patrick.net

SFace says

You mean selling 6B in bonds to buy their own shares for $25 average last
year? A lot of the cash is located in foreign bank accounts that are not
moveable. They can't fund buyback or dividends without borrowing. A lot of the
stock price is supported by 45B in buybacks. A lot of it (11B added recently) is
built on debt issuance.

How much of that buyback reallty reduced the float instead of stock options
granted to employees?

------------------------------------------
I think Apple has that same problem of repatriating it's warchest too, no?

INTC's 41% payout ratio tells me it IS a cash machine. The recent $6Billion used for buybacks, has nothing to do w/ its ability to pay dividends. I'd rather see INTC spend it's $$ on Tic-Toc and dividends, and then borrow some for the buybacks. Think about it. Using the power of Intel's financials, the banks have absolute confidence in Intel. Intel is using that money to buy back shares BELOW THE COST OF THE DIVIDENT RATE. They are making/saving more money by borrowing $$ to buy back shares. It then doesn't have to pay the dividends on the shares it just gobbled up. This move....
- It reduces share count.
- It increases EPS.
- It secures a floor in the share price
- They 'get it' by buying back stock at lower stock prices - It keeps shareholders happy (shareholders = institutions, btw, that hold 60% of all outstanding shares). This borrowing of $$ to fund buybacks at extremely low cost is a no brainer. It's not a decision because of a position of weakness. It's a move from a position of strength.....

Listen, I don't deny that INTC has serious headwinds in its near term. Sqashing a bumbling AMD in the last 10 years and facing competent companies now like Qualcomm, ARM, etc are two completely different scenarios. I get that.

I've been referencing Ashraf's articles on SA, because he is the most intelligent INTC bull I have ever come across, w/ the technological chops to back up his beliefs/statements. He loves ARM and Intel, and all things 'semiconductor'. I give him full credit in my arguments here on patrick's site. On that note, here's a complete explanation of why INTC is issuing $6B to fund its buybacks (NOT DIVIDENDS) from a position of strength....

Intel's Big Buyback Will Roast The Bears...

http://seekingalpha.com/article/1068981-intel-s-big-buyback-will-roast-the-bears

Kevin says

We were talking about mobile. Read the second half of that paragraph.

--------------------------
But wait, didn't you say x86 was dead and Apple was "COMPLETELY COMMITTED" w/ ARM? I do understand iPad/iPhone make up the majority of Apple's profits, but you can't be selective in this argument.

Kevin says

You really don't know what's going on, do you?

Apple already has a touch screen OS. Its called iOS and it is the second most
popular operating system on the market (windows is now a distant third).

The corporate market has already been infiltrated by apple. Its called the
iPad.

The traditional PC is becoming a niche market, and apple doesn't care about
it anymore.

-------------------------------------
Tell me something. When will Adobe CS6 get to run on an iPad? Oh yeah. You can't. Not for awhile anyway. You'll need a MacBook, a WinTel PC (notebook, lapop, desktop PC, or one of the new hybrid touch-screen tablets w/ INTC chips that can handle CS6....I do know what's going on outside, and inside corporate. And you shouldn't underestimate corporate.

Kevin says

And ALL or MOST of these devices will have an Intel chip in them. I predict
spreadsheets/powerpoint/database work/etc will not be done on an iPad in the
corporate environment.

They already are. When was the last time you set foot inside of a "corporate
environment"?

-----------------------------------------
Just because Apple took RIMM's lunch in smartphones the last3 years, doesn't mean they are 'dominating' corporate.

As we are seeing now, Android is now taking some (not all) of Apple's lunch in corporate smartphones. As far as iPads/Android tablets go, these are the out of office toys for the top 1% of the execs at the top of the corporate ladder. They still go to their INTC powered laptops and desktops to get work done in the office and at home. The vast majority of the 'worker bees' do not get ipads/phones that corporate pays for. I know, because I set these up and deploy ALL OF THESE DEVICES myself.

That said, I step inside a 'corporate environment' every day. I work for a multinational engineering firm w/ offices world-wide, so I talk from experience.

When will the following apps run on an iPad/iPhone, thus 'dominating corporate', in your mind??

- MS Office (Window Surface RT is irrelevant)
- Adobe Acrobat, CS6, Adobe anything?
- Anything Oracle?
- Any Business intelligence sw (Cognos/IBM, etc)
- Any AutoDesk/AutoCAD
- Any Bentely Microstation, Projectwise, etc?
- Any ESRI?
- MS SharePoint, SQL?
- Web development?
- Database Apps?
- Accounting apps?

AverageBear says

Kevin says

We were talking about mobile. Read the second half of that paragraph.

--------------------------

But wait, didn't you say x86 was dead and Apple was "COMPLETELY COMMITTED" w/ ARM? I do understand iPad/iPhone make up the majority of Apple's profits, but you can't be selective in this argument.

I didn't say they were "completely committed" with ARM (check who you're quoting maybe?). What they are committed to is building their own chips, and currently they prefer ARM architecture for this. I did say that x86 is dead, because it is.

