 2007, Mr. Perlmutter was also granted a long-term stock option to purchase 52,500 shares and 5,000 long-term RSUs. Primarily because of the increases in his annual equity awards and performance-based cash compensation, Mr. Perlmutter’s total compensation increased 72% for 2007. The committee believes that Mr. Perlmutter’s total compensation was significantly below the 65th percentile. In 2007, the committee compensated Mr. Perlmutter at levels below the target percentile for total compensation due to his relatively short tenure as an Executive Vice President.
 
                               
      2007
    2006
    Change
      ($)     ($)     (%)
                               
Base Salary
      357,200         258,500         38  
                               
Total Cash Compensation
      1,612,400         938,800         72  
                               
Annual Equity Awards (based on grant date fair value)
      1,903,200         933,500         104  
                               
Long-Term Equity Awards (based on grant date fair value)
      417,800         419,600          
                               
Total Compensation
      3,933,400         2,291,900         72  
                               
 
Considerations Specific to Mr. Smith
 
Since Mr. Smith was not an Executive Officer when the 2007 compensation decisions were made, Mr. Otellini determined Mr. Smith’s compensation for 2007. Beginning in 2008, his compensation is determined by the committee.
 
Elements of Compensation
 
Base Salary
 
When the committee determines the executive officers’ base salaries during the first quarter of the year, the committee takes into account each officer’s role and level of responsibility at the company. In general, executive officers with the highest level of responsibility have the lowest percentage of their compensation fixed as base salary and the highest percentage of their compensation at risk. The committee strives to have the majority of the executive officers’


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compensation at risk. Based on market data, the committee believes that in 2007 the base salaries of the listed officers were, on average, below the 25th percentile of our peer group companies. The committee believes the 25th percentile is an appropriate target for base salaries because the committee strives to have performance-based compensation be a substantial majority of executive officers’ total compensation. Base salary represents a small percentage of total cash compensation (20% in 2007) and total compensation (7% in 2007) for the listed officers.
 
Performance-Based Compensation
 
Intel’s pay-for-performance programs include performance-based cash compensation that rewards strong financial performance, and equity awards that reward stock price appreciation. Annual and semiannual incentive cash payments are determined primarily by Intel’s financial results and are not linked directly to Intel’s stock price performance. The committee believes that targeting total cash compensation at the 65th percentile is appropriate because of the high proportion of cash compensation that is variable, at risk, and tied to Intel’s financial performance relative to the peer group. A high percentage of total compensation is performance-based (88% in 2007), with the majority of total compensation in the form of equity awards (58% in 2007).
 
Annual Incentive Cash Payments. Net income is the key financial component of Intel’s incentive cash programs, and in 2007 net income increased 38% compared to 2006. Primarily because of this result, total cash compensation to listed officers increased 57% overall.
 
Annual incentive cash payments are made under the Executive Officer Incentive Plan. This plan mirrors the broad-based plan for employees, with the added feature of an individual performance adjustment. The three core elements of the program, which are multiplied together to determine the annual incentive cash payment, are as follows:
 
  •   a formula based on earnings growth and operational performance, which results in a bonus multiplier;
 
  •   an incentive cash baseline for each executive officer; and
 
  •   an individual performance adjustment.
 
The annual incentive cash payment cannot be increased beyond the maximum limits calculated each year under the formula and cannot in any event exceed $10 million for any individual. The following illustration shows the Executive Officer Incentive Plan formula.
 
(Formula Graphic)
 
As shown above, the sum of the three corporate performance components determines the Executive Officer Incentive Plan multiplier. We expect the multiplier calculated under the plan to typically range between 2 and 4 (but it may be higher or lower depending on the output of the formula), with a target multiplier of 3. The Executive Officer Incentive Plan provides that the individual performance adjustment could range between 90% and 110%. The committee has the ability to apply subjective, discretionary criteria to determine the individual performance adjustment percentage.
 
Each corporate performance component is targeted around a score of 100%, with a minimum score of zero. The committee elected to use net income as the financial performance metric to reward executive officers for growing


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earnings. Diluted earnings per share was considered, but the committee preferred net income to evaluate both absolute and relative financial performance, as it is independent of factors such as stock price movements and stock buybacks that affect earnings per share. The committee may adjust Intel’s net income based on qualifying criteria selected by the committee in its sole discretion as described in the plan. The methodology used to calculate Intel’s net income for both absolute and relative financial performance is the same. Further details on each component follow:
 
  •   Relative Financial Component. To determine relative financial performance, the committee compares Intel’s annual net income growth relative to the market, which for this purpose we define as the 15 technology peer companies plus the companies that make up the S&P 100. To determine Intel’s performance relative to the market, Intel’s net income percentage growth (plus one) is divided by the simple average (with each group weighted equally) of the annual net income percentage growth for the S&P 100 and the 15 technology peer companies (plus one). There is some overlap in the S&P 100 and the 15 technology peer companies that we have identified. We have done this intentionally to provide slightly more weighting to our relative performance compared to the technology peer companies that are also in the S&P 100. Through this component, the committee rewards executive officers for how well Intel performs compared to a broader market. In 2007, Intel’s net income grew significantly faster than the market average (38.3% vs. 5%).
 
