Describe about the Corporate Information about Intel Corporation?
Intel Corporation is an American-based company. The company has its headquarters at Santa Clara. This company is regarded as the world’s largest semi conductors chip manufacturing company. This award was rewarded based on the revenue numbers of the company. The Intel Company, from the past many years, has been engaged n supplying processors for the company to many renowned companies including Apple, Samsung, etc. This company was founded in the year 1968. Till date the company has been engaged in manufacturing multiple devices related to computing and communications which include motherboard chipsets, network interface controllers and integrated circuits, graphics chips, flash memory, embedded processors, etc. The management of the company in the early 90’s have realised to growth in the IT industry and based on this; the company has made the big investment on chip manufacturing. The company in the early 1980’s manufactured DRAM and SRAM memory chips. This inventory catered their major revenue in those years. Further, in the year 1971, the company manufactured the world’s first commercial microprocessor chip. The management of the Intel Company has currently started their research work on electrical transmission and generation. The Company has recently developed the 3D transistor that will work in the energy efficiency and performance stream.
The management of the company focuses on striving the transparency in how the company carries out the business. They consistent believe in interacting with their stakeholders and informing them about the performance of the company.
The Intel Corporation is the world’s largest semi conductors chip manufacturing company. The company operates through six segments with one competitor each for every segment.
|
Operation segments for Intel Corporation |
Competitors |
|
PC Client revenue and operating segment |
IBM |
|
DEG microprocessor segment |
Microchip Technology |
|
DEG chipset |
Advanced Micro Devices (AMD) |
|
Data centre group segment |
Avago Technologies |
|
Flash memory segment |
Microchip Technology |
|
Software services group |
Symantec |
The Intel Company has been placed very nicely in the industry. In the present day, the Intel Company is the largest chip processor in the world, in terms of the revenue.
In the recent times, the management of the Intel Company has acquired Altera Corporation. This acquisition has been regarded as the milestone for the success of the company going forward.
Further during the current year, the company declared a cash dividend of 24% n its common stocks. In terms of dollars, the dividend amount comes close to 96 cents per share.
The management of the company decides to make an investment worth $50 million to make advancement in the Quantum computing. For this advancement, the Intel Corporation has entered into ten years collaborative relationship with the Delft University of Technology for carrying out the research work.
In the recent times, the US court finalises the law suit for the tech workers. In this case, workers have accused the Intel Corporation and other big companies of poaching each other’s employees, thus limiting job mobility.
Further, the Intel Company decides to make an investment worth $5 million in the coming five years to develop its engineering relationship with Georgia Institute of Technology.
The top management of the Intel Corporation plans to invest $300 million to increase the diversity levels within the company and within the Tech Industry.
The management further plans to increase their hiring levels in the coming years with proper retention plans for the exiting employees.
The Corporation announces future joint efforts with Google to manufacture low price power ultra notebook on Android platform.
The stocks of Intel Corporation are listed on NASDAQ. Currently, the stock of Intel Corporation is trading at $29.75. The market capital of the company stands close to $140.44 billion. There have been consistent ups and downs in the stock prices of the company. Especially in the year the 2009, the stock prices of the company dipped down to close to $12. However, after that dip, there has been consistent growth to the stock. There has been little fluctuation in the prices, but the same is consistently moving an upward direction. The company is very consistent with providing the dividend to its shareholders. In the past dividend history, it is noted that the company has declared dividend 4 times every year. From the past three years, the company is declaring dividend worth 0.225 dollars every quarter.
Ratio Analysis of Intel Corporation
Ratio analysis is being used a technique for financial statement analysis purposes. It is being used to understand the financial performance and position of the company. The management of the company can use it for understanding the movement of the company over the prior periods. These calculations are being used by the stakeholders and shareholders to understand and analyse the financial position of the company and use the same for decision making purposes at times of investment.