Apple are gradually winding down their traditional PC business. It could disappear tomorrow and the hit to Apple's earnings would be relatively minor. 80% of their revenue and 90% of their profits come from iOS devices. By 2015 PCs will be less than 5% of their revenue, and it won't be surprising at all if they simply stop making traditional PCs. They've already started the process of killing off their desktop and server lines.

AverageBear says

Tell me something. When will Adobe CS6 get to run on an iPad?

Never, but CS7 will be later this year. Adobe announced last year that CS7 would be shipping on ipad and android tablets in 2013. Try to keep up.

AverageBear says

ust because Apple took RIMM's lunch in smartphones the last3 years, doesn't mean they are 'dominating' corporate.

I didn't use the word "dominating". You gave examples of programs that you predict won't be done on an ipad, despite clear evidence that they are being used on an ipad RIGHT NOW. Most fortune 500 companies have deployed ipads to some set of employees. The iphone is the most commonly used device in the corporate environment (with Android devices in aggregate being the majority OS). The ship has sailed, and the present and future are in mobile devices.

AverageBear says

As we are seeing now, Android is now taking some (not all) of Apple's lunch in corporate smartphones. As far as iPads/Android tablets go, these are the out of office toys for the top 1% of the execs at the top of the corporate ladder. They still go to their INTC powered laptops and desktops to get work done in the office and at home. The vast majority of the 'worker bees' do not get ipads/phones that corporate pays for. I know, because I set these up and deploy ALL OF THESE DEVICES myself.

You are personally responsible for the 50M+ mobile devices deployed in corporate environments last year? Holy shit, you must work late.

AverageBear says

That said, I step inside a 'corporate environment' every day. I work for a multinational engineering firm w/ offices world-wide, so I talk from experience.

Cool story, bro. Me too.

AverageBear says

When will the following apps run on an iPad/iPhone, thus 'dominating corporate', in your mind??

- MS Office (Window Surface RT is irrelevant)

Probably later this year, according to rumors. Not that it matters: for most people, either Google Apps or Apple's productivity suite are more than adequate, and work on tablets today.

- Adobe Acrobat, CS6, Adobe anything?

Acrobat, maybe never (again, a creative tool for a niche audience). CS6 also never, but CS7 in late summer / early fall.

- Anything Oracle?

- Any Business intelligence sw (Cognos/IBM, etc)

The clients already work on mobile. Nobody's running the servers on their tablet, but they weren't running them on their laptops either, so it's hardly relevant.

- Any AutoDesk/AutoCAD

- Any Bentely Microstation, Projectwise, etc?

- Any ESRI?

Like I said, software for creative professionals (who are a tiny minority of office workers) will continue to use the niche machines. Some low power legacy apps are already seeing their clients ported.

- MS SharePoint, SQL?

Hopefully never.

- Web development?

What does this even mean? IDEs? Text editors? All available on Android (they can't be sold on iOS due to Apple's policies, though you can deploy them yourself if you have a developer key)

- Database Apps?

- Accounting apps?

Widely available today. Yes, even the well-known stuff like Quickbooks / peachtree.

Kevin says

They're trying to sell mobile chips in emerging markets because nobody will
buy them anywhere else. Nobody is buying them in the emerging markets
either.

-------------------------------------------------------
Nobody? Really? When you say INTC is 'trying' in emerging markets, do you mean the Lenovo's INTC-powred phones in China. You know Lenovo, currently the best-selling phone in China.

Or are you talking about the Intel-Motorola deal w/ China Mobile: the largest wireless service provider w/ 700 MILLION SUBSCRIBERS; ie, more than twice the population of the US.

Or are we talking about the Intel-powered Lava ZOLO in India?

No Intel in Google/Android? Wrong again....

......"Lenovo grew 870% in smartphones in a single year and shipped 7 million smartphones in the third quarter. Intel has also entered into agreements with Google (GOOG) to make Android and x86 more compatible. Intel has entered into a comprehensive agreement with Google's Motorola Mobility business unit. The results of that agreement are just now being recognized. Motorola has introduced the Intel-powered Razr i in Europe as a complement to the nearly identical non-Intel Razr M in the U.S.

Early this year, Intel announced several non-U.S. partners in the mobile business. One of these is Lenovo, which is in the process of passing Hewlett-Packard (HPQ) as the world's largest PC manufacturer. As such, we can assume that Lenovo and Intel have "met." Lenovo has also entered the smartphone business with some impressive results:

In last year's third quarter, the company had a 1.7% share of the market, according to Gartner.

A year later, the company was ranked second in China's smartphone market for the third quarter, with a 14.8% share. This put it right behind Samsung, which had a 16.7% share.

'We know that Lenovo is one of the strongest local companies in China,' said Gartner analyst Sandy Shen on Wednesday. 'But we just didn't expect the change to come so fast... We thought it would take them several years to grow their business in mobile devices.'

