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:

Company		Reported Fiscal Year		Revenue (in billions) ($)		Net Income (in billions) ($)		Market Capitalization on 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
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:

Company		Reported Fiscal Year		Revenue (in billions) ($)		Net Income (in billions) ($)		Market Capitalization on 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
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.

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.