This excerpt taken from the INTC 10-K filed Feb 22, 2005.
Intel Communications Group
The revenue and operating loss for the ICG operating segment for the three years ended December 25, 2004 were as follows:
Revenue increased by $1.1 billion, or 28%, in 2004 compared to 2003, primarily due to higher revenue from higher unit sales of flash memory products, embedded processing components and wireless connectivity products. Revenue from flash memory products increased to $2.3 billion in 2004 from $1.6 billion in 2003.
The operating loss decreased to $791 million in 2004 from a loss of $824 million in 2003. Contributing to the lower operating loss were higher revenue, as well as approximately $100 million from lower inventory write-offs for flash memory products due to improved demand and sales of flash memory product inventory that had been previously written down. These improvements were partially offset by higher unit costs for flash memory products as we sold higher density products, as well as the negative impact of reducing the carrying value of ending inventory to lower current replacement costs. In addition, higher startup costs in 2004 of approximately $160 million partially offset the decrease in operating loss.
For 2003, revenue decreased by $360 million, or 8%, compared to 2002. The decrease was primarily due to lower unit sales of flash memory products. Revenue from flash memory products decreased to $1.6 billion in 2003 from $2.1 billion in 2002. In 2003, revenue for flash memory products was negatively affected by lost business as a result of the pricing strategy on certain products. This decrease was partially offset by increases in revenue for wireless connectivity products, increases in revenue from sales of application processors for data-enabled cellular phones and handheld computing devices, and increases in revenue from sales of embedded processing components.
The operating loss remained relatively flat in 2003 at $824 million, compared to $817 million in 2002. Negative impacts to the operating results included lower revenue and higher inventory write-offs for flash memory products, and a mix shift to lower margin wired connectivity products. These negative impacts were offset primarily by a decrease in operating expenses of $160 million in 2003 as we continued our efforts to streamline operations and refocus on our core strategic areas.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS