September 8, 2014

Eq uity Research Intel Corp. INTC: IFA Trade Show--Launch Of 14nm Core M Processor Outperform /

• On September 5th Intel presented at the IFA trade show in Berlin. The company launched its 14nm Core M (Broadwell) processor line and demonstrated a variety Sector: Semiconductors of new products and technologies, such as 3D cameras, magnetic resonance wireless charging devices and home automation technologies. Market Weight

• Intel formally launched its Core M (Broadwell) processor family. Intel noted that it currently has over 20 design wins from 5 OEMs that should begin appearing on Company Note shelves in the October timeframe. Intel stated that its 5th generation Core i3, i5, and i7 processors will be available in the marketplace in early 2015. Intel listed 2013A 2014E 2015E the Acer Aspire Switch 12, ASUS Transformer Book T300FA, ASUS Transformer EPS Curr. PriorCurr. Prior 300Chi, ASUS ZenBook UX305, Dell Latitude 13 7000, HP Envy x2, Lenovo Q1 (Mar.) $0.40 $0.38 A NC $0.50 NC ThinkPad Helix, and Wistron N-Midas as Core M based devices that should be Q2 (June) 0.39 0.55 A NC 0.49 NC Q3 (Sep.) 0.58 0.64 NC 0.61 NC available in 2014. Q4 (Dec.) 0.51 0.63 NC 0.74 NC • Intel demonstrated its new smart earbuds (from SMS Audio), MICA (My FY $1.89 $2.19 NC $2.34 NC Integrated Communications Accessory) smartband (from Barneys and Opening CY $1.89 $2.19 $2.34 FY P/EPS 18.5x 16.0x 15.0x Ceremony), and Intel XMM6255 3G modem. Rev.(MM) $52,708 $55,695 $59,500 Source: Company Data, Wells Fargo Securities, LLC estimates, and Reuters • Intel remarked that it is accelerating its LTE solution development (with Acer, NA = Not Available, NC = No Change, NE = No Estimate, NM = Not Meaningful Asus, Dell, Foxconn, and Lenovo), highlighted its 7160 modem (which is used by V = Volatile, = Company is on the Priority Stock List Dell, Asus, and Lenovo, features 150Mbps connectivity, and supports 15 LTE bands for global mobility), and stated that its 5 mode advanced LTE XMM 726x modems feature 300Mbps/CAT6 and are currently shipping to OEMs. • Intel announced that by the end of the decade it wants to eliminate wires for charging, data, displays and docking; wants to eliminate passwords; and wants to put 3D cameras into all computers in order to help create more natural user Ticker INTC interfaces. In looking at these goals, Intel expects to see over 300 million WiDi Price (09/05/2014) $35.00 enabled PCs by the end of 2016 and discussed how it is interested in advancing 52-Week Range: $22-36 adoption of WiGig to help with wireless docking and data transfer. Intel showed Shares Outstanding: (MM) 5,117.0 pads and clock radios that enable wireless charging. Intel discussed its RealSense Market Cap.: (MM) $179,095.0 technology, and stated that 3D front facing cameras should begin appearing on S&P 500: 2,007.71 products as soon as the fourth quarter of this year. These cameras should help to Avg. Daily Vol.: 28,607,800 enable better security, object measurement and 3d modeling for 3D printing, background abstraction for video chats, and gesture based gaming. Dividend/Yield: $0.90/2.6% LT Debt: (MM) $13,180.0 LT Debt/Total Cap.: 18.2%

Valuation Range: $35.00 to $42.00 ROE: 19.0% Our range is based on about 15-18x our FY2015 EPS estimate of $2.34. This is 3-5 Yr. Est. Growth Rate: 13.0% within the range in which Intel has traded in the past. Company-specific risks CY 2014 Est. P/EPS-to-Growth: 1.2x include competition from AMD and rising capital spending. Sector risks include the Last Reporting Date: 07/15/2014 possibility of decelerating growth in PC shipments. Source: Company Data, Wells Fargo Securities, LLC estimates, and Reuters

