Every Intel employee, leader and board member needs to answer to the questions raised here
https://youtu.be/KPbZs0kJhsA
5 replies (most recent on top)
Party like it’s 1998!
The last time Intel stock was at this level.
Absolutely incompetent management to add 0 value over 25 years.
Their 5 node science projects don’t mean sh!t without capital.
“Gross Profit Margins are Worse than Stated
But it’s much worse than the first blush, as there were meaningful accounting adjustments and an insurance adjustment to prop up the current quarter’s profit margin. There was a ~170 bps improvement to gross margins from insurance, meaning their core gross margin was closer to ~37% this quarter.”
“… the accounting change to improve depreciation was moving the useful life of equipment from five to eight years. That reflects the change of business model to IDM 2.0, and while tools do last a long time, this is a pretty egregious accounting lever to pull to improve gross margins.
Taking their annual depreciation of ~11,128 million, assuming that is for five years to get the approximate total asset base, and then dividing that number by eight, gets us to annual depreciation of ~6,900 million a year. They said it would reduce total depreciation by ~4,200 million in 2023, and this calculation gets us to ~25% gross margin for 1Q 2023. This implies a 25% Q1 2023 gross profit margin.”
“This is frankly out of the realm of imagination for Intel. I would never have thought this could be possible, yet here we are. They ramp up a huge amount of capital for future projects while losing massive market share during an intense drawdown. ”
“PC TAM Delusions
The most confusing part of the entire story is the PC TAM. Dylan did a great job discussing the unreasonable TAM expectation of ~300 million units. I think that is the part that is terrifying about Intel. They still believe in the 300 million unit estimate, while everyone disagrees. It’s Intel in the wrong here.
Intel is clinging to 300 million units, similar to how it’s clinging to its dividend. Why? I have no idea.”
“Intel is “D-mb Capital” with the Dividend and Capital Structure
Intel got asked why they are paying a dividend this quarter, which is the first time they have ever been asked that question, and what’s worse is their answer. A complete stonewall.
How can they use the words smart capital when they are paying a ~5%+ annualized dividend while burning cash into the foreseeable future? It feels downright delusional. If they cut the dividend, I think the stock would go up, yet they continue to cling to the dividend.
Intel had negative ~$9.4 billion in free cash flow in 2022. They are paying ~$6 billion in dividends a year. They have ~$11 billion in cash at year's end, which will quickly be burnt this coming year. Remember, their original aspiration was burning ~$1.5 billion this year and being FCF breakeven for 2023 and 2024. They will burn through their cash balance at an accelerated rate with the dividend.
The 2029 tenor of bonds is yielding 4.5%, yet the equity is yielding 5.5%. I don’t understand why they would let this happen to the capital structure; frankly, the debt looks absurdly priced. I think the debt is an interesting short if you can do that.
Right now, Intel’s capital structure is almost a ponzi scheme. They are borrowing debt to pay out equity to investors. I understand the fear of dividend funds being forced to sell Intel stock, but this is not sustainable, and as Intel gets more levered, they are screwing over their future even worse.
Intel still has an A+ debt rating, but this will have to drop at some point. This a reminder that they are burning cash and will have meaningfully negative EPS for the coming future. How do you feel comfortable issuing debt against a capital-intense business in turmoil with no visibility to profit for at least two quarters?
We have seen this story play out in equity markets over and over. The unsustainable dividend always breaks. I’m reminded of this amazing quote.“
https://www.fabricatedknowledge.com/p/intel-is-the-antithesis-of-smart
If Intel is so done, why are you wasting your time here bashing it? Clearly Intel is living rent free in your heads for you to be so obsessed with it everyday.
Pat and ELT are talk talk talk.
Intel has fundamental existential problems.
They want to compete with giants while at the same time shrinking? It just does not compute.
You can talk about your fairy tale nodes all day long, but when you lack the capital to actually deliver those in a cost competitive manner, you are absolutely DONE.
There is simply not enough money to run against TSMC, let alone Samsung.
The industry has moved on from Intel. Let’s get real. The leaders are very clearly TSMC and their customers like Apple, AMD, Nvidia and Qualcomm. There’s a reason Warren Buffett invests billions in TSMC and Apple and not Intel.
Lol I was just watching this.
The logic is irrefutable.
Intel is so done.