The financial ratios of Intel Corporation’s for the year 2013 and 2014 are as follows:
|
Profitability |
2013 |
2014 |
|
Tax Rate % |
23.72 |
25.93 |
|
Net Margin % |
18.25 |
20.95 |
|
Asset Turnover (Average) |
0.6 |
0.61 |
|
Return on Assets % |
10.89 |
12.7 |
|
Financial Leverage (Average) |
1.59 |
1.65 |
|
Return on Equity % |
17.58 |
20.51 |
|
Return on Invested Capital % |
14.27 |
16.57 |
|
Liquidity/Financial Health |
2013 |
2014 |
|
Current Ratio |
2.36 |
1.73 |
|
Quick Ratio |
1.12 |
1.15 |
|
Financial Leverage |
1.59 |
1.65 |
|
Debt/Equity |
0.23 |
0.22 |
|
Efficiency |
2013 |
2014 |
|
Days Sales Outstanding |
25.67 |
26.16 |
|
Days Inventory |
76.71 |
76.07 |
|
Payables Period |
51.61 |
51.5 |
|
Cash Conversion Cycle |
50.77 |
50.73 |
|
Receivables Turnover |
14.22 |
13.95 |
|
Inventory Turnover |
4.76 |
4.8 |
|
Fixed Assets Turnover |
1.77 |
1.73 |
|
Asset Turnover |
0.6 |
0.61 |
|
Market Value |
2013 |
2014 |
|
PE ratio |
9.015 |
13.56 |
|
Price to Book ratio |
2.064 |
2.304 |
(Source_ Financial Morningstar)
The financial performance of the company has shown large foot steps towards success. The revenue of the company has increased tremendously over the period of last five years. The major jump in the revenue has increased by nearly 30% in the year 2010, after that year, the sales have increased by 5%-8% every year. With the increase in the revenue numbers of the company, operating expense of the company has also increased. In spite of these facts, the management of the Intel Corporation can maintain the net profit of the company above20% level.
Looking at the above ratio, it appears that the company maintains a strong financial stand. The Current ratio reflects the current liabilities of the company in terms of its current assets of a business. This ratio checks the ability of the firm to cater out its debts over the coming period of 12 months. The market liquidity and firm’s ability to meet out the demands raised by creditors is indicated by this ratio. In the case of Intel Corporation, the current ratio stands at around 170% in the year 2014. This ratio has although decreased from the prior periods. On the other hand, the quick ratio keeps a track on the liquidity of the company. This ratio checks the ability of the company to meet out its short-term obligations through the help of its liquid assets. In the case of Intel Corporation, the quick ratio stands at around 115%. These ratios are maintained on a considerable basis, in comparison to last years. The company has maintained the gross margin ratio close to 60% over the last five years. However, there have been some fluctuations in the net profit of the company but still the management of the company are able to maintain the ratio above 20%. The return of total asset stands near to 11% which shows the return the company is expecting on its total assets. There have been some fluctuations in the initial years but since past 3 years the ratio is consistent enough. However, there has been an increase in the debt equity ratio of the company. The debt-equity ratio stands close to 5% by the year 2010 but after that year, the ratio increased consistently and reached to 22% by 2014. Although the sales of the company have increased over the period of last five years but still the company is able to maintain the inventory turnover close to 4.5. For these manufacturing companies, it is important for them to maintain a proper cash rotation. Intel Corporation in this case, is far ahead from other companies. The cash conversion cycle stands close to 50 days for the past 2 years. This is more important being in this period, the sales of the company has witnessed huge growth. The PE ratio of the company also stands on a higher side. The company is expecting to have its PE ratio close to 13.76% by the year 2016. The company on the other hand is very well in maintaining the inventory level. Despite to the fact that the company’s sale has increased over the period, the day’s inventory stands near to 80 days.
Avago Technologies is regarded as the biggest competitors of Intel corporations. This company is incorporated in Singapore and has its headquarters in both Singapore and in California. This company is also engaged in manufacturing of the semiconductors segment. Avago Technologies is listed on NASDAQ stock exchange. The company in the year 2013 acquired LSI Corporation which acted as a milestone for the company and helped them to enter into the industry which will help them in entering the manufacturing line of chips etc. The company by the year 2014 became the world’s ninth largest semiconductor company. The company further sold the LSI’s Axxia Networking business to Intel Corporation for $650million.
|
Profitability |
2014 (Avago Technologies) |
2014 (Intel Corporation) |
|
Tax Rate % |
9.65 |
25.93 |
|
Net Margin % |
6.16 |
20.95 |
|
Asset Turnover (Average) |
0.61 |
0.61 |
|
Return on Assets % |
3.78 |
12.7 |
|
Financial Leverage (Average) |
3.24 |
1.65 |
|
Return on Equity % |
8.58 |
20.51 |
|
Return on Invested Capital % |
6.13 |
16.57 |
|
Interest Coverage |
4.11 |
— |
|
Liquidity/Financial Health |
2014 (Avago Technologies) |
2014 (Intel Corporation) |
|
Current Ratio |
3.77 |
1.73 |
|
Quick Ratio |
2.35 |
1.15 |
|
Financial Leverage |
3.24 |
1.65 |
|
Debt/Equity |
1.68 |
0.22 |
|
Efficiency |
2014 (Avago Technologies) |
2014 (Intel Corporation) |
|
Days Sales Outstanding |
51.3 |
26.16 |
|
Days Inventory |
61.34 |
76.07 |
|
Payables Period |
60.5 |
51.5 |
|
Cash Conversion Cycle |
52.14 |
50.73 |
|
Receivables Turnover |
7.12 |
13.95 |
|
Inventory Turnover |
5.95 |
4.8 |
|
Fixed Assets Turnover |
4.69 |
1.73 |
|
Asset Turnover |
0.61 |
0.61 |
|
Market ratio |
2014 (Avago Technologies) |
2014 (Intel Corporation) |
|
PE ratio |
27.01 |
13.56 |
|
Price to Book ratio |
4.547 |
2.304 |
(Source_ Financial Morningstar)
There has been a jump in the share prices of Avago Technologies. The stock prices were near to $56 by the year 2014 but by the end of the year 2015 the same reached to $119.
