Good morning. I would now like to please call the meeting to order. I'm Andy Bryant, Chairman of the Board. It's a pleasure to welcome you to the 20 team Annual Stockholder Meeting. In addition to being in Santa Clara, the meeting is also being conducted via the Internet through our Investor Relations website, www.intc.com.
We have 5 proposals here today. We have to elect directors for the coming year, Vote for the selection of Intel's auditors, an advisory vote to approve Executive compensation, an extension of the 2006 Equity Incentive Plan And we have a stockholder proposal. The polls are now open for those who have not already voted and wish to and we'll remain open until 9:15. We will introduce our new President and our new CEO. We will report on the state of the economy.
We will follow that with a Q and A with live audience and taking questions from the Internet. It referred to the printed program you have for the agenda and meeting rules. With that, let me turn it over to Kerry Klapter, Corporate Secretary. Thank you, Andy.
Thank you. There we are. Okay. Just a couple of housekeeping items. We began to distribute our notice of meeting and proxy On April 3 this year and March 18 this year was our record date for voting.
You had to own shares on that date For the purpose of voting, there are approximately 5,000,000,000 shares outstanding, of which approximately 4,000,000,000 are present in person or by proxy at this meeting. So we have 80% of the shares here, which makes it a quorum, and we can actually hold the meeting. As Andy said, if you've already voted, you don't have to do anything further today. If you want to change your vote or if you have not voted yet, you can vote here in the meeting room. You can also vote on the Internet.
Jim Rait from American Election Services is here. He serves as our Inspector of Elections and he will take your vote. The polls close at 9:15, so you have to vote by them or not vote at all this year. And if I can move the foil, there we are. Okay.
This is the most important part for securities lawyers, so please Bear with me. Some of today's presentations, including our business update, contain forward looking statements. All statements made during the meeting that are not historical facts Are subject to a number of risks and uncertainties and actual results may differ materially. Please refer to our recent Q1 earnings release, Our Form 10 ks and our most recent Form 10 Q for more information on the risk factors that could cause actual results to differ from any outlook. If we use any non GAAP financial measures during the presentation, you will find on our website, www.intc.com, The required reconciliation to the most directly comparable GAAP financial measures.
And with that, let me turn the meeting back to Andy.
Thank you, Kerry. On behalf of the Board, I would like to thank the stockholders who returned proxies and those here to vote in person or online. We have 5 items to deal with today. The first proposal will be the election of 9 directors. Each nominee must receive a majority of the votes cast.
At this point, I would like to introduce And some of the directors are smiling at me, so I don't know what's up to it. But anyway, I'd like to introduce the directors. Please Stand when your name is called and remain standing until all have been called and please hold any applause until all have been introduced. First is Charlene Barshevsky, Senior International Partner at WilmerHale Susan Becker, Principal of Vectory Ventures James Plummer, Professor of Electrical Engineering and Dean of School of Engineering at Stanford University Frank Urie, Principal of Darwin Capital Associates and David Jaffe, Professor at Harvard University's Graduate School of Business Administration. Our other nominees, John Donahoe, Reed Hunt and David Patrick were unable to attend today's meeting.
There were no other nominations submitted in accord with the bylaws, So the nominations are closed. The 2nd matter today is ratification of the Selection of independent auditors. That's a selection of Ernst and Young, independent auditors for 2013. I would like to introduce the Audit team, President from Mark Borsos and Matt Sapp, would you please stand? Thank you.
The 3rd item on the agenda is an advisory vote to approve executive compensation also known as say on pay. We are asking stockholders to approve on an advisory basis The compensation of Intel's listed officers as described in detail in the proxy statement. We have a long history of strong pay for performance alignment and we believe our compensation decisions in support Of our succession planning process, we're in the best interest of stockholders. While this is an advisory vote, the Board and the compensation committee We'll carefully assess the voting results and we'll consult directly with stockholders to better understand any issues or concerns Raised to the stockholder vote. The 4th item on the agenda is the An extension of the 2006 Equity Incentive Plan.
This is the plan we use when we grant stock options and restricted stock to our employees. Our policy is to present the plan for renewal every 2 years, so stockholders can review our use of the plan a regular basis. The final agenda item today is a stockholder proposal submitted by Mr. John Sheveden. I believe Mr.
Shepparton has a representative here today, Mr. Richard Robertson. Would you please step to the microphone and make your presentation. We'd like you to limit to 5 minutes if possible.