Lenovo grew 870% in smartphones in a single year and shipped 7 million smartphones in the third quarter. Intel has also entered into agreements with Google (GOOG) to make Android and x86 more compatible. Intel has entered into a comprehensive agreement with Google's Motorola Mobility business unit. The results of that agreement are just now being recognized. Motorola has introduced the Intel-powered Razr i in Europe as a complement to the nearly identical non-Intel Razr M in the U.S.

Motorola is also releasing an Intel-powered smartphone in China through China Mobile (CHL), the world's largest mobile service provider with over 700 million subscribers. Yes, that number is twice the entire population of the U.S. This phone carries the Intel Z2460 and an Intel baseband chip.

The Lava ZOLO carries Intel parts to India, another market of "interest". Orange brings Intel SoCs to the U.K. Even Russia gets some Intel smartphone parts. Not bad for a company with "no strategy."

None of these smartphones are market leaders or iPhone killers. They are mid-market, inexpensive, capable smartphones. All of these products use the Z2460 Medfield SoC. This device is a four-year-old architecture manufactured on Intel's trailing edge (but cheap) 32nm process. Next year will see 22nm, new architecture dual core SoC with 4G LTE on a chip, or nearby, with much higher performance and much lower power.

We have no idea how well these products are selling in their respective markets, and Intel will remain silent on that subject because that is what "dark horses" do. Since there is a dire shortage of 28nm devices from Taiwan Semiconductor (TSMC), what is available is going into high-end phones, primarily in the U.S. Because of the above situation, we could get a pleasant surprise regarding the international progress of Intel's mobile effort.

-------------------------------------------------------------

http://www.bloomberg.com/news/2013-01-09/lenovo-to-begin-selling-smartphone-based-on-intel-mobile-chip.html

http://seekingalpha.com/article/1038641-does-intel-have-a-mobile-strategy-judge-for-yourself

http://www.computerworld.com/s/article/9233920/Lenovo_poised_to_top_smartphone_market_in_China_by_2013

Kevin says

You are personally responsible for the 50M+ mobile devices deployed in
corporate environments last year? Holy shit, you must work late.

-----------------------------------
Yes, I am that good.... Seriously, you questioned whether I even stepped in a 'corporate environment'. You called BS on me, and questioned my argument. Well, I deal, prep and deployed all of this shit for the last 6 years. I've deployed Blackberries, iPhones, Androids, laptops, desktop, iPhones, iPads to my 200 seat office, another 400 seat office in MA, 2 other 100+ offices in CT, a 50+ office in RI, 4 300+ offices in the NYC/NJ office, and talk to the other techs that represent the rest of our offices in the US and Canada. That said, I have some clue about the 'corporate environment', and my exposure is quite adequate, unlike your attempt at humor...

Kevin says

Widely available today. Yes, even the well-known stuff like Quickbooks /
peachtree.

----------------------------------------
Oh yes I forgot. Fortune 500 companies go straight to Quickbooks and Peachtree for their accounting needs. hahaaa. PFFT. I guess Intel has everything to fear on that front....

Kevin says

Anything Oracle?

- Any Business intelligence sw (Cognos/IBM,
etc)

The clients already work on mobile. Nobody's running the servers on their
tablet, but they weren't running them on their laptops either, so it's hardly
relevant.

------------------------------------------------------
Are you saying all accounting department's users have an ipad or tablet or iphone/android on their desks to do their #-crunching all day from 9-5? I've seen the accountants I work with play with their ARM-based toys during their smoke-breaks, but then go back to their drudgery at their desks, toilling all day on their INTC-based laptops and desktops.

Kevin says

Tell me something. When will Adobe CS6 get to run on an iPad?

Never, but CS7 will be later this year. Adobe announced last year that CS7
would be shipping on ipad and android tablets in 2013. Try to keep up.

------------------------------------------
Welll, I haven't personally installed CS7 yet, but I doubt my company will pay for an iPad for someone that will need to run CS7. Maybe the'mahogany row' execs will get a few. These execs represent about 1-2% of our company's workforce. I can tell you that at least 20% of all PCs (whether laptop or desktop) will be replaced by (yet another) intel-based laptop/desktop, for the remaining 98% of the 'worker bees'..... x86 is dead indeed...

we actually do know how many x86 devices have shipped, since android apps track them: fewer than 250,000 out of more than 200m android devices sold last year.

And, no, obviously not everybody is using iPads in the office every day. The point is that the trend is PCs being replaced by phones and tablets for many workers. The apps in question are already available and people are using them.

What happens at your company is utterly irrelevant. You work in an IT department? Who gives a shit. I actually write some of the apps we are talking about, and we can see where the demand is.

Kevin says

I didn't say they were "completely committed" with ARM (check who you're quoting
maybe?).

----------------------------
My bad. SFace said this, and thought it was you...

SFace says

They are commited with ARM for tablets and Phones and they are not going back. They can't for the mac yet as ARM based prodessor underperform vs. Intel. I am certain Apple is looking at a non-Intel based Mac in the future.

From the looks of it, it's more likely that any future mac will just be an ipad with an attached keyboard. Just look at what has happened to OSX over the last two versions.

More likely, the mac line will just disappear, since apple isn't particularly interested in the creative professional niche any more.

