INTC is getting into the “any fool can make money off of” territory.
In spite of my low opinion of the management (and knowing that “when bad management meets a good business, management wins”) - it’s hard to ignore the financials.
So, inspite of being 50+% down on my OTM calls, I will nibble at these prices.
problem with buying options here is two fold…you don’t get the dividend, and the turnaround might expire long befoe this occurs…
i don’t see why you think management sucks…because the missed the mobile wave?
someone showed me that gangnam style nonsense. wasn’t funny and the song sucked. no idea why stuff like this catches on.
Should have made clear - I went back to buying the stock.
I think management sucks because they are just not good capital allocators and have no clue what to do with software companies that they acquire (this is through personal experience, but also look at recent announcement of McAfee layoffs. icc (Intel C compiler) was technically far superior to gcc and open source tools but went nowhere. They acquired Dialogic which they had to spin off.) In general, they should stick to what they know best - IA32/IA64 architecture and process improvements.
To be fair, they are returning money to shareholders with dividend and buybacks even as they go on stupid buying sprees, so it’s not all bleak.
This has to be a genetic defect among value investors. Seriously guys stop bargain hunting among beaten down firms. Look for firms that are emerging, and gaining in strength and market share…they’ll be more valuable and won’t kill in you in the short term.
But to each his own…
Everything is a deal at some price, growth or value, beaten down or king of the heap.
I think Intel is approaching that price, along with Guess Jeans and Dell.
STX (Seagate) was at that price a year or so ago. At that point, precise fundamentals (beyond “going concern” assumption) are almost secondary.
honestly i got sucked into INTC through the financial figures first…i don’t know crap about chips/technology and just starting to read about it now…so i am definitely speculating here but certain pieces of the puzzle make sense to me
size/scale matters - INTC has resources. I can figure out a way to stop ARM holdings. its called buying them out. yes, its not efficient and a dumb solution but a solution nonetheless but the point is they have the resources to reproduce ARM’s assets. Try taking out google.
certain problems require time and/or money to solve. people just jumped off this ship in the past quarter and analysts have all downgraded them with their 12 month forecast of PC shipments. thing i know is, those guys don’t think past 12 months and the stock can hit values where if you forecast out far enough and have some patience, it might make sense.
^ I think the issue is complex, but to hit on a few points:
I think to simply view it as an issue of money is misleading, you’re right that Int can pour enough money into the business and develop a line of processors that will compete well with ARM, but overall, Int won’t necessarily have the market share that it had earlier, it’s possible it will simply be one of many processor developers. (I don’t see any network effects with processors)
The movement seems to be towards weak, cooler, cores, whereas Int has focused on strong, hot, cores, the end result being weaker margins as well, so the profit margins Int has had historically can’t be counted on in the future.
It’s possible that Int can focus on developing a niche in powerful processors for servers, but it will be a smaller market with a niche focus and Int doesn’t seem to be taking that route.
I think Intel can be competitive in the future if they focus and manage the transition well, but how strong it will be is an open question. I think you need to get a decent picture of that AND have confidence that the management is on the same page.
I know you don’t consider this a serious option, but buyout is definitely out of the question as ARM has refused to sell.
I think Intel is good to study and follow and can become a potential long position down the line, but I don’t think the case is very convincing.
The rest of your points are valid but I will take issue with this one. Whoever controls the processor controls the chipset. Intel doesn’t just sell Pentium (and derivatives), it sells a complete chipset including the north bridge, the south bridge and so on. Plus if you want MS Windows you need Intel (till recently, MS has announced they will make Windows for ARM but it’s still vaporware.)
^ The cheaper Surface model is getting ARM. I agree it’s not a big impact to Intel and still doesn’t actually exist yet, but you can see how it can be a starting point for one.
you guys certainly know the technicalities of the products a lot better than I do…but ultimately, I think what will happen in terms of how it happens its unknown…you can find literally 1000’s of articles on chip processes and what works and what doesn’t…so debating those issues is a non starter for me especially since I don’t even know what a transistor is really…
I’m placing my emphasis on INTC’s scale, know how and general industry economics…their financials are solid…I want to see how a company like this loses…
Palantir, if you apply the same type of analysis you did on PH, Neustar etc, you might find INTC is more undervalued, the problem is you might know too much about INTC whereas you know a lot less than you think on those other companies…
Frank, no one disagrees that it is cheap. The question is how is it going to do in the future? Are you willing to wait for 5 years while it executes a transition? (GD is cheap too right?)
We could see a successful business down the line or we could see HPQ v2.0. I think it’s a bad idea to focus on the fact that it is cheap.
When you look at the numbers, do you see a strong or weak company? they’re not a laggard in the industry they’re the leader…I hope i don’t have to wait 5 years but getting a 3.5% dividend (i bought initially at 24.75) is not the worst thing that can happen…I don’t have the capability to tell you what INTC is going to do to combat this industry threat, i really don’t know but with $10 billion dollars, i think there might be a solution…i saw an interesting presentation by INTC on data centres suggesting that mobile phones isn’t the only thing out there…apparently people need chips to run all these clouds…
its not fair to compare them to HPQ…HPQ is not just facing industry headwinds, its a problematic company to begin with…management has changed hands how many times over the past 4 years? their margins are razor thin and they don’t have any financial flexibility…their competition is neck and neck with them in terms of size…INTC’s competition is 1/10th of their size
GD is in another industry altogether, but I take INTC over GD…i’m actually planning on selling GD and buying more INTC, TEVA, AIG, etc…
bottom line is, i don’t think you have to do much forecasting for INTC they’re effectively priced as a no growth business over time so its much easier than buying something like a GOOG for me…
Let me know how it works out then. I personally already own a cheap tech giant which is facing similar headwinds to Intel (MSFT), so I’d prefer not to take on another one at this point, hence I’m trying to spread my bets by looking at emerging firms that are also good values.
More famous guys own MSFT…i have benn scannning the portfolios of gurus and MSFT definitely came up more often
Getting cheaper by the minute. I am not a trader but the very short-term optimum time to get in would be when it shows a small uptick.
OTOH I’ve pretty much lost all on the $30 Jan 14 calls, so I may sell those in a few weeks and harvest some tax losses.
there is still ample time for the stock to hit 30 by Jan 14. New chips are being brought out by mid 2013 so who knows. Me personally, I think it’ll take a couple years but you get paid to wait.
if you take away all the tech lingo etc, a key concern is behind their vertically integrated foundry model vs. the fabless outsourcing production model of ARM.
i don’t see INTC getting crushed and at these levels, its attractive. Same thing goes for MSFT.
1recho - register at this website if you want to discuss ideas: http://www.cornerofberkshireandfairfax.ca/forum . Frankie and I post there.
^ will do.