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Identified Intangible Assets
9 Months Ended
Oct. 01, 2011
Identified Intangible Assets [Abstract] 
Identified Intangible Assets [Text Block]

Note 18: Identified Intangible Assets

 

Identified intangible assets consisted of the following as of October 1, 2011 and December 25, 2010:

 October 1, 2011
    Accumulated   
(In Millions)Gross Assets Amortization Net
Acquisition-related developed technology$ 2,526 $ (437) $ 2,089
Acquisition-related customer relationships  1,706   (187)   1,519
Acquisition-related trade names  65   (18)   47
Licensed technology  2,349   (660)   1,689
Identified intangible assets subject to amortization$ 6,646 $ (1,302) $ 5,344
Acquisition-related trade names  812   —   812
Other intangible assets  289   —   289
Identified intangible assets not subject to amortization$ 1,101 $ — $ 1,101
Total identified intangible assets$ 7,747 $ (1,302) $ 6,445
         
         
 December 25, 2010
    Accumulated   
(In Millions)Gross Assets Amortization Net
Acquisition-related developed technology$ 235 $ (97) $ 138
Acquisition-related customer relationships  152   (10)   142
Acquisition-related trade names  46   (10)   36
Licensed technology  1,204   (765)   439
Identified intangible assets subject to amortization$ 1,637 $ (882) $ 755
Other intangible assets  105   —   105
Total identified intangible assets$ 1,742 $ (882) $ 860

As a result of our acquisition of McAfee during the first quarter of 2011, we recorded $3.6 billion of identified intangible assets. In addition, as a result of our other acquisitions during the first nine months of 2011, we recorded $1.3 billion of identified intangible assets, most of which was from the acquisition of the WLS business of Infineon. For further information about identified intangible assets recorded as a result of acquisitions during the first nine months of 2011, see “Note 15: Acquisitions.”

 

In January 2011, we entered into a long-term patent cross-license agreement with NVIDIA. Under the agreement, we received a license to all of NVIDIA's patents while NVIDIA products are licensed to our patents, subject to exclusions for x86 products, certain chipsets, and certain flash memory technology products. The agreement also included settlement of the existing litigation between the companies as well as broad mutual general releases. We agreed to make payments totaling $1.5 billion to NVIDIA over six years ($300 million in each of January 2011, 2012, and 2013; and $200 million in each of January 2014, 2015, and 2016), which resulted in a liability totaling approximately $1.4 billion, on a discounted basis. In the fourth quarter of 2010, we recognized an expense of $100 million related to the litigation settlement. In the first quarter of 2011, we recognized the remaining amount of $1.3 billion as licensed technology which will be amortized into cost of sales over its estimated useful life of 17 years. As of October 1, 2011, the remaining liability of $1.2 billion is classified within other accrued liabilities and other long-term liabilities, based on the expected timing of the underlying payments. The intangible asset and associated liability for future payments to NVIDIA are treated as a noncash transaction and, therefore, have no impact on our consolidated condensed statements of cash flows for the nine months ended October 1, 2011. These future payments will be treated as cash used for financing activities.

 

For identified intangible assets that are subject to amortization, we recorded amortization expense on the consolidated condensed statements of income as follows:

 

 Three Months Ended Nine Months Ended
 Oct. 1, Sept. 25, Oct. 1, Sept. 25,
(In Millions)2011 2010 2011 2010
Acquisition-related developed technology$ 135 $ 16 $ 345 $ 48
Licensed technology  44   36   133   121
Cost of sales$ 179 $ 52 $ 478 $ 169
            
Research and development (licensed technology)$ 1 $ — $ 1 $ —
            
Acquisition-related customer relationships$ 73 $ 2 $ 180 $ 5
Acquisition-related trade names  3   2   8   6
Amortization of acquisition-related intangibles$ 76 $ 4 $ 188 $ 11

Based on the identified intangible assets that are subject to amortization as of October 1, 2011, we expect future amortization expense to be as follows:

 Remainder            
(In Millions)of 2011 2012 2013 2014 2015
Acquisition-related developed technology$ 134 $ 518 $ 503 $ 484 $ 212
Licensed technology  44   169   152   141   123
Cost of sales$ 178 $ 687 $ 655 $ 625 $ 335
               
Research and development (licensed technology)$ 1 $ 6 $ 6 $ 6 $ 6
               
Acquisition-related customer relationships$ 72 $ 283 $ 263 $ 258 $ 250
Acquisition-related trade names  2   10   10   10   9
Amortization of acquisition-related intangibles$ 74 $ 293 $ 273 $ 268 $ 259