Investment Thesis: David Wong, CFA, PhD, Senior Analyst Intel has a dominant position in a market we view as attractive (microprocessors (212) 214-5007 / for PCs). We think Intel has a strong lineup of products that will help it gain [email protected] microprocessor market share. Intel also has a history of strong roadmap execution, Amit Chanda, Associate Analyst enabling it to maintain a leadership position in microprocessor technology. (314) 875-2045 / [email protected] Parker Paulin, Associate Analyst (212) 214-5066 / [email protected] Charles E. Long, Associate Analyst (212) 214-8017 / Please see page 6 for rating definitions, important disclosures [email protected] and required analyst certifications All estimates/forecasts are as of 09/08/14 unless otherwise stated.

Wells Fargo Securities, LLC does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of the report and investors should consider this report as only a single factor in making their investment decision.

WELLS FARGO SECURITIES, LLC Semiconductors EQUITY RESEARCH DEPARTMENT

Company Description: Intel, based in Santa Clara, California, is the world's largest supplier of semiconductor chips. The company designs and manufactures microprocessors, boards, and semiconductor components that are used in computers, servers, and networking and communication products. The company is the world's largest supplier of microprocessors, with a worldwide market share of more than 75%.

On September 5th Intel presented at the IFA trade show in Berlin. The company launched its 14nm Core M (Broadwell) processor line and demonstrated a variety of new products and technologies, such as 3D cameras, magnetic resonance wireless charging devices and home automation technologies.

14nm Broadwell Y (Core-M) launch

Intel formally launched its Core M (Broadwell) processor family. • We believe that the first products available will be the low power Broadwell-Y processors. Intel did not provide a full list of the products it is launching but did note the lineup extends up to the 2.0 GHz Intel Core M-5Y10/5Y10a processors and the 2.6 GHz Intel Core M-5Y70 processor. • Intel expects that the first systems using the new chips will become available next month (October). • The new family enables fanless devices: o We believe that Intel will be first making available its Broadwell-Y low power products because it views higher performance fanless tablets and 2-in-1s as a new market that it can help develop with its products. We expect other variants of the Broadwell processors will begin to appear in notebook and desktop products in the first half of 2015. • Intel stated that the new low-power (4.5 W) products offer 50 percent faster computer performance and 40 percent faster graphics than the current low power (11.5W) Haswell chips. Intel said that the new processors: o Can help system makers achieve 20 percent longer battery life (more than 8 hours of video play) than the current generation Haswell. o The Broadwell (Core M) package is 50 percent smaller than the current Haswell family and that this, together with it having low enough power consumption for fanless operations allows it to be used in systems with thicknesses of less than 9mm. • Intel noted that it currently has over 20 design wins from 5 OEMs and listed the following systems as using the new Core M processors: o Acer – Aspire Switch 12 o Asus ƒ Asus Zenbook UX205 ƒ Transformer Book T300FA ƒ Transformer T300 Chi o Dell – Latitude 13 7000 series o HP – ENVY x2 o Lenovo – ThinkPad Helix • Intel stated that its Core M models will go into premium tablets, Detachable 2-in-1s, Convertible 2-in1s and notebooks with touch, while Core i3, i5, and i7 models will support mobile workstations, enthusiast notebooks, traditional notebooks and notebooks with touch. Intel stated that its 5th generation Core i3, i5, and i7 processors will be available in the marketplace in early 2015.

