Intel Is Down – Not Out (NASDAQ:INTC)


Intel is one of the true heavyweights in the semiconductor industry .

I own Intel (INTC) in my personal accounts as well as in my Investors Edge ® subscriber model portfolio. I also own Taiwan Semiconductor (TSM) and Tower Semiconductor (TSEM) in both.

I would like to discuss with you why I think Intel is a sleeping giant ready to regain its territory. I will not be comparing AMD’s (AMD) 7nm, 8 core laptop products with Intel’s 10nm, 4 core Ice Lake or the 14nm 6 core Comet Lakes offering or discussing clock speeds and heat signatures and such. You can read this in any of a dozen articles at various sites likely posted the same day you read this.

Nor will I discuss the virtues or shortcomings of silicon versus silicon carbide versus gallium nitride et al. There are hundreds of articles (and thousands of comments) that already reach deep into the weeds to shed light on why company X or company Y has the best chance of owning this space in the short term.

I offer instead a view on the investing merits of Intel. Of course, these are affected by staying on the leading edge of product development, but also by the strength of a firm’s marketing team, their reputation and longevity in delivering top-quality product, their ability to attract and retain top talent, their senior managers, national policies, global politics, and the depth and breadth of their R&D capabilities. These are the company-specific issues I am interested in.

To these I add the valuation metrics for the stock itself. It is easy to get lost in those weeds above, forgetting that we are trying to make great investments here, not out-shout someone about a particular chip or other product.

Yes, Intel stumbled when they announced they were behind schedule on delivering their new 7nm product. Whoopee-do. Companies announce delays all the time.

Is this a death-knell for Intel? No. Is it a wake-up call? Yes. And if the problem is one of manufacturing capacity rather than significant design flaws, there are other firms Intel can sub-contract to in order to get quickly up to speed.

I almost never buy 100% of my position at once. I am happy with a relatively small 350 shares for now. If it goes down, and the metrics I use to analyze a company remain the same or improve, I will buy more in additional tranches. If it goes up, I do not marry any stock. As it rises, I will place trailing stops.

MANAGEMENT AND WORKFORCE

This seems to be a very big concern of commenters and authors on this and other sites. The big knock against Intel’s CEO, Bob Swan, is that he is a “finance guy,” having been promoted from the Intel CFO position, not an engineer. The question seems to be, “How can he run a semiconductor company when he doesn’t understand the intricacies of the physics and engineering characteristics of the product?”

My answer is simple. I do not know Mr. Swan, who may or may not be a skilled CEO, but I know that there are hundreds of other executives who are fine leaders, keen judges of talent and excellent delegators.

Warren Buffett was never a railroad executive, bricklayer, candy-maker or fast-food executive. Yet Berkshire Hathaway’s 100%-owned Burlington Northern, Acme Brick, See’s Candies and International Dairy Queen seem to be doing just fine.

Chuck Schwab had never run a discount brokerage firm when he saw an unmet need 1975, the year the SEC began to allow negotiated commission rates.

I could name hundreds of other fine executives and strong entrepreneurs who succeeded in areas they knew little about or in evolving areas, like discount brokerage, that no one knew anything about.

How did men and women like these succeed? They knew their own strengths and their own weaknesses, and they surrounded themselves with talented individuals to do the things they were not good at. (Okay, maybe Chuck missed one or two since he added my little firm to his stable with nothing more than a handshake. Hey, everybody’s entitles to the occasional mistake!)

Let’s take a look at some of the senior folks at Intel. First, a couple board members:

Chairman of the Board: Dr. Omar, CEO and Chairman of Medtronic (MDT), a global leader in medical technology, from 2011 until April of this year. Ph.D. in electrical engineering.

Director: Dr. Tsu-Jae King Liu, Professor, Electrical Engineering and Computer Sciences and Dean of the College of Engineering, UC .Berkeley. Holds more than 90 patents. Current research focused on nanometer-scale logic and memory devices, and advanced materials, process technology and devices for energy-efficient electronics.

Director: Alyssa Henry, who oversees global engineering, product management, design, sales, marketing, partnerships and support for e-payment firm Square Inc (SQ). She was previously vice president of Amazon Web Services Storage Services (AMZN)and at Microsoft (MSFT) working on databases and data access technologies in a variety of engineering, program management and product unit management…



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