  •   Absolute Financial Component. To determine absolute financial performance, Intel’s current-year net income is divided by Intel’s average net income over the previous three years. Due to historical volatility in earnings, the committee decided to use a rolling three-year average in the denominator so that Intel does not over- or under-compensate executive officers based on volatility in earnings. Through this component, the committee rewards executive officers for sustained performance. In 2007, Intel’s net income was 10% higher than the trailing three-year average.
 
  •   Operational Component. Each year, the committee approves operational goals and their respective success criteria for measuring operational performance. The operational goals typically link to performance in several key areas, including financial performance, product design/development roadmaps, manufacturing/cost/productivity improvements, and customer satisfaction. For 2007, the committee approved 23 operational goals, allocated and grouped into the categories described in the following tables, with weightings that total 100 points. The goals and success measures are defined within the first 90 days of the performance period. The scoring for each goal ranges from 0 to 1.25 based on the level of achievement reflected in Intel’s confidential internal annual business plan. The results are summed and divided by 100, such that the final operational score is between 0 and 1.25. The operational goals selected by the committee are also used in the broad-based employee annual incentive cash plan and are prepared each year as part of the annual planning process for the company, so that all employees are focused on achieving the same company-wide operational results. These operational goals are derived from a rigorous process for tracking and evaluating performance; however, some goals have non-quantitative measures that require some degree of subjective evaluation. Over the past five years, operational goals have scored between 88% and 108%, with an average result of 99%. The operational goals are intended to be a practical and realistic estimate of the coming year based on the data, projections, and analyses that Intel uses in its planning processes. The scores for the year, representing Intel’s achievement of the year’s operational goals, are calculated by senior management and are reviewed and approved by the committee. The company scored 107% on its operational goals in 2007, up from 88% in 2006.
 
2007 Operational Goal Categories
 
       
 
Architecture/Platforms – 25 points
    Customer Orientation – 25 points
       
•   Next-generation product development
   
    •   Improved roadmap flexibility, delivery performance, and
•   Graphics leadership
          response rates
     
    •   Reinvigoration of brand leadership
       
Manufacturing/Technology – 25 points
    Growth and Execution – 25 points
       
•   Factory performance and costs
   
    •   Revenue and product roadmap ramps/execution
•   Process technology milestones
   
    •   Headcount and spending metrics and execution
       


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Executive Officer Incentive Plan Formula Results for 2007
 
Following the end of fiscal year 2007, the committee determined the annual incentive cash payments in accordance with the plan’s formula. The 2007 financial results yielded a multiplier of 3.49, calculated as follows:
 
                                     
      Absolute Financial Component
                       
Relative Financial Component     (In millions)($)     Operational Component       Points       EOIP Multiplier   
                                     
(1 + 38.3%)
    6,976
      Architecture/Platforms         24.0            
(1 + 5.0%)
    6,314(1)       Manufacturing/Technology         30.5            
              Customer Orientation         24.6            
              Growth and Execution         28.0            
              Total         107.1/100            
                                     
1.32
    1.10                 1.07           3.49   
                                     
(1) With the requirement in 2006 to include the impact of stock-based compensation in generally accepted accounting principles financial statements, the 2004 and 2005 net income numbers include the impact of stock-based compensation to ensure consistency in measuring net income growth. Additionally, the 2005 net income number excludes the additional tax expense of $250 million related to the decision to repatriate non-U.S. earnings under the American Jobs Creation Act of 2004.
 
In addition, for fiscal 2007 the committee elected to provide each listed officer with a positive individual performance adjustment in light of the totality of Intel’s strong performance in 2007.
 
The following graph illustrates how the amount of the average annual incentive cash payment to listed officers has varied with changes to Intel’s net income.
 
(Bar Chart)
 
Semiannual Incentive Cash Payments. Intel’s executive officers participate in a company-wide, semiannual cash incentive plan that calculates payouts based on Intel’s corporate profitability to link compensation to financial performance. Payouts are communicated as a number of extra days of compensation, with executive officers receiving the same number of extra days as other employees. Two formulas compute a payout, with the actual payout based on the formula that delivers the higher value:
 
  •   0.65 days of compensation (calculated based on eligible earnings for the six-month period, including one-half of incentive baseline amounts) for every two percentage points of Intel’s pretax profit as a percentage of revenue; or
 
  •   a payment expressed as days of compensation based on 4.5% of net income divided by the current value of a worldwide day of compensation (essentially, Intel’s daily payroll cost).
 
An additional two days of compensation are awarded annually if Intel achieves customer satisfaction goals. Payouts occur in the first and third quarters of each year based on corporate performance for the preceding two quarters.
 
Plan payments earned in 2007 totaled 17.3 days of compensation per employee, up from 15.1 days in 2006. This total included two days of compensation resulting from Intel’s achievement of its customer satisfaction goals in 2007. In 2007, 2006, and 2005, semiannual incentive cash payments represented 5% or less of listed officers’ total performance-based cash compensation.