Sure. Thank you. This stockholder proposal for executives to retain significant stock presented by Mr. John Sheveden of Redondo Beach, California Resolved, shareholders urge that our executive pay committee adopt a policy requiring senior executives To retain significant percentage of shares acquired through equity pay programs until reaching normal retirement age and to report shareholders regarding The policy is before the company's next annual meeting. The purpose of this policy Normal excuse me, for purpose of this policy, normal requirement age shall be defined by the company qualified retirement plan It has the largest number of planned participants.
The shareholders recommend that the committee adopt a share retention percentage requirement Of at least 25% of net after tax shares, the policy should prohibit hedging transactions for shares subject to policy, Which are not sales, but reduce the risk of loss to the executives. This policy shall supplement any other shareholder ownership requirements They've been established for senior executives and should be implemented so not to violate our company's existing contractual obligations What are the terms of any compensation or benefit plans currently in effect? Requiring senior executives to hold a significant portion of stock obtained Through executive pay plans, we'll focus our executives on company's long term successes and long term processes. A conference board task force report on executives' pay stated that hold true requirements give executives a ever growing incentive To focus on long term stock price performance, please vote to protect shareholder value, proposal 5, Executives to retain significant stock. Thank you.
Thank you, Mr. Robinson. The Board agrees with the critical importance of creating a strong link between the interest of our executives and the interest of our stockholders. However, for more than 10 years, we've had stock ownership guidelines for directors and corporate officers. We believe that these share amounts are appropriately set To align the interests of Intel's corporate officers with those of our stockholders, while taking into account the company's equity compensation program and the personal financial and tax situations of our corporate officers.
We believe that aspects of our company's current compensation program Also already accomplished the proposal's stated goal of ensuring the executive office focus on the company's long term success. As discussed in the compensation discussion and analysis, the Board believes that our executive compensation programs for both cash And equity are designed to align executive officers' interest with the long term interest of our stockholders. The compensation committee has adopted a portfolio approach Using multiple equity vehicles to incent executive office to take a balanced approach to long term shareholder value creation. For these reasons, we recommend shareholders vote against the proposal. Before we proceed, I'd like to with the other introductions, I'd like to take a few minutes To say thank you and goodbye to Intel's departing CEO, Paul O'Eleni.
Paul has invested in his entire career in Intel, Played a key role on the front lines of the most important changes in the company and in the computing industry. I have known Paul for over 30 years From when I started Intel and Finance and he worked in finance, and I've worked closely with him for almost 20 years from when I first became CFO. I've admired his contributions to Intel throughout his career. Paul joined Intel in 1974, 6 years after the company was founded. Although silicon was an emerging technology, Paul saw its potential.
With the goal to find work in the semiconductor industry, He received offers not only from Intel, but also from AMD and from Fairchild Semiconductor. The other two firms offering higher compensation, but he chose Intel because of the people and the environment he I'll walk through the interview process. After several years in finance, he moved on to manage several Intel businesses, including the company's PC and Server Microprocessor Division and the Global Sales and Marketing Organization. Paul was named President and Chief Operating Officer and elected to Intel's Board of Directors in 2002 and became President and CEO In 2005, during Paul's tenure as CEO, Intel made significant strides in financial performance. The company generated cash from operations of $117,000,000,000 made $26,000,000,000 in dividend payments, Increased the quarterly dividend 181 percent from $0.08 to $0.225 Grew annual revenue to exceed $50,000,000,000 Intel also achieved notable business success under Paul's leadership.
The company transformed operations and the cost structure for long term success. We achieved breakthrough innovations including Hi k metal gate Now 3 d Tri Gate Transistors, dramatic improvement in energy efficiencies of processors. We invented the PC with ultrabort devices. He expanded our partnership with customers. He made strategic decisions That basically strengthened Intel's presence in security, software, mobile communications, delivered the 1st smartphones and tablets for sale with Intel Inside And he grew the vast network of cloud based computing based on Intel products.
With Paul's leadership, Intel's vision has been that this decade we will create And he always remembered that technology exists to serve the people. Paul has been a strong leader, only the 5th CEO in the The Board is grateful for his innumerable contributions. With that, I'd like to invite Paul on stage. We have a So At the token appreciation, we have for you 300 millimeter Intel wafer signed by every member of the Board and your management team. It's possible the next time a retiring CEO receives a plaque like this, it will be a 4 50 millimeter wafer, Possible because of the far side investments you make and you authorize.
This is one example of the many aspects of your potential legacy. We wish you the best in all your future endeavors and thank you for all you've done for us. We were going to make him carry the thing off, but we decided not to. Normally at this time, what I would do is introduce corporate officers. In this particular meeting, what I want to do is call attention to the fact we have a number of corporate offices here.