By looking at the financial ratios of Avago Technologies, it looks like a fluctuating company. The financial position of the company is not stable. The movement in the net profit ratio speaks the same. This is not only the case with the net profit ratio of the company but even the gross profit ratio of the company is not stable. There have been consistent ups and downs in these ratios, making it difficult for the investors to judge the financial performance of the company going forward. The revenue of Intel Corporation is 10 times higher than the revenue of Avago Technologies. However the company is growing and the increase in revenue numbers by 60% in the year 2014 as compared to 2013 speaks the company’s performances. Being Intel Corporation’s turnover s very much higher than Avago, still the management of Intel is able to manage the net profit and Gross profit levels of the company on a higher side and most importantly consistent over the years. The GP ratio of Avago Technologies is although improving over the period and by the year 2014; they are able to manage the GP ratio close to 44%.
The shareholders of the company are interested in knowing the return which they would be getting for the investment they have made in the company. They are likely to make investment in the stock whose return is higher and most importantly consistent in nature. In the case of Avago Technologies, the return on equity is not consistent and in the year 2014, the same has fallen to 9%. Whereas in the case of Intel, the return on equity is consistent and stands close to 20% over the period of last 5 years.
In terms of the financial health of the company, the Avago Technologies current ratio stands close to 300%, and the quick ratio stand near to 200%. However, in case of Intel Corporation, the current ratio stands close to 170%, and the quick ratio stands near to 115%. However, the dependence of Avago Technologies on the debt for meeting its operations is relatively on the higher side than Intel corporations. The debt-equity ratio in case of Avago Technologies stands close to 170% which is on a higher side.
The shareholders of the company are interested in knowing the return which they would be getting for the investment they have made in the company. They are likely to make an investment in the stock whose return is higher and most importantly consistent in nature. In the case of Intel Corporation, the return is on the higher side. Further, the corporation is providing dividend on a regular basis that is the most requirement to attract the shareholders. The stock prices of the Corporation are also increasing on a regular basis. Looking at the financials of the company, it is evident that the company has a strong financial background. The company is relying more on equity for carrying out its operations rather than on debts but in recent years, the debts portion has increased but still the same is manageable.
For the investor, Intel Corporation is an ideal company. The company as adequate investment plans for its future. The company is looking to increase its line of business and has recently announced future joint efforts with Google to manufacture low price power ultra notebook on Android platform. Further, the top management of the Intel Corporation plans to invest $300 million to increase the diversity levels within the company and within the Tech Industry.
Thus looking at all these points, the investor should decide to make the investment in the stock of Intel Corporation.
References
Intel Corporation, Corporate Information about Intel Corporation, viewed on 17th Jan 2016 https://www.intc.com/corpInfo.cfm
Reuters, Key Developments: Intel Corp (INTC.O), viewed on 17th Jan 2016, https://in.reuters.com/finance/stocks/INTC.O/key-developments
Intel Corporation, Intel CEO Outlines Company’s Plans to Lead Future of Computing, viewed on 17th Jan 2016 https://newsroom.intel.com/community/intel_newsroom/blog/2011/09/13/intel-ceo-outlines-companys-plans-to-lead-future-of-computing
Stock prices of Intel Corporation, viewed on 17th Jan 2016, https://www.marketwatch.com/investing/stock/intc/analystestimates?CountryCode=US
Financial Morningstar, Financial ratios of Intel Corporation., viewed on 17rd Jan, 2016, https://financials.morningstar.com/ratios/r.html?t=INTC
Financial Morningstar, Financial ratios of Avago Technologies., viewed on 17rd Jan, 2016, https://financials.morningstar.com/ratios/r.html?t=AVGO
Avago Technologies, Background of the company, viewed on 17rd Jan, 2016, https://www.avagotech.com/
Annual report of Avago Technologies, Annual report 2014, viewed on 17rd Jan, 2016, https://www.annualreports.com/Company/avago-technologies-limited
Annual report of Intel Corporation, Annual report 2014, viewed on 17rd Jan, 2016, https://www.intc.com/intel-annual-report/2014/files/Intel_2014_Annual_Report.pdf
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