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Equity Incentive Plans
 
The committee and management believe that equity compensation is a critical component of a total compensation package that helps Intel recruit, retain, and motivate the employees needed for the present and future success of the company. In 2006, Intel began granting employees RSUs in addition to stock options. Stock options provide actual economic value to the holder if the price of Intel stock has increased from the grant date at the time the option is exercised. In contrast, RSUs have economic value when they vest even if the stock price declines or stays flat. Stock options motivate executive officers by providing more potential upside. RSUs assist the company in retaining executive officers because they have more stable value.
 
The use of RSUs also assists in maintaining the Board’s long-term goal that equity grants not result in an average annual dilution rate that exceeds 2%. Because the grant date fair value of each RSU that we grant is greater than the grant date fair value of each stock option, employees on average receive fewer RSUs now than stock options in the past. Most equity grants occur on an annual basis in connection with the annual performance review and compensation adjustment cycle. In general, annual stock options and RSUs vest in 25% annual increments beginning one year from the date of grant. For all employees including executive officers, Intel uses pre-established quarterly dates for the formal granting of equity awards during the year. With limited exceptions, these dates typically occur shortly after publication of Intel’s quarterly earnings releases.
 
For Intel’s executive officers, the committee grants a combination of annual equity grants targeted to be below market average in value, and long-term equity grants, which in combination with the annual grants are intended to approximate the 65th percentile of the peer group. The committee believes that the 65th percentile is an appropriate target because the majority of equity awards granted to executive officers are in the form of stock options, which have no economic value unless the market price of Intel’s common stock increases. Executive officers are eligible to receive long-term grants that generally have a five-year cliff-vesting schedule, meaning that 100% of the grant vests on the fifth anniversary of the date that the grants are awarded. The annual equity grants and long-term equity grants are both generally a mix of stock options and RSUs based on their grant date fair values as calculated under SFAS No. 123(R). In 2007, the committee approved management’s recommendation to increase the RSU mix for all employees, including moving almost all executive officers from an 80/20 split to a 70/30 split. The committee and Mr. Otellini believed that increasing the use of RSUs would help with retention and to make Intel’s compensation package more competitive with the companies in the peer group.
 
The committee determines the amount of annual equity grants and long-term grants based on its subjective consideration of factors such as relative job scope, expected future contributions to the growth and development of the company, and the competitiveness of grants relative to the peer group. When evaluating future contributions, the committee projects the value of the executive officer’s future performance based on the officer’s expected career development. The equity grants are meant to motivate the executive officer to stay at Intel and deliver the expected future performance.
 
Because equity compensation is more complicated than cash compensation, there are a number of ways to present the costs to Intel and the benefits to the listed officers resulting from Intel’s equity compensation program. The following graphs and table present five different views of Intel’s equity compensation program. The first two graphs are based on the reporting of share-based compensation expense in Intel’s financial statements. The table following these graphs shows some of the key metrics (dilution, burn rate, and overhang) that the committee and Intel’s management use to measure how effectively Intel manages its equity compensation program. The third and fourth graphs show how the economic value that the listed officer receives from equity compensation varies with changes to Intel’s stock price by showing the listed officers’ realized and unrealized gains and losses.
 
The following graph shows the SFAS No. 123(R) expense that Intel incurred during each year for financial statement purposes for grants to listed officers. The amount of expense that Intel incurs each year relates to a portion of many years worth of equity awards. For example, expense related to annual stock options granted in April 2007 would typically be incurred as the award vests, with expense in 2007, 2008, 2009, 2010, and the beginning of 2011. SFAS No. 123(R) expense for the listed officers declined 19% in 2007 compared to 2006, primarily because the number of equity awards that completed vesting exceeded the number of new equity awards granted.
 


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(Bar Chart)
 
The graph below shows the expense for awards granted to listed officers during each year for financial statement purposes. The grant date fair value of annual and long-term equity awards granted to listed officers in January and April 2007 totaled $17.1 million, and this expense will be incurred over the service period as the awards vest in 2008, 2009, 2010, 2011, and 2012. The grant date fair value of equity awards that the committee granted in 2007 increased 92% compared to 2006, with the majority of the increase ($5.3 million) due to the granting of long-term equity awards.
 
(Bar Chart)
 
While the two graphs above focus on how our equity compensation program impacts our financial statements, there are other key metrics that the committee and Intel’s management use to determine the costs to stockholders of Intel’s equity compensation program. The following table shows how these metrics have changed over the past three years. We define the metrics as follows:
 
  •   Dilution is total equity awards granted (less cancellations) divided by shares outstanding at the beginning of the year.
 
  •   Burn rate is similar to dilution, but does not take cancellations into account.
 
  •   Overhang is equity awards outstanding but not exercised plus equity awards available to be granted, divided by total equity awards outstanding at the end of the year.
 
Equity Compensation Key Metrics
 
                               
      2007
    2006
    2005
      (%)     (%)     (%)
                               
Dilution
              .2         1.3