Kevin says

What happens at your company is utterly irrelevant. You work in an IT
department? Who gives a shit. I actually write some of the apps we are talking
about, and we can see where the demand is.

---------------------------------------------
WOW... Condescension so thick, you can cut it with a fork. Yeah, so you work higher up the chain in the IT world than I do. I guess I should stop defending INTC because I'm arguing w/ a developer. Oooooooh. I should just stop and kneel down and wait for more pearls of wisdom, shaking in anticipation. So you are a developer in a country of 300 million. Who gives a shit? Your opinions don't seem to go beyond what's happening outside the US.

So you think my workplace is niche, INTC will scale down and be a dwarf of it's former self? And x86 will die.

Aaaand you think "NOBODY" (your words) will work with INTC. Aaaand all PCs will be replaced w/ phones/tablets.

Well, guess what. While your current occupation caters to the 300 million Americans (I'm guessing here, so take it with a grain of salt), INTC is making deals w/ phone and tablet makers that are catering to the 3 BILLION person markets in China and India.

You don't know, or care to mention that although PC sales are slipping, the server/datacenter group is making up some of the losses w/ very good growth. You don't mention the deals that INTC is making w/ Facebook, Google and other companies that dominate the 'net. You don't seem to mention the growing server farm market that INTC will be catering to, that will run your code. You don't WANT to acknowledge that INTC is in fact growing in the mobile market in developing nations w/ 8-10x the population of the US, and that x86 exists in the European mobile market in the form of Motorola and others. And you don't want to even acknowledge that INTC WILL be making modems, taking away some market share from QCOM. It's gonna happen.....Tell me, you think Glo-Flo, TSMC and Samsung are going to back-engineer anything below 14nm that's coming out of Intel? Tri-Gate? When the power efficiencies and processing power is demanded at this level and lower and in massive quantities, I think these foundries are fucked. Go ahead and search the 'net, and see if anyone can get to the same levels at INTC's Tri-Gate, w/ the same dimensions and power requirements. It may not be needed now, but INTC sees this day coming. Just because you see INTC slipping now, doesn't mean they aren't planning for the future.

In your tunnel vision of your US-based bubble of thought, you think INTC will die off, luring investors w/ decent dividends, to financial catastrophe.

I see INTC as more of a threat to ARM's turf in mobile, more than ARM's threat in the low-power server/datacenter space. I see and confirm that INTC is pushing it's way into mobile in markets that dwarf the US. I see x86 in Motorola, Lenovo and Android platforms. I guess you ignore these facts (maybe because they exist outside of our borders?). You think INTC doesn't even exist in mobile outside of our borders in the growing mobile market. Well you are wrong.

I don't have a beef w/ ARM, Apple, or Qualcomm. These are great companies. You seem to have a pure hatred for INTC/x86 that is blinding you as an investor. As a DGI investor, I like the size and innovation of Intel, as well as the growing dividends. But when I hear an egotistically blinded developer that thinks INTC only by what he CURRENTLY sees in the US, I laugh.

Good luck w/ your investments. I'll take my chances w/ Intel, one of 25 companies I'm invested in, that are currently growing their dividends.

Actually, I mentioned intels strengths in the data center in my first reply.

But servers can't make up for all the lost revenues in the desktop segment. Not even close.

I don't write apps for the US market, by the way. The US isn't even our primary focus.

I don't hate Intel. Im actually rooting for them to get their shit together with a legitimate competitor to ARM. I just believe that they are seriously misguided with their religious devotion to x86.

Further more, even if Intel can manage to produce something better than arm, its not relevant because neither Samsung nor apple will buy from them. In other words, they have no chance on 90% of mobile devices.

This is about whether Intel is a good investment, not personal feelings about hardware.

Kevin says

Actually, I mentioned intels strengths in the data center in my first reply.

But servers can't make up for all the lost revenues in the desktop segment. Not even close.

I don't write apps for the US market, by the way. The US isn't even our primary focus.

I don't hate Intel. Im actually rooting for them to get their shit together with a legitimate competitor to ARM. I just believe that they are seriously misguided with their religious devotion to x86.

Further more, even if Intel can manage to produce something better than arm, its not relevant because neither Samsung nor apple will buy from them. In other words, they have no chance on 90% of mobile devices.

This is about whether Intel is a good investment, not personal feelings about hardware.

------------------
Are we talking about 90% of the 300 million US Market , or the 3 billion person markets of China/India? from what I've read, INTC is in Lenovo, Google's Motorola and in the European Razr...Lenovo may be less relevant here in the US, but is a "Beast in the East" so to speak...Google is already running x86 in some of its stuff already. I think we will see more...

The x86 moto phone hasn't been released yet. Neither moto nor lenovo has committed to anything but one device for x86.

Samsung and apple combined represent about 90% of worldwide smartphone sales. Not just the us. Its actually somewhat less in the us since moto and HTC do a bit better here.

Kevin says

And, no, obviously not everybody is using iPads in the office every day. The point is that the trend is PCs being replaced by phones and tablets for many workers. The apps in question are already available and people are using them.