After the meeting, feel free to interact with them. But I'm going to save the introductions for the fact that we have a new President and new CEO and I'm going to spend my time there. So first, Renee James, The Board of Directors has elected Renee James to be President of Intel. During not yet during Renee's 25 years at Intel, She has spearheaded the company's strategic expansion into providing software and services for applications in security, cloud based computing and smartphones. Renee has a broad knowledge of the computing industry spanning hardware, security, software and services, which she developed to the leadership positions at Intel and as Chairman of Intel Software Business Subsidiaries Havoc, McAfee and Wind River.
Renee will join the CEO in Intel's Executive Office, where she will bring a deep understanding of the future of computing architecture and broad experience running product R and D in one of the world's largest software organizations. Renee, please stand Enjoying the Board in welcoming her to the position of President. Now it's my great pleasure to introduce our new CEO, Brian Krzanich. With Paul's retirement, Brian today becomes the 6th CEO of Intel. I've worked with Brian closely for the last 5 years.
He has impressed me with his ability to listen, to learn and to grow. Brian is a strong leader, has a deep understanding of the business. Brian's track record of execution and strategic leadership Combined with his open minded approach to problem solving has earned Helm the respect of employees, customers and partners worldwide. In his most recent role as Chief Operating Officer, Brian led an organization of more than 50,000 people. This included Intel's Technology Manufacturing Group, its Foundry and Memory Businesses, its Human Resources and Information Technology Groups And it's China's strategy.
The Board believes he has the right combination of knowledge, depth and experience to lead the company during Don't shut. Don't shut. You don't need to shut. And now I'm going to invite Brian to the stage to do a brief Review of the company's current position. Brian?
I'm deeply honored to be Intel's 6th CEO and really to be given the opportunity to lead what I think it's the best company on the planet. And so, as shareholders, I also want to thank you for showing up this morning and having interest in again what I believe is the best I thought I would start off our conversation this morning talking about 3 main topics. First, I thought I'd give just a brief update on our business conditions. Just a quick financial look at the company And really what have we returned to shareholders? The next topic I thought I would talk about What is really the megatrends that are driving our industry and technology.
And that really will lead into the final section I'll try and talk about which is what are imperatives for growth as a company? And those are spawned from these megatrends. So hopefully today you'll get a picture of a great foundation, How we see the trends driving where we're headed and what it takes for us to grow moving forward. So let's start with just where are we as a business. And as you probably saw in our earnings announcement and as We've been watching the company over the last couple of years.
We really have a solid foundation. We had net income of over 50 $3,000,000,000 or excuse me net revenue of over $53,000,000,000 62 percent margin and an operating profit of over almost $15,000,000,000 That puts us in the top 15 of the S and P 500 for net income. The PC and the data center group Generate almost $1,000,000,000 over $1,000,000,000 a month in operating profit and it delivers about Greater than $4,500,000,000 of cash from operations per quarter. So solid financial foundation from which to grow from moving forward. We've tried to take that great operation and return to the shareholders As well.
And if you take a look at over the last decade, we've returned to shareholders through dividends And stock buybacks over $85,000,000,000 But we believe this is important and this brings a real value not only our company and our employees, but the shareholders that are key to driving Intel's growth as well. So this foundation, this financial picture is what we will use now To move forward and really drive additional growth. And so I'd like to transition now to what are these megatrends? Where is the industry headed? And as a result, how does that drive our And as a result, how does that drive our imperatives for growth moving forward?
I don't think we can start a discussion like that Without first having a quick discussion about one of the key real trends that have occurred over the last couple of years and that's really this Ultra mobile and move to tablets and phones that has occurred in our industry. We see that we've been a bit slow to move into that space. But what I want to show you today is that we see the movement. We're well positioned Already and the base of assets that we have will allow us to really grow in this area at a much faster rate moving forward. So let's start with megatrend number 1, which is just that.
It's about ultra mobile. We see that computing is becoming more and more a Connected computing environment. The people want their computing next to them. They want to carry it with them. And that really means you have to have connectivity.
You have to have low power. You have to have integration. And you have to be in these new markets and new devices that are moving towards more and more Connectivity. We see it. We believe we're well positioned.
We have 15 phones in 22 countries already Or excuse me, 12 phones in 22 countries, 15 tablets both Android and Windows. And so we've got a good base. We see this trend. And I'll show you in a little bit with our imperatives, we're well positioned to move forward. The next one is one that I think is really driving great growth and is a great opportunity in some place where really established well is.
This really that the data center is continuing to grow at phenomenal rates. It's growing because of The move to cloud and tied to that connected computing environment people want to keep more and more and have more and more access to the cloud. And then you're also seeing a move in the data center around big data that as all of these connected devices Continue to grow. It provides a wealth of information that companies can now use to offer better services and better understanding of what Consumers want. And that's really what big data is about.
