Intel: We could be a foundry if the fit was right

[notty22]

Intel: We could be a foundry if the fit was right



Snip

Here are some snippets from Otellini's talk.

We sell to Samsung today. We sell modems. Samsung from my perspective always had a very pragmatic view of what component they put inside their devices. They are a big customer of PCs from us today. If we have a better chip than they can build, then their semiconductor company can build, they will use it and that's been true for now. I don't see any reason why it wouldn't continue to be true.
I would be a foundry for strategic relationships and not to enable our competitors. You can read what you want into that statement but Samsung -- it's hard to imagine Samsung as a -- a foundry in parts for Samsung would be -- would fit that model.
​

Discuss.

Intel's Otellini Sees Next Chief From Inside; Open to Foundry Relationships

 

[Idontcare]

In other words "if people are willing to give us their money, and do so in a way that in no way will prevent us from convincing other people to continue to give us their money as well, then of course we will graciously accept everyone's money".

 

[blastingcap]

Interesting. But Otellini is a lame duck so his successor may not feel the same way.

 

[Idontcare]

LOL, I pity the CEO who comes in after Otellini's track record and says "yeah, yeah, that's all well and good but I'm here to change course because my unproven ideas and unproven strategy is the bomb y'all, you ain't seen nothing yet!"

 

[ShintaiDK]

Interesting. But Otellini is a lame duck so his successor may not feel the same way.

Err what?

 

[Centauri]

http://en.wikipedia.org/wiki/Lame_duck_(politics)

 

[ShintaiDK]

He also says what I keep saying. If there is a better chip, then companies like Samsung will easily ditch their own. (Insert something about smartphones here.)

 

[ShintaiDK]

http://en.wikipedia.org/wiki/Lame_duck_(politics)

Lol thanks. Thats a wierd name tho

 

[pablo87]

"We could be a foundry if the fit was right" doesn't sound like a strategy to me. Sounds like they don't have a plan and have have all the time in the world.

As we know, Intel has been spending money left (McAfee), right (ASML) and center (capex) which sooner or later depending how much they stretch their historical depreciation policy will translate into a doubling of that component of the cost of a processor, an annual profit reduction of what, $4B?, and slashing the company's market cap by 25-30%.

Yet, they borrow $6B this week, to buy back shares we are told. It seems they really believe there is nothing wrong inside intel and that the problem lies with investors which a little more debt and some stock buybacks will easily fix. Tinkering on the edges perhaps?

But maybe part of the reality is they're not comfortable with their cash levels and cash flow - after capex and dividends, there seems to be very little left over for any strategic opportunity or rainy days.

Anyone else see a pattern here with their lack of a plan to deal with the increased foundry capex and depreciation, the Otellini resignation (which we are told is a natural transition), and the debt raised this week?

Individually, the spin might make sense but collectively it begs the question, what's going on? How does a company that has a quasi monopoly (earned mind you) in many areas of the computing industry end up in this situation?

Typical AMD I say.














Except it's Intel we're talking about.

 

[pablo87]

LOL, I pity the CEO who comes in after Otellini's track record and says "yeah, yeah, that's all well and good but I'm here to change course because my unproven ideas and unproven strategy is the bomb y'all, you ain't seen nothing yet!"

You think Otellini's track record is that good, really?

 

[Idontcare]

Yet, they borrow $6B this week, to buy back shares we are told. It seems they really believe there is nothing wrong inside intel and that the problem lies with investors which a little more debt and some stock buybacks will easily fix. Tinkering on the edges perhaps?

If you believe your stock will appreciate at a CAGR that exceeds that of the APR on the loan, it is a matter of simple accounting to justify borrowing money and investing it into yourself.

I did it. I borrowed money so I could go to college, earn a degree, and make back many times more income than the interest expenses on the college loan.

Had I worked at McDonalds long enough to accumulate enough cash to pay for my college education without needing to borrow then I'd probably never make it to college.

There are lots of good reasons to borrow money, not all debt is bad debt or an indication of fiscal weakness.

 

[mrmt]

Anyone else see a pattern here with their lack of a plan to deal with the increased foundry capex and depreciation, the Otellini resignation (which we are told is a natural transition), and the debt raised this week?

I do not see a pattern here. I don't think Intel recurring CAPEX is anything out of proportion related to their revenues and operating cash flows and I don't see a problem in raising debt to buy shares back (CAPM vs WACC someone?). I also don't see a problem in a CEO announcing a retirement and staying 6 months on the helm.

 

[jhu]

HP has been using Intel as their foundry for >10 years.

 

[Blandge]

As we know, Intel has been spending money left (McAfee), right (ASML) and center (capex) which sooner or later depending how much they stretch their historical depreciation policy will translate into a doubling of that component of the cost of a processor, an annual profit reduction of what, $4B?, and slashing the company's market cap by 25-30%.

Intel always invests during economic downturns. This was readily apparent during the 2008-2009 stock plunge, and that's the intended goal here. Intel added 20,000 employees in 2012 during a time when other companies are laying off thousands of people. Does that seem like a company who isn't confident in their future potential to you?