As a corp Accounting dept Controller.. I see 8 desk tops.. that is the only access points I have to worry about to our Financial information .. many countless managers and staffers in Accounting and IT support dept.. it isnt desirable who are responsible and accountable for security. The past thing we want to worry about is rouge access to our systems. In public companies the bar is even higher !

What one shills in SW engineer disconnected from real business world ..tries to promote doesnt go very far.

Forget about it... not going to happen.

People said the same thing about mainframes. How's that working out?

Apple and Samsung have BOTH reported more mobile devices sold than the entire PC market for last quarter.

Dead. Dead. Dead.

Kevin says

Apple and Samsung have BOTH reported more mobile devices sold than the entire
PC market for last quarter.

Dead. Dead. Dead.

---------------------------------------------------
yes, ARM dominates mobile for now. However, I wouldn't count INTC out. We all know how quickly the average consumer goes through a cell/smartphone (what, every 18-24 months). There's plenty of 'churn' for INTC to gradually gain more wins, as more designs get refreshed.

However, outside of mobile, there are some 'rumblings' worth noting, that I think many "Street Analysts" haven't focused on. And in particular, I'm talking about the Cisco deal...

(Culled from an SA article's comment section, which I think is relavent)......

....."I think a lot of folks are missing how important the Cisco deal is. The smartphone market is actually small compared to the overall penetration of ARM processors in products. In terms of products with processors in them, INTC and x86 in computers is actually a very small part of global processor consumption. In fact, the laser like focus on smartphone and INTC penetration into that segment is like missing the forest for the trees.

The fact that INTC is supplanting ARM in Cisco products is indicative of a paradigm shift in x86 versus ARM. If INTC can now sell its products to markets traditionally out of its reach due to the power characteristics of x86, the size of the potential markets opened is enormous. Cisco routers and INTC set top boxes reveal that INTC is now reaching an inflection point where it is just starting to obtain access to those markets. ".....

...I also think some of that 50% under-utilized capacity (that INTC detractors are crowing about), will be going towards chips destined for Cisco HW, and other deals we don't know about...

X86 in high end networking gear (Cisco has effectively abandoned home networking with the sale of Linksys) isn't going to replace a meaningful portion of desktop PC revenue.

Set top boxes are irrelevant. The video game and cable companies are all migrating to using smartphones and tablets for content. Comcast can already be used entirely over IP via tablet or Xbox.

Intel itself may survive for a very long time, but they won't be the giant that they have been. That's why I don't think they're a good long term investment. Nobody will be willing to pay $50+ just for the CPU anymore.

Kevin says

Further more, even if Intel can manage to produce something better than arm,
its not relevant because neither Samsung nor apple will buy from them. In other
words, they have no chance on 90% of mobile devices.

-----------------------------------------------------------
Why wouldn't Apple buy from Intel? Apple is already using their chips in their high-end MacBooks. I understand your argument that you think Apple will abandon MacBooks, or the laptop market altogether. But my point is that Apple is already in bed w/ Intel for awhile. If they were that disgusted w/ Intel, they would have stopped doing business together for awhile now... Knowing the pile of cash Apple has created the last 3-5 years, you'd think they'd pull the trigger, and cut Intel off. But they haven't... Why?

Why should Apple care what profit margins that Intel makes by using their components? If Apple sees Intel as the company w/ the best components at the best price, and can deliver them w/o disrupting Apple's supply/production chain, why would they give a shit what Intel makes in profits?

Samsung won't do business w/ Intel, because it's obvious they have their own foundries. I get that. But Apple? C'mon....

I can't understand your mentality that 'everyone that buys from Intel hates Intel'... Well, why does every business that stuffs their equipment into datacenters buys from Intel year after year after year?

You describe the companies that Intel deals with, as disgusted ex-girlfriends. They are businesses, and only care about profit, making sales #'s, etc. You paint a picture as if there's some moral dilemma that Intel isn't entitled to enjoy the high margins they've worked for........ If Intel makes the best chip/product at the best price, why should companies care about their margins? Who are they gonna go to? And if they did want to take their business elsewhere, why haven't they done so already?

Do they even have competition? I'm not familiar with that market, so I can't really invest in something I don't understand that well. But I've heard a lot of good about them.

SFace says

Intel pissed away a lot of their cash buying a shitload of shares at $25. As
a shareholder, you should be pissed.

---------------------------------------------------------
I'm actually thrilled they went through with the buyback. Well, of course I'd love INTC to initiate a buyback at $19.30, or whatever the 52-week low # is. But that's almost impossible to predict. At $25, it's roughly in the middle of the 52 week low and high, so I can't complain. Not the best price, and certainly not the worst. In fact, w/ down #'s for 2012, for INTC to continue w/ their buyback programs tells me of the complete confidence this company has in its products and execution.

As I mentioned before in this thread, the $6 Billion buyback does a number of positive things...