It's about providing answers as you increase the data rate that's available to you. We see that. Again, we believe our products and our services are well positioned for this and we'll talk a little bit about that in our imperatives Moving forward. And the 3rd trend is Really around the foundation of Intel, it's around integration and innovation. And I believe this is really what Intel does best.
When you look at our name and where we came from, Intel is integrated electronics. That's what the name stands for. And this is what we've always done best. This allows us to combine our silicon technology, our architecture, our software and services To really drive the SoC or the system on a chip environment to levels that nobody has seen before we believe moving forward. And it means really going out and bringing in new innovations, new technologies, new communication capabilities and bringing those into silicon And using that Moore's Law and leading edge technology to allow us to drive these at a rate faster than anybody else on the planet can.
So those are the 3 big megatrends that we see driving technology and the industry moving forward. What I'm going to show you now is that we have the assets That we can apply towards these megatrends and then how those drive the imperatives for the company moving forward. Let's first take a look at the assets. And I believe this is an asset base that any company in the world would be envious of. We have our manufacturing assets, something that's been near and dear to my heart over the years, 4,000,000 square feet of manufacturing cleanroom.
We have leading edge technology. We have 22 nanometers in production, the world's only tri gate FinFET technology. It's our 3rd generation of Hi k metal gate. We're in the final stages of development prior to production of 14 nanometers. Our 2nd generation of Tri Gate transistors, our 4th generation of high k metal gate, that's an asset that everybody on the planet would love to have To apply towards those megatrends that we just talked about.
We have our architecture, which really ranges from for data center and servers all the way down to the Atom architecture which allows us into micro servers, but into that connected computing. And what you'll see is a move more and more as we go forward To continue to drive that continuum of computing capability into more and more markets, that's really an asset that again Very few companies if anyhow. And the last is to tie it all together, software and services. We've talked you've seen our acquisition of McAfee and Wind We've built a services business. What this allows us to do is take all of those assets and apply them to each one of those markets I talked about in the megatrends.
And what it allows us to do is provide more than just silicon. It allows us to provide a platform and a user experience That nobody else care. And if it's a secure and user friendly experience that by the 105,000 employees that are always Intel's greatest asset. The ability of these employees to when we apply them towards these markets and these imperatives you'll see in a second here, is by far the greatest asset Intel has and will continue to be moving forward. So I've shown you our base.
I've shown you the megatrends. I've shown you what I believe is the greatest assets in the world to apply to those. So let's talk about what the imperatives are then moving forward. The first one Is to drive PC innovation. We've talked a bit about this.
It's the foundation of that financial picture that I showed you at the beginning. With Haswell coming out this year, it's launching actually right now And throughout the year as the Haswell products come out, with Ultrabooks, we have the greatest level of innovation in the PC in its history. You're going to see ultrabooks. You see 2 in ones which are convertibles and which are bringing a tablet and a PC together. And with Haswell, you see the largest Improvement in battery life and computing capability that Intel's ever brought to production.
So we believe that we are well positioned For what will be truly the PC's greatest time of innovation that we've all seen in our lives. The next imperative is to aggressively move into this ultra mobile space. As I said at the beginning, We're well positioned. We're already shipping 12 phones in 22 countries. We have 15 tablets out there Both Windows and Android.
We've got products that are specifically designed for this ultra mobile space that have been in the works for a couple of years now. You saw the Silvermont announcement earlier this week. You're going to see you see the Bay Trail will come out in the Q4, which is really a product targeted towards tablets and low power clamshells and convertible devices. You're going to see Merrifield, which is our next generation phone device. And just as important is our LTE technology, which is critical for that 2nd part of connected computing, which is the communication.
We have databased LTE coming out this summer And we have multimode LTE, which allows voice data and voiceover data at the end of this year. And that really opens up all the rest of the markets our phones and our connected devices. So we believe we're well positioned. We've made the move, but we believe also that our architecture And the moves we've made allow us to move even quicker into this market now moving forward. The third one Again tied to the trends that I showed you at the beginning is to accelerate growth in the data center.
We have a great position at the data center already. We believe that Real trends like big data, movement to the cloud, software defined networks, all of those things allow for phenomenal growth in this space. We believe our product line is well positioned to let us lead there. We have the Haswell, which I've talked about our 2nd generation of 22 nanometer architecture. We'll be shipping a Xeon level or Server level class product in mid-twenty 13.
We have Avaton, which is Adam for micro servers. We will be the first to this microserver trend. You hear a
lot about it. You hear
a lot of people talking about it. You should know that Intel was first to this space. We didn't wait for it to be created. We're going to go move that space. We're going to go define that microserver space.