Internet of Things

Intel highlighted the fact that its products appear in a variety of segments including: • The Internet of Things • Wearables • Phones • Tablets • 2-in-1s • Notebooks • Portable All-in-Ones • All-in-Ones • Mini Desktops • Desktops • Gaming PCs • Servers

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WELLS FARGO SECURITIES, LLC Intel Corp. EQUITY RESEARCH DEPARTMENT

Intel discussed its involvement in the internet of things in terms of automotive, retail, and industrial segments and highlighted the following partnerships: • Automotive o Ford o Hyundai o BMW o Infinity o Land Rover o Jaguar o Kia • Retail o Costa Coffee (Intel demonstrated Costa Coffee’s retail coffee machine, which runs on an Intel Core i7 processor) o Metro Group o Pepsi o Marriott o Tesco • Industrial o Beckhoff o National Instruments o Siemens

Intel highlighted the fact that it recently created the New Devices Group at Intel and demonstrated its new smart earbuds (from SMS Audio), MICA (My Integrated Communications Accessory) smartband (from Barneys and Opening Ceremony), and Intel XMM6255 3G modem.

Tablets

Intel showcased a variety of Intel-based tablets, including: • Acer Iconia One 8 • Toshiba Encore Mini • Toshiba Encore 2 Write 8” • Toshiba Encore 2 Write 10” • AlpenTab Wienerwald • Asus MeMO Pad 7 • Asus Pro7 Entertainment Pad • Lenovo Tab S8-50 • Dell Venue 7 • Dell Venue 8 • Acer Iconia One 7 • Acer Aspire Switch 10 • Acer Iconia Tab 8 • Toshiba Excite Go • Toshiba Encore 2 10” • Toshiba Encore 2 8” • KD Interactive Kurio Tablet • Asus FonePad 7 (3G) • Asus FonePad 8 (3G) • Asus Transformer Pad (LTE) • Asus MemoPad 7 (3G) • Lenovo ThinkPad 10”

Separately, several tablet vendors introduced new tablets that use Intel Atom processors. • Lenovo introduced the TAB S8 Android tablet. o The list of top tier vendors that have announced Intel Atom-based Android tablets now includes: ƒ Dell ƒ Asustek ƒ Acer ƒ Toshiba

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WELLS FARGO SECURITIES, LLC Semiconductors EQUITY RESEARCH DEPARTMENT

ƒ Lenovo • Although Samsung launched on Atom-based Android tablet last year, to our knowledge none of Samsung’s Android tablet families introduced this year include Atom-based offerings. • Acer introduced the Iconia Tab 8 W, an 8-inch tablet that runs Windows 8.1 and expanded its Iconia One series with the Iconia One 8 (8-inch display and Android 4.4). • Toshiba introduced the Encore 2 Write tablets (8- and 10.1-inch variants) and the Encore Mini, which both run Windows 8.1. o All five tablets feature the Atom Z3700 series Bay Trail processors. ASUS also displayed an updated version of its MeMO Pad 7 powered by an Atom Z3565 Moorefield processor. According to Intel, the MeMO Pad 7 and Tab S8 both feature the XMMTM 7160 LTE.

Communications (LTE)

Intel remarked that it is accelerating its LTE solution development (with partners Acer, Asus, Dell, Foxconn, and Lenovo), highlighted its 7160 modem (which is used by Dell, Asus, and Lenovo, features 150Mbps connectivity, supports 15 LTE bands for global mobility, and is optimized for low power consumption), and stated that its 5 mode advanced LTE XMM 726x modems feature 300Mbps/CAT6 and are currently shipping to OEMs.

The PC Market and PC processors.

Intel discussed how the PC market is evolving and now includes a multitude of form factors such as traditional desktops, all-in-ones, portable-all-in-ones, workstations, gaming PCs, small form factor PCs, and mini PCs.

Intel remarked that over the last decade compute performance has increased by over 40x and pointed out how in 2003 130nm single core Pentium 4 Extreme Edition processors featured 1.7 million transistors, while today’s 22nm 8 core Core i7 processors feature up to 2.6 billion transistors.

Intel discussed its Iris and Iris Pro graphics and highlighted Acer’s Aspire V13 (which will sell for under €599 with a 4th generation Core i3 processor and Iris graphics) as well as a separate MSI laptop (which will ship with Iris Pro graphics). Intel also stated that Asus and Lenovo offer Iris-based graphics in some of their devices.