- It reduces share count.
- It increases EPS.
- It secures a floor in the share price
- They 'get it' by buying back stock at lower stock prices - It keeps shareholders happy (shareholders = institutions, btw, that hold 60% of all outstanding shares). This borrowing of $$ to fund buybacks at extremely low cost is a no brainer. It's not a decision because of a position of weakness. It's a move from a position of strength..... You do know the borrowing costs of 2.5% is less than the dividend of 4 - 4.3%.... They are actually saving $$ by not having to pay the dividend of those shares it's buying back. For INTC, this buyback is like killing 3-4 birds with one stone....

I bought some shares of Intel recently just because:

1. I use their products in all my laptops, even the Macs lately.
2. They have a dividend yield over 4%.
3. They have a P/E under 10.
4. I worked there for 8 months once and they are pretty well run.

Revenue did not grow from 2011 to 2012, but oh well. I still think they're probably a pretty good bet.

SFace says

It's a love hate thing. Because in the past, Microsoft and Intel abused the PC
manufacturer.

--------------------------------------------
....Or the PC manufacturer couldn't build a better mousetrap.... So is Apple still gonna hate on INTC because all of the other smartphone companies are 'commoditizing' the market? (whether or not they are using INTC chips?)............

It will be interesting when (not if) INTC starts making SoCs w/ LTE that will be more powerful and just as good at sipping electrons as any ARM-based SoC. When INTC starts making better chips that are cheaper than Apple's own in house designed chips, I wonder how Apple will react.

4. I worked there for 8 months once and they are pretty well run.

As far as semi manufacturing goes, Intel is a couple of years ahead of anyone else. Intel management mis-judged the mobile market, but that is likely to be a temporary setback.

SFace says

Rising income with rising dividend is a great sign. Rising dividend with
lowering of income is a horrible sign. HPQ is an example of the latter. Intel is
in the latter category.

-----------------------------------------------------
Comparing INTC to HPQ is laughable at best...

As we all know, the semiconductor business is cyclical....

I think ARM-based chip makers are more worried about INTC entering mobile, than INTC is about ARM entering Data-Center/micro-server/PC chip market. Any losses in mobile are expected to a point. Many think INTC can't get into the US-mobile market, thus thinking they missed the boat? What I find absurd is that INTC bashers are complaining why INTC hasn't tackled the US-mobile market first. The US-market being over-saturated, while being a fraction of what China/India/Brazil/Asia-Africa emerging markets are. INTC is able to tackle this growing market first w/ it's 2/3LG SoC chips first...Don't worry, INTC will be in the US-mobile market w/ 4G LTE soon enough.

Until then, I'll collect my sustainable 4+ % dividend from this free-cash flow machine.....

Nobody will be able to copy an INTC chip once it hits sub 20nm; whether it's processing power, energy consumption, wafer-yield....

Stop obsessing about the past "Win-Tel" PC-chip monopoly, and look at what's going to happen in the near- to medium-term. "Apple will control Intel more"??? Really? That's a fallacy. Where will hand-set makers (even thinking Apple on this one) go for their chips when future growth is on the horizon? TSMC, Glo-Fo are all tapped out and maxxed out production-wise. AAPL has already kicked Samsung to the curb for its chips. Google/Android and INTC have been 'knockin' boots' for awhile already, while INTC is gaining more design wins for handset models outside of the US (where the REAL growth is).

INTC is hardly worrying about AAPL controlling them. I think AAPL is more worried about where it will get its chips in the future. Tic-Toc marches on....

SFace says

AverageBear
says

Why wouldn't Apple buy from Intel?

Money. Apple is famous for controlling their supplier in critical areas and a
big part of the startegy is to design their own chips.

------------------------------
Apple may have its way w/ FoxCon, but INTC "aint no FoxCon"....

SFace says

Samsung and Apple has taken the same strategy under different roadmap. HTC,
Motorola, Nokias will have to follow that trend. It is a large reason why only
Apple and Samsung makes money while nobody else can.

--------------------------------------------
Much to the chagrin of Apple, Motorola/Android is definitely NOT taking the same strategy. Motorola/Google are expanding INTC's x86 architecture into more and more handset models. Lenovo too(think 2nd largest handset maker in China)..... So Apple and Samsung are the only ones making money? Tell that to Google, Lenovo and others...

AverageBear says

Nobody will be able to copy an INTC chip once it hits sub 20nm; whether it's processing power, energy consumption, wafer-yield....

Not right away at least. Intel has a huge manufacturing lead over competitors. Lots of folks who are not familiar with semi manufacturing just don't understand this.

Nobody has mentioned intellectual property issues either. Intel has a vast patent portfolio that could easily be used to negotiate better business deals, or to extract licensing revenue from competitors.

SFace says

What's happening in the near of medium term?

X86 is a failure for the mobile market and your CEO got an early retirement
gift. The design wins is just a hedge bet that some customers want a non-arm
based prodecessor. You basically have a high end Lenovo, a high end Motorola and
you know Intel had to undercut, so these design wins have miniscule margins.