And we have Rangly, which is our product for network and comms infrastructure, which really allows us to move into the other sides of the data center where Communications and that networking infrastructure occur. So those products combined we believe we're well positioned accelerate this growth into the data center. And then lastly is to continue our silicon leadership. We talked early on about 22 nanometers, the first technology to bring out the tri gate transistor. But more importantly is we have a road map of Moore's Law that continues that we see us growing further in along the Moore's Law transitions.
We have 14 nanometer in its final stages of development ready for production at the end of this year and moving into next year. We understand what is beyond 14 nanometers for Moore's Law. That silicon leadership allows us to drive the innovation in every one of these other areas And really bring it together in a trifecta of cost, battery and performance that allows us to bring products to any one of these markets that's required. So to bring this to closure, as my this is my first presentation as CEO, I guess. I've shown you that we have a great basis from which to grow on.
But financially the company is sound and in a very solid position. I've shown you that we understand the megatrends and that we understand exactly how the market's moving into these Data center areas, connected computing and ultra mobility. And I tried to show you we have laid out the imperatives and the assets To really allow this these us to move into these new areas. So with that, I'd just like to bring this to closure to show you that I believe we're well positioned. I believe that we have the best position in Intel's History in a long while to grow into these areas and we really look forward to the coming years.
And with that, I'd like to call back up Andy and Renee for Q and A.
So we will this is a Q and A session. We will be taking questions from the room and the web. If we do not get to your question From the web, we will try to answer your questions and post answers on the web. In the room, we have 2 mics, 1 on each aisle. Please state your name and your question.
Please limit speaking time to 2 minutes. We will try to limit each topic to 6 minutes. With that, I'm going to take the first question from the web, if I could. Question 1, it's been 2 years since we purchased McAfee. How has McAfee contributed to the bottom line?
What is the long term plan with this company? Renee, why don't you take that one?
Thank you.
Are you miked?
I am.
Okay. It
just needs to turn on. When McAfee and the acquisition of McAfee is Part of a broader strategy that we've had to increase the overall security not only of our products, But as we move into cloud based computing and into ultra mobility that Brian talked about, we believe that one of the opportunity spaces for Intel Is to provide a more secure solution, more secure platforms around your data, around the devices that we build And around your own personal identity and privacy. So, McAfee is one of many assets that we have acquired. They've been doing A very good job. And you may have read that we've added to McAfee over the course of the last 2 years.
We recently announced A week ago that we made an additional acquisition, which was always part of our strategy to grow what McAfee offered around the network and the cloud. And we continue to evolve their product line. And this week, we made an announcement around a personal identity and data security product for consumers That is bundled with our new platforms. So we're very happy with them. It is part of a much broader Strategy that's consistent with what Brian just talked about and you should look for more in that area.
Thank you. Next question.
Tony Mezzapelli, shareholder, thank you for the presentation. A month ago, I saw a 70 year old woman in the library She was working on a resume with a community volunteer. The community volunteer asked her why she was looking for work. She said some of her investments didn't pay off. Her main investment was Intel.
She had advised that this was a good stock. It didn't work out. Now she was looking for work as a baker. And with all our ROE, our high-tech at Intel, our Domination in the market, It didn't translate into financial benefit for her. And I can relate to her because over the last decade, our stock has been flat.
It's more or less tracked Microsoft. It's underperformed the S and P 500 compared to Qualcomm. Qualcomm is up 300%, Apple up 6,000 percent for Qualcomm for example is now worth Whereas we mostly missed the market. It was worse is that we had the huge manufacturing capability that you talked about, Maybe 3.5 year lead on competitors. So if we're just now coming out with Haswell, Silvermont products, etcetera, Our design side of the house must be behind by 3.5 years or so.
And that's not good because now we're in catch up mode And that's risky. And this isn't the first time in the last dozen years that we've missed the industry trend. So I'm very concerned about The product design side of the house. This company has been very focused on manufacturing from Bob Noyes on down The microprocessor, the 4,004 was an afterthought. The products matter to this company.
So I'm wondering If you think that the Board, the top management, the comp packages focus on product Development well enough and if you've seen any improvements in the last few years who improved the effectiveness of the product design.
That we were slow to the mobile market. And I wanted to do that purposely to let the shareholders know we saw it, But that we're moving much more aggressively now moving forward. And we believe we have the right products. What we had to do is really make some decisions around You see we bought assets to allow us to get into the LTE space. We've made transitions in what we designed for Adam.