 

[Phynaz]

In other words "if people are willing to give us lots of their money, and do so in a way that in no way will prevent us from convincing other people to continue to give us their money as well, then of course we will graciously accept everyone's money".

FTFY :biggrin:

It's telling in the last line of the article where Otellini says they wouldn't do "cost plus".

 

[Av9114]

Am I crazy to read this as we're currently negotiating with Apple and they're going to pay us handsomely; so don't freak out about our margins when you see the deal finalized.

 

[MisterMac]

Am I crazy to read this as we're currently negotiating with Apple and they're going to pay us handsomely; so don't freak out about our margins when you see the deal finalized.

Apparently - because that deal is already sealed @ TSMC and morris chang - according to our in-the-know elder stateforum goers

 

[pablo87]

If you believe your stock will appreciate at a CAGR that exceeds that of the APR on the loan, it is a matter of simple accounting to justify borrowing money and investing it into yourself.

I did it. I borrowed money so I could go to college, earn a degree, and make back many times more income than the interest expenses on the college loan.

Had I worked at McDonalds long enough to accumulate enough cash to pay for my college education without needing to borrow then I'd probably never make it to college.

There are lots of good reasons to borrow money, not all debt is bad debt or an indication of fiscal weakness.

This kind of financial gymnastics shouldn't even be on the radar for Intel, period. Do you see Qualcomm, Apple, Google, Microsoft doing it?

 

[pablo87]

Intel always invests during economic downturns. This was readily apparent during the 2008-2009 stock plunge, and that's the intended goal here. Intel added 20,000 employees in 2012 during a time when other companies are laying off thousands of people. Does that seem like a company who isn't confident in their future potential to you?

I hope so but I think this is different. Anyway, I've nothing to add.

 

[mrmt]

This kind of financial gymnastics shouldn't even be on the radar for Intel, period. Do you see Qualcomm, Apple, Google, Microsoft doing it?

http://www.bloomberg.com/news/2010-...ale-to-pay-for-dividends-buy-back-shares.html

Microsoft Said to Plan Debt Sale to Pay for Dividends, Buybacks

http://www.bbc.co.uk/news/business-17434328

Apple to pay dividend and buy back share

http://paidcontent.org/2009/11/12/4...res-for-first-time-in-wake-of-admob-purchase/

Nov 12, 2009 - 3:25AM
Google To Buy Back Shares For First Time In Wake Of AdMob Purchase

===================


This is no financial gymnastic. The number one job of a good CFO is to manage the company's cash reserves in the best way possible, and if a share buyback is the best thing to do with the money, it is a duty to do so.

 

[pablo87]

http://www.bloomberg.com/news/2010-...ale-to-pay-for-dividends-buy-back-shares.html

Microsoft Said to Plan Debt Sale to Pay for Dividends, Buybacks

http://www.bbc.co.uk/news/business-17434328

Apple to pay dividend and buy back share

http://paidcontent.org/2009/11/12/4...res-for-first-time-in-wake-of-admob-purchase/

Nov 12, 2009 - 3:25AM
Google To Buy Back Shares For First Time In Wake Of AdMob Purchase

===================


This is no financial gymnastic. The number one job of a good CFO is to manage the company's cash reserves in the best way possible, and if a share buyback is the best thing to do with the money, it is a duty to do so.

Still I don't like it but I've nothing to add so.

 

[Av9114]

Apparently - because that deal is already sealed @ TSMC and morris chang - according to our in-the-know elder stateforum goers

Just found that thread. Interesting, IDC certainly knows more about this stuff than I do. It's still not clicking for me. Fab 14 phase 5-6 isn't scheduled to begin production until early 2014. What's the plan for 2013? Samsung 32nm? TSMC 28nm HPM? Where is 28nm HPM btw, is that ever coming?

It just feels like one of those where there is smoke there's fire sort of things. I wonder if there's some sort of option 3 that we haven't considered. Maybe Apple's working with Intel as a backup plan B type thing? This has to be about Apple though, right? Is there any other fabless designer that isn't a competitor to Intel which would require enough volume to make this interesting?

 

[Tsavo]

AMD is lining up right now to pay them big money to make nothing for them.

 

[Idontcare]

Just found that thread. Interesting, IDC certainly knows more about this stuff than I do. It's still not clicking for me. Fab 14 phase 5-6 isn't scheduled to begin production until early 2014. What's the plan for 2013? Samsung 32nm? TSMC 28nm HPM? Where is 28nm HPM btw, is that ever coming?

It just feels like one of those where there is smoke there's fire sort of things. I wonder if there's some sort of option 3 that we haven't considered. Maybe Apple's working with Intel as a backup plan B type thing? This has to be about Apple though, right? Is there any other fabless designer that isn't a competitor to Intel which would require enough volume to make this interesting?

It won't be Intel...you don't send 600 Irish workers home as you scuttle their training and delay capex into their fab if you've got a huge juicy foundry deal coming down the pipe.