How can you call INTC a 'failure' in mobile when the party really hasn't gotten started yet? Are you talking about US penetration? They are in cahoots w/ Google/Android/Motorola, and at the same time they are gonna kill TSMC. Not just in Mobile (smartphone/tablets)... x86 is not dead... more info to follow...

SFace says

If you would have held one year ago today.

You would have collected 90 cents in dividend
but lost $6 in capital.

and netted a $5 per share lost when the market went up 25% overall. Granted,
at $21, it's less risky then $27.

As far as free cash flow machine, I am estimating

10B - 11B in net income.
8B - 9B in non cash addback,
depreciation
(14B) in Capex and other investments
4B - 5B in FCF. 2013 is
a lot worst than 2012 and 2011. If the PC market weakens deeper, the FCF will
fall even short of that. Basically, any idiot can see income coming down 10-15%
and capex bumped up 10-15% so free cash flow will suffer.

The capex is a blessing and a red flag.

I did hold over a year ago, and I plan on holding on for many more. This is a long-term investment, where I'm at my accumulation phase. I'm going to love going over my #'s for Yield on Cost in another couple of years. Payout ratio for dividends is 41%. Even in a down year like 2012, INTC didn't even BLINK about dividends, and especially the buybacks. Server/DataCenter income is fine, growing slowly. PC chips market is slowly declining (NOT off a cliff), they are entering mobile,and sha-zam! they just entered a deal with Altera...

History has a way of repeating itself, and in this case, INTC is addicted to high margins. 2nd version, same as the 1st, baby... They will get that w/ the Altera deal, and probably other deals in the pipeline we don't know about, and will slowly squeeze out TSMC. After yesterday's news, we now know what INTC is doing w/ it's CAPEX and overcapacity... Yah, INTC is really worried about AAPL 'controlling' them. ;)

.....And finally, I'm getting to yesterday's news, via Seeking Alpha's Ashraf Eassa......

http://seekingalpha.com/article/1223651-intel-s-altera-win-is-a-big-deal

.........."At the close of the 2/25 trading session, Intel (INTC) and FPGA giant Altera (ALTR) announced that the latter would be leveraging Intel's upcoming 14nm tri-gate process for its future high performance programmable logic parts. While Intel had announced a couple of smaller foundry deals with a few FPGA startups, this is the first evidence that we have that Intel can actually score tier-1 customers with its foundry services.

So, just why is this Altera win a big deal?

Xilinx Could Be In Trouble

The most obvious implication is that Xilinx (XLNX), Altera's long-time rival, is likely to face some serious trouble at the high end of the FPGA spectrum. While the middle to lower end will apparently continue to be serviced by Taiwan Semiconductor (TSM) for both firms, it seems that at the bleeding edge, Altera just got an indisputable advantage.

Altera and Xilinx essentially run a duopoly in the programmable logic space. Sure, there are some smaller players like Lattice Semiconductor (LSCC), but these folks play in the very low cost, low power space in which bleeding edge process technology isn't all that important. At the very high end, these two giants, much like Nvidia (NVDA) and AMD (AMD) in graphics, are pretty much on even footing. They're about the same size and are always pretty competitive with one another because they are both fundamentally restricted by the same process technology.

Altera, however, has significantly disrupted this by signing on with Intel for foundry services. It will now have a 2-4 year lead over its nearest rival, which means that in a given area and thermal envelope, it can pack more transistors, which ultimately means a higher performance, higher ASP product.

Unfortunately for Xilinx, it will not be able to also sign on to Intel's foundry services as the agreement between Altera and Intel stipulates that Altera be the only major FPGA vendor to be allowed access to Intel's 14nm node technology. However, this makes perfect sense for what Intel is aiming for: strategic customers.

Intel Is Getting Paid For Its Transistors

Intel's management has been crystal clear that it does not want to fab for low margins; the company's transistor technology is far ahead of anything that the foundries have (no, "roadmaps" from the foundries claiming that they'll simply magically "catch up" don't count), so it wants to get paid a premium for the privilege.

The kinds of deals that Intel is making are obvious: find companies that don't directly compete with Intel that need an edge and, for the right price, give them the edge that they need. While I suspect that Intel's foundry margin is healthy and above what TSMC charges, I also believe that in the case of a duopoly like Altera/Xilinx, having the better transistor tech will allow the one paying Intel's premium to have significant pricing power over its competitor. If a company is locked out of Intel's fabs, there is literally nowhere else on the planet that can build similarly advanced chips -- talk about a competitive advantage!

Is There More In The Pipeline?

Intel has made it clear that there are more such deals in the pipeline, but that they would be revealed when the customers were ready to do so. If Intel really pushes this (and it looks like it's doing just that), then Intel Custom Foundry could be the secular growth engine that Intel really needs in order to shield it from the ups and downs of the PC market. Yes, Intel is expanding into smartphones and tablets, and yes the Data Center Group is growing nicely, but this could be a high growth, highly profitable division for Intel going forward, especially since it leverages existing infrastructure. We'll have to see how the numbers play out over the next few years, but it's clear to me that this is exciting for the long-term investor.

