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0:00
Hello and welcome
to the next talk in
the Henry Stewart Talks
business cases collection.
Today's talk is
about Valuing Intel.
I'm Dr. Michael McDonald.
I'm a Professor of Finance
at Fairfield University in
Fairfield, Connecticut,
and I'm pleased to be able to
talk about this subject with you.
0:17
You may be familiar with Intel.
Intel is historically one of
the dominant companies
in the computing space.
Specifically, they were the
biggest manufacturers of
CPUs, which are
foundational to computers.
Whether it's laptops,
desktops, or servers.
Intel historically
has been one of
the dominant semiconductor
companies in the world.
But in the last few years,
particularly since COVID,
Intel has had a run of,
you might call it bad luck
or poor business outcomes.
Essentially, at this stage,
Intel is a turnaround and
capital-allocation story.
Let's take a look
at what that means.
1:02
When I look at Intel's
revenue trends,
we see is that in 2019,
the firm had about 72
billion in revenue.
You'll see this is the
income statement for
the five-year period leading
up to the end of 2025.
It covers all of 2024,
2023, 2022, 2021, and 2020.
You'll see that in 2020,
they had about 77 billion
in total revenue.
By the time you get to 2021,
they're at about 79
billion in total revenue.
That's the peak.
But in comparison to almost
every other company
on the planet,
look what happens
to Intel's revenue
as we move through
the next few years.
It goes from 63 billion, to
54 billion, to 53 billion.
In other words, there's a
sharp post 2021 correction
and yet at the same time, when
we look at the next line,
the total operating expenses,
we see those operating
expenses don't go down;
if anything, they go up.
By the time we get to 2024,
Intel's total
operating expenses are
64 almost 65 billion versus
a revenue of 53 billion,
leading to a negative
operating income.
Operating income had collapsed
from 23, almost 24,
billion in 2020
to zero essentially in 2023
and then turns dramatically
negative in 2024.
Now we've talked about Intel
in previous talks and
why this occurred.
But in a nutshell, it was
essentially a function of
Intel's new CapEx
plans and the reality
that the company had
to invest heavily
in order to maintain its
leadership position.
The problem becomes
this takes away
from Intel's ability
to fund the business,
and it takes away from
Intel's ability to
maintain consumer and
particularly investor confidence.
You see that playing out
over the last few quarters.