And we've looked at how do we design our silicon technologies to allow integration of those because comms And the CPU are a little bit different in the silicon technologies they require. So we do believe we're positioned well moving forward. But you're asking a more fundamental question How do we see market trends? And how do we really make sure that we understand how the market is moving? And actually we spent a lot of time with the Board over the last several months, partly in just the normal discussions with the Board and partly in this process of selection.
Both Renee and I talked about how we're going to build a much more outward sensing environment Intel, so that we understand where our architecture needs to move first. We actually understand that integration is occurring more and more That it's important more about integration than almost anything else right now. And that's really how these new devices are Craig, we have plans to build a structure that allows us to have consultants and people from the outside to help us look at these trends and Look at our architectural choices and make sure we're making the right decisions. And we're trying to build a much closer relationship with our customers So that we understand where they want to go. We spent actually Renee and I over the last week a lot of time with customers and they're all showing us Here's where the market's moving and here's where we need Intel to move.
We're going to make adjustments in our architecture and our product choices to align to those much, much closer Moving forward. So we do believe we see what you're talking about, about how we made those choices, but we believe we've made the right decisions and we have the right process moving forward to make sure We stay
aligned. I'll take the next question from the web. What is the company doing to ensure executive compensation is tied to performance? For that one, I'd like to turn to David Joffe. Does
So our historical approach towards compensation for executives at Intel has always been very heavily performance based. Roughly 10% of the compensation is cash compensation and 90% is related to performance. In addition, a year about 3, 4 years ago, we decided that half of the equity compensation would be created around a special new unit that we call Outperforming stock units. This actually requires that if executives in the company wanted to Receive a bonus, they have to be able to perform not just well relative to Intel's history, but they actually have to perform better than The 15 technology peers that we measure ourselves against. So the actual rewards for Intel employees are the same rewards that go to shareholders.
The better we do in terms of delivering stock value for our shareholders, the better the compensation and vice versa. If we underperform, our executives actually get less Shares vested and therefore less income.
Let me take the next question from
Good morning. I'm Jeff Lynrothe and I'm President of Leading Better LLC, which is a financial advisory firm and a Registered Investment Advisor. My question is about the software services group as compared to the PC Client Group, the software and services is certainly expected to grow and I'm particularly interested in the gross margin contribution not just today. I'm interested in your vision 3 to 5 years from now, How you see the gross margin contribution of the software group comparing and either increasing or decreasing Relative to the PCCG group.
The software and services group as you know is a new Reportable segment in the last several years for us. Software business in general are good opportunities For growth and ones that are aligned with the market segments that we're going to provide products into or provide products into today It's a good opportunity for us to enhance our offering to our customers. In general, we have a very, very good business. Brian about the margin profile of business we have today. The businesses that we're pursuing in Software and Services are equally good opportunities, And we expect that those businesses will continue to contribute as software companies do in the market in about the same way that they do in the market today.
Okay. Thank you.
Again, I'll take the next question from the web. Can you comment on your strategy with regards to the dividend? And for that one, I'll turn to our Chief Financial Officer, Stacy Smith. We need to get him a mic as well.
Thanks. And let me just add my welcome to all of you for coming. Our priorities in terms of what we do with the cash that we generate our 1st and foremost invest in our business and then secondly is our dividend. And we believe that the combination of Those two things are the right thing to drive long term shareholder return. Specific to the dividend, we have upped the percentage of our free cash that we allocate to the dividend.
So we're now targeting 40% of our free cash flow to the dividend program. And we look at External data and we believe that we have actually one of the best dividend programs in the industry. Our dividend payout on an annualized Basis is $0.90 That means that we paid $4,400,000,000 last year out in dividends. And our dividend yield I haven't looked at today's stock price, but we're approaching 4% in terms of our dividend yield. And so we believe the combination of how we allocate cash, How we've grown the dividend over time gives us one of the best dividend programs actually in the world.
Thank you, Stacy. Next question from the floor.
Edward Abramczyk, shareholder since I was a kid. First of all, congratulations on both of your promotions. As Sue Decker can attest, well, at least Hope can attest, Warren Buffett believes in investing in companies that can protect earnings out for the next decade. For the first time as a shareholder of Intel, I'm kind of wondering and curious about the look forward a decade from now. And here's the context to the question.
The CapEx spending has more than doubled in the last two years. R and D has gone up by 53%. You're making a really significant investment in the future that you talked CEO, Brian. Okay. And you've made a transition over to the FinFET.
Last week, as preparation for the meeting, I looked at the ITRS roadmap. And about 2020, it indicates that gate lengths would be running around 10 nanometers. When I look realistically at that, the question I have is, 1, what device architecture would you be using there more than likely? And number 2, Isn't it time for a transition, an inflection point as Andy Grogg might have said, to either switching photons or quantum computing or something else? Maybe part of the question is directed towards you, Ryan.