New technologies

Intel announced that by the end of the decade it wants to eliminate wires for charging, data, displays and docking; wants to eliminate passwords; and wants to put 3D cameras into all computers in order to help create more natural user interfaces. In looking at these goals, Intel expects to see over 300 million WiDi enabled PCs by the end of 2016 (via the help of companies such as ActionTec) and discussed how it is interested in advancing adoption of WiGig (which Intel plans to have silicon for) to help with wireless docking and data transfer.

Intel discussed its involvement and founding member partnership with Samsung in the Open Interconnect Consortium to help deliver an open standards-based royalty-free environment for home interconnectivity.

Intel showed pads and clock radios that enable wireless charging and stated that it is a board member and founding partner of the Alliance for Wireless Power, which is promoting the usage of Rezence (magnetic resonance) wireless charging. Intel showed the makeup of the Alliance for Wireless Power Board of Directors (which includes Broadcomm, Gill Electronics, IDT, Intel, Qualcomm, Samsung, Samsung Electronics, Samsung Electro Mechanics, and WiTricity) as well as a variety of over 100 members of the program.

Intel stated that it is now supplying voice assistance technology from Nuance and iFlyTek that is available on products from HP, Acer, Lenovo, Samsung, Toshiba, ASUS, and Dell.

Intel discussed its RealSense technology, and stated that 3D front facing cameras should begin appearing on products as soon as the fourth quarter of this year. These cameras should help to enable better security, object measurement and 3d modeling for 3D printing, background abstraction for video chats, and gesture-based gaming. Intel highlighted the momentum it is seeing in its RealSense cameras via a list of 30 various companies that have adopted the technology.

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WELLS FARGO SECURITIES, LLC Intel Corp. EQUITY RESEARCH DEPARTMENT