Why Intel Won't Fab For Competitors

Get it out of your head that there's any chance that Intel will fab for Apple (AAPL), Qualcomm (QCOM), or Nvidia (at least for mobile SoCs). While foundry margin is juicy, the margin obtained from design and foundry is juicier. It seems widely recognized that Intel's process advantage lead ultimately enables a significant competitive advantage in every area of semiconductors that require performance. PC processors, FPGAs, and GPUs, and so on are all clear beneficiaries of a manufacturing advantage. So, why not mobile SoCs?

Doesn't Wall Street understand that once Intel is able to leverage its process technology in these spaces that it will likely have a better product from a performance/watt standpoint than any of its competitors? This means that Intel will start stealing more and more design wins as it will soon be able to offer a better product (measured by performance/watt -- the key mobile metric) than any of its competitors, all of whom are stuck using the same exact fabs with the same abilities/limitations.

Why give that away for mere foundry margin? If Intel can really get its SoC processes materially ahead of its competitors then it will build the better mousetrap (I know this assumes that Intel doesn't botch its designs, but Intel is a world class CPU design house) at a better cost structure than its fabless peers, and ultimately can take significant share in the tablet/phone space and make more money than any of its peers while it's at it.

Intel wants to drive everyone else out of the market, and get into as many Apple and Samsung phones/tablets that it possibly can. The goal with regard to Apple isn't to build Apple's chips, but to convince Apple that Intel's chips are better and that spending all that money designing the A-series of processors just makes no sense. If Intel's SoCs turn out to be materially better than Apple's own homebrew, then Apple will have no choice but to ditch its own and hop on board the "Intel Inside" bandwagon. While I view this as pretty unlikely in the near term, that's the only scenario in which Intel builds phone/tablet chips for Apple.

Conclusion

I'm excited that this could be an opportunity for Intel to really grow its top and bottom lines over the longer term. A steady stream of income from the foundry business could completely supercharge net income/EPS, and ultimately keep the dividend-growth engine alive and well for years to come. That, my friends, is a really attractive prospect at today's 4.40% yield, although capital appreciation on the stock is still likely to be subdued in the near-to-medium term as these deals really won't start to pay off for a while. With the market looking toppy, and with smartphone hype in full force, you'll still have plenty of time to get in (or in my case, add)................."

I'm looking forward to how my INTC investment plays out....

AverageBear says

Intel's process advantage lead ultimately enables a significant competitive advantage

I think this is what you're buying. IMO Intel really does have the process nailed down in a way that other manufacturers don't appear to. nVidia for example produces tons of stuff that doesn't measure out in QC. So much that they ship it anyway and as a lower performing model (I know they do this with their video cards, some models are the same as the top model with dead cores).

With home PCs on the decline Intel doesn't have a have a killer product right now, but the idea is that if they are #1 in manufacturing expertise it's only a matter of time.

SFace says

http://finance.yahoo.com/news/quarterly-personal-computer-sales-decline-202342908.html

Intel may miss and guide down.

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As expected for the next couple of quarters... I take a tiny grain of salt w/ the IDC 'guesstimats'.... It's obviously bad news, but we already knew the trend. It's the acceleration of that trend that's gotten everyone's attention. We'll see Intel's #s soon enough...

Microsoft's drop today was more impressive. I'm not worried about Intel. They can make good money off of servers, and elsewhere.

INTC missed by a penny, and Mr. Market yawned....Weathering the storm pretty well, till the new chips, 4G LTE chips start shipping later this year into '14...

SFace says

* Intel benefited from a 16% tax rate, vs. 28%. That is 3 cents a share. Pre-tax income dropped a lot more than it looks.

* 500M in buyback. by far the lowest level in quite some time. Borrowed 6B dollar. It looks like buyback will slow to that level and below.

* Cap-ex plans reduced by 1B. It seems cap-ex is flexible depending on capacity/needs.

* second half growth story. Intel is quite optimistic about second half guidance with margins normalziing back into the low 60's. They were also optimistic this time last year too but the second half was bad.

* With Intel, the long term investment worry is really the slow commoditizing of chips into low cost anchored by ARM. Features are less important. The days of 65%+ gross margin may be a thing of the past. You can agree or disagree with new chips,. LTE whatever, that's just how I see it.

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I think that's a pretty fair assessment... As far as margins go, I can't speculate either. There are just too many 'moving parts' (PC chip sales, Server Chip Sales, Mobile (Atom) chip sales, amount of new mobile/tablet chip sales (ie, a new revenue stream), new foundry deals, etc. Commoditizing vs. the cost margins INTC DOESN"T have to pay for (foundry costs and ARM licenses)....

As someone who is long INTC, I'm cautiously optimistic about this quarter's #'s, becuase these quarters are supposedly 'the darkest before the dawn'. They are on the tail end of the 3 year effort to transition into mobile, and so far so good....During this time, they've kept and increased dividends, kept buybacks going (though recently at a slower pace), and the free cash flow is at a respectable level. I've been accumulating between $20.50 and $22, so I'm hoping for some good news (dividend growth and slow stable price appreciation) in the next 12 months...