And the other part, could we possibly hear from your CTO or Head of TD?
I'll start. It was a pretty long question. So let me see if I can get most of your points. Your point first point was CapEx has gone up. You're spending a lot more on technology.
Is there a time for a transition in that technology? And I would tell you that We have a we typically have about a 10 year view of Moore's Law. And we've always had a 10 year view. You went back 10 years ago, we had a 10 year view. If you went back 5 years ago, we have a 10 year view.
That's about as far out as you can see. And we believe that We have the right architectures to continue to grow Moore's Law in a silicon environment for at least that period of time. That's not to say we don't have efforts in Photonics. We actually have efforts in Photonics and we're going to bring products to market in Photonics More about switching in the data center. But the fundamental silicon technology and our ability to continue to drive it beyond 10 nanometers, to be honest with you.
We plan to be on 10 nanometers much earlier than 2020, I can tell you that. Is we believe sound and fundamental and it's why we made investments. You saw us make an investment in ASML last year of Almost $4,000,000,000 in total. That was really to drive EUV technology for the lithography to allow us to keep pushing well below 10 nanometers From a Moores loss standpoint. So we think we're pretty well positioned to keep moving at least for the next decade in the current technologies.
I don't know if
Bill, do you have anything to add?
Bill, do you want to add anything to my Bill is Bill Hohle is
It's on. Novartis did a good job, but if you look over the last
Go ahead. Go ahead. Go ahead, Randy.
But if you look back at the last 3 or 4 generations, each one has come with a substantial innovation or change. There is no simple scaling in our business anymore And that will continue. And so each time we plan to advance the technology, we have to make changes relative to photonics and quantum computing. We do have, Brian said, have efforts in those, but those are clearly not something that are any time on the near horizon. There's lots of interesting work going on there, but none of it really is Practical to turn into real computing devices.
Just
a brief follow on. I'm curious, what kind of ROI, are you expecting for your R and D and CapEx spending? Any thoughts on that? How do you think about it?
Do you want to answer it or do you want me to answer it? I can take it. We look at ROI from We very carefully look at it. I mean, if we about every 3 or 4 years go back and look at Moore's Law And the ROI around Moore's Law. And it's pretty compelling.
I mean, remember, you not only get that Performance and power reduction, but you get a scaling factor of roughly 2 thirds. And so You get almost a doubling of the number of transistors in the same space. And so even though that same space costs X percent more, the fact that you're almost doubling the number of transistors in that space allows you to make choices around performance Or cost at any point. And so with Moore's Law, we can drive down cost of devices or we can hold if we believe we can get paid for the performance, Hold the price and drive the performance instead. And when you look at that full spectrum of products and the ROI that Moore's Law provides, which is most of our R and D spending, We see a very good return on investments around that.
Thank you.
I'll take the next question from the web. How do you expect the foundry market to impact margins short and long term? Back to you, Brian.
Okay. So I think Stacy has talked in several of the earnings calls that we currently see margins to be in the range Looking forward of 55% to I believe 65% was the range he gave. Those were inclusive of our foundry business. I would tell you that we've already built the foundry growth and all into our current projections for margin. And we actually believe we're being selective.
We're not going into the general foundry business. We're not opening up to anybody. We're really looking for partners that can utilize And take advantage of our leading edge silicon. And that's why we're able to stay in that range, we believe, moving forward.
Next question will also be from the web. What is Intel doing to increase the diversity of its Board? Want to take it, want me to? I'll take that one. Intel has a strong belief in Having a diverse Board, if you look at our history, we pull people from different professions, From different views of life, we have currently 2 females on the board, which puts us about normal with what Corporate America would be.
But the governance committee run by David Jaffe and Susan Decker run a rigorous process of looking at what the board needs, what What capabilities, what different viewpoints, what different ways to look at markets? They run that assessment. When we have a Chance to add someone to the Board. We test them against that criteria. And we're always looking to try to bring different views into the Board room.
Next question here. My name is Colin. Colin Shim, I'm a Private Investor.
First of all, congratulations on the Board making a good And have LTE and good processing, they all make sense. However, I have an issue with this executions. If you look at the mobile world right now the arms holding they have 95% of market share. I understand Intel has 1,000 researchers. I think they're Doing basic research.
And how come Intel didn't see this mobile way coming and that the ARM product holding take 95% of market share? On top of that, Microsoft going to RT, they tried this Windows RT with their ARM holding and HP just announced a new tablet with NVIDIA, Tegra process also based on ARM. So everybody is trying to take the CPU share away from you. And I understand Intel is having this Haswell ship coming out in June. Some questions, are you confident this Haswell can hold Arms holding back.