Figure 1. Quarterly Income Statement--Intel (Exhibits In Millions, Except Per Share Data) INTC Q1 13 Q2 13 Q3 13 Q4 13 FY13 Q1 14 Q2 14 Q3 14E Q4 14E FY14E Q1 15E Q2 15E Q3 15E Q4 15E FY15E Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Revenue 12,580 12,811 13,483 13,834 52,708 12,764 13,831 14,400 14,700 55,695 14,000 14,000 15,000 16,500 59,500 % Ch. Y/y -2.5% -5.1% 0.2% 2.6% -1.2% 1.5% 8.0% 6.8% 6.3% 5.7% 9.7% 1.2% 4.2% 12.2% 6.8% % Ch. Seq. -6.7% 1.8% 5.2% 2.6% -7.7% 8.4% 4.1% 2.1% -4.8% 0.0% 7.1% 10.0% Cost of Goods Sold$ 5,514 5,341 5,069 5,263 21,187 5,138 4,914 4,896 5,513 20,461 5,740 5,670 5,700 6,105 23,215 Cost of Goods Sold% 43.8% 41.7% 37.6% 38.0% 40.2% 40.3% 35.5% 34.0% 37.5% 36.7% 41.0% 40.5% 38.0% 37.0% 39.0% Gross Margin$ 7,066 7,470 8,414 8,571 31,521 7,626 8,917 9,504 9,188 35,235 8,260 8,330 9,300 10,395 36,285 Gross Margin% 56.2% 58.3% 62.4% 62.0% 59.8% 59.7% 64.5% 66.0% 62.5% 63.3% 59.0% 59.5% 62.0% 63.0% 61.0% R&D$ 2,527 2,516 2,742 2,826 10,611 2,846 2,859 2,900 2,850 11,455 2,850 2,950 3,000 3,050 11,850 R&D% 20.1% 19.6% 20.3% 20.4% 20.1% 22.3% 20.7% 20.1% 19.4% 20.6% 20.4% 21.1% 20.0% 18.5% 19.9% SG&A$ 1,947 2,165 1,970 2,006 8,088 2,037 2,061 2,000 1,800 7,898 1,850 1,850 1,950 2,050 7,700 SG&A% 15.5% 16.9% 14.6% 14.5% 15.3% 16.0% 14.9% 13.9% 12.2% 14.2% 13.2% 13.2% 13.0% 12.4% 12.9% Total Op. Exp. 4,474 4,681 4,712 4,832 18,699 4,883 4,920 4,900 4,650 19,353 4,700 4,800 4,950 5,100 19,550 % of revenue 35.6% 36.5% 34.9% 34.9% 35.5% 38.3% 35.6% 34.0% 31.6% 34.7% 33.6% 34.3% 33.0% 30.9% 32.9% % Ch. Seq. -2.5% 4.6% 0.7% 2.5% 1.1% 0.8% -0.4% -5.1% 1.1% 2.1% 3.1% 3.0% Special Charges Amortization 73 70 74 74 291 73 72 65 90 300 75 75 75 75 300 Restructuring charge 124 116 240 137 81 20 238 Purch in proc. R&D Special Charges & Amortization 73 70 198 190 531 210 153 85 90 538 75 75 75 75 300 Operating Income 2,519 2,719 3,504 3,549 12,291 2,533 3,844 4,519 4,448 15,344 3,485 3,455 4,275 5,220 16,435 Operating Margin 20.0% 21.2% 26.0% 25.7% 23.3% 19.8% 27.8% 31.4% 30.3% 27.5% 24.9% 24.7% 28.5% 31.6% 27.6% Interest & Other -50 -37 -32 -32 -151 112 -17 95 Gain/Loss on Equity Sec. -26 11 452 34 471 48 95 143 Other Income -76-264202320160780 023800000 Pretax Income 2,443 2,693 3,924 3,551 12,611 2,693 3,922 4,519 4,448 15,582 3,485 3,455 4,275 5,220 16,435 Income Taxes 398 693 974 926 2,991 746 1,126 1,265 1,245 4,383 941 933 1,154 1,409 4,437 Tax Rate 16.3% 25.7% 24.8% 26.1% 23.7% 27.7% 28.7% 28.0% 28.0% 28.1% 27.0% 27.0% 27.0% 27.0% 27.0% Net Income 2,045 2,000 2,950 2,625 9,620 1,947 2,796 3,254 3,202 11,199 2,544 2,522 3,121 3,811 11,998 NI % of revenue 16.3% 15.6% 21.9% 19.0% 18.3% 15.3% 20.2% 22.6% 21.8% 20.1% 18.2% 18.0% 20.8% 23.1% 20.2% Avg.Shs.Diluted (MM) 5,080 5,106 5,100 5,103 5,097 5,117 5,123 5,123 5,123 5,122 5,128 5,128 5,128 5,128 5,128 EPS$ 0.40 $ 0.39 $ 0.58 $ 0.51 $ 1.89 $ 0.38 $ 0.55 $ 0.64 $ 0.63 $ 2.19 $ 0.50 $ 0.49 $ 0.61 $ 0.74 $ 2.34 Source: Intel and Wells Fargo Securities, LLC estimates

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WELLS FARGO SECURITIES, LLC Semiconductors EQUITY RESEARCH DEPARTMENT

Required Disclosures

IntelIntel Corp.Corp. (INTC)(INTC) 3-yr.3-yr. PricePrice PerformancePerformance

$39.00

$37.00

$35.00

$33.00

$31.00

$29.00

$27.00

$25.00

$23.00

$21.00 Security Price $19.00

$17.00 9/7/11 8/8/12 9/5/12 9/4/13 8/6/14 8/7/13 7/9/14 9/3/14 5/16/12 6/13/12 7/11/12 1/23/13 4/17/13 4/16/14 10/5/11 11/2/11 1/25/12 2/22/12 3/21/12 4/18/12 10/3/12 2/20/13 3/20/13 5/15/13 6/12/13 7/10/13 10/2/13 1/22/14 2/19/14 3/19/14 5/14/14 6/11/14 12/26/12 11/30/11 12/28/11 10/31/12 11/28/12 10/30/13 11/27/13 12/25/13 Date