Mike? First, I'd say In my presentation, I talked about the fact that yes, we missed it. We were slow to tablets and some of the mobile computing. We do believe we have a good base, right? 12 phones, 22 countries, 15 tablets, Android and Windows 8.
I think that's important that we've looked at
both of
those. And then we have these products moving forward. I would tell you that it's more than just Haswell. Haswell is a key product. It's going to extend core much further on both ends from a high performance Xeon space to the low power space.
You're going to see single digit power levels on a core Which will allow it to move into very mobile spaces. But that alone would not go beat Arm or go beat the competition into those spaces you talked about. What you really have to do is extend into that atoms space as well. And that's where you see products like Clover Trail and Clover Trail Plus today, Silvermont. And then moving into the rest of this year, you see Bay Trail.
Baytrail will be one of the biggest advances we've made in ATOM that allows us to move into the mobile space much stronger. And then thirdly was the asset we purchased a few years back, which was the Infineon Mobile Group, which gave us the comms side of this. I told you that we'd have comms, LTE data the middle of this summer and multimode at the end of this year. We'll actually be the next leading person in LTE space and that's critical to get into those markets. You don't want to have to depend on others to provide that comp.
And then as we move into next year, you'll see us integrating that, which will we believe allow us to move back onto that leading edge. So this gets back to that, do we have a good product roadmap to allow us to go win share in that space? We believe we do. Next question is, do we have a good ability to view that space moving forward? Because whatever it is today, it won't be what it is 5 years from now.
And that's what Renee and I are committed to go putting together because we absolutely believe this connected computing will continue to move down And via continuum of products moving forward.
I'd like to take the next question On the floor?
Yes. Bruce Mitchell. I'm a stockholder and a former Intel employee. And question is related to the diversity of the Board and UCO's Board and the management. Recent New York Times article indicated that the VC world is looking at 32 as being the threshold age for start up CEOs or senior executives, what's been the average age of senior management at Intel?
Has it Remains stable, gone up, gone down over the last decade.
I don't know the answer to the question. Does Richard or Patty? This is Patty Murray, who is our leadership advisor.
I would say, stable to slightly down. If you're referring to the number of executives on what used to be ESM and is now MCM, it's kind of the people that we've added have been younger. The people who stayed have gotten older. So that's kind
of What's been the average then?
The average number? I actually
Average, has it increased or decreased in terms of average age range?
The average I'm saying it's either slightly down or flat based on the two factors that I explained.
Thank you. I'll take one last question from the web. What measures are in place for you to use more renewable energy? I'm going to tell you one of the folks to take it.
I'm okay with Michael. Is this Michael?
So one of Intel's strategic objectives is to care for our people, to plan it And inspire the next generation. So in delivering to that strategic objective, Intel has been committed to reducing our carbon footprint Through things like renewables, but also energy efficiency and conservation. But on the renewables front, Since 2008, Intel has been the largest purchaser of renewable energy. In 2013, we increased that commitment to cover All of our electricity use in the U. S.
We have 18 solar installations on 9 sites, creating about 10,000,000 kilowatt hours of energy. Every Intel employee's variable pay is linked To environmental metrics, so when it comes to something like renewables, I think it's just in our DNA as an innovation company.
Thank you. With that, I'll bring the Q and A session to a close. Thank you, Brian and Anae. I would now like to invite Kerry Claptur back to the stage to read the preliminary voting results.
Okay. Thank you, Andy. As I mentioned earlier, we have approximately 4,000,000,000 shares Present in person or by proxy. For the election of directors, the directors have to be elected Individually, on what's called a majority vote system, more yes votes than no votes. And for each of our directors, and we'll post all of the detail later, Each of the directors received between 85% 99% yes votes of the votes voted for them.
With respect to the ratification of the selection of Intel's auditors, Ernst and Young, E and Y received approximately 98% yes vote On the advisory vote to approve executive compensation, the proposal received approximately 68% yes votes, and so it was adopted. For the amendment and extension of the 2006 Equity Incentive Plan, Approximately 89% yes votes of those who voted on the matter. And with respect To the stockholder proposal from Mr. Sheveden, approximately 28% of shares voted in favor, and so that proposal fails. Those are the voting results, Sandeep.
Thank you. I would like to get your direct attention to Ntell's investor website, intc.com for final voting results, as Kerry said, and financial updates throughout the year. With the agenda completed, Do I have a motion to adjourn? No. Do I have a second?
We are adjourned. Thank you for