Date Publication Price ($) Rating Code Val. Rng. Low Val. Rng. High Close Price ($) 9/7/2011 Wong 9/7/2011 NA 1 26.00 32.00 20.08 z 10/18/2011 23.40 1 28.00 34.00 23.40 z 1/19/2012 25.63 1 30.00 36.00 25.63 z 4/17/2012 28.47 1 33.00 39.00 28.47 z 10/17/2012 22.35 1 28.00 33.00 21.79 z 10/16/2013 23.39 1 26.00 30.00 23.70 z 1/16/2014 26.54 1 29.00 34.00 26.54 z 7/15/2014 31.71 1 35.00 42.00 31.71

Source: Wells Fargo Securities, LLC estimates and Reuters data

Symbol Key Rating Code Key d Rating Downgrade ‹ Initiation, Resumption, Drop or Suspend 1 Outperform/Buy SR Suspended c Rating Upgrade „ Analyst Change 2 Market Perform/Hold NR Not Rated z Valuation Range Change ˆ Split Adjustment 3 Underperform/Sell NE No Estimate

Additional Information Available Upon Request

I certify that: 1) All views expressed in this research report accurately reflect my personal views about any and all of the subject securities or issuers discussed; and 2) No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this research report.

ƒ Wells Fargo Securities, LLC maintains a market in the common stock of Intel Corp. ƒ Wells Fargo Securities, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in the next three months from Intel Corp. ƒ Wells Fargo Securities, LLC and/or its affiliates, have beneficial ownership of 1% or more of any class of the common stock of Intel Corp. ƒ Intel Corp. currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided noninvestment banking securities-related services to Intel Corp. ƒ Wells Fargo Securities, LLC received compensation for products or services other than investment banking services from Intel Corp. in the past 12 months. ƒ Wells Fargo Securities, LLC or its affiliates has a significant financial interest in Intel Corp.

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WELLS FARGO SECURITIES, LLC Intel Corp. EQUITY RESEARCH DEPARTMENT

INTC: Company-specific risks include competition from AMD and rising capital spending. Sector risks include the possibility of decelerating growth in PC shipments.

Wells Fargo Securities, LLC does not compensate its research analysts based on specific investment banking transactions. Wells Fargo Securities, LLC’s research analysts receive compensation that is based upon and impacted by the overall profitability and revenue of the firm, which includes, but is not limited to investment banking revenue.

STOCK RATING 1=Outperform: The stock appears attractively valued, and we believe the stock's total return will exceed that of the market over the next 12 months. BUY 2=Market Perform: The stock appears appropriately valued, and we believe the stock's total return will be in line with the market over the next 12 months. HOLD 3=Underperform: The stock appears overvalued, and we believe the stock's total return will be below the market over the next 12 months. SELL

SECTOR RATING O=Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. M=Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. U=Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months.

VOLATILITY RATING V = A stock is defined as volatile if the stock price has fluctuated by +/-20% or greater in at least 8 of the past 24 months or if the analyst expects significant volatility. All IPO stocks are automatically rated volatile within the first 24 months of trading.

As of: September 7, 2014 49% of companies covered by Wells Fargo Securities, LLC Wells Fargo Securities, LLC has provided investment banking Equity Research are rated Outperform. services for 44% of its Equity Research Outperform-rated companies. 48% of companies covered by Wells Fargo Securities, LLC Wells Fargo Securities, LLC has provided investment banking Equity Research are rated Market Perform. services for 31% of its Equity Research Market Perform-rated companies. 3% of companies covered by Wells Fargo Securities, LLC Wells Fargo Securities, LLC has provided investment banking Equity Research are rated Underperform. services for 11% of its Equity Research Underperform-rated companies.

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SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE

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