Infineon - Intel's plan to acquire infineon's wireless solutions (WLS)in August, valued at approximately US 1.4B. WLS will operate as IntelMobile Communications, a standalone business division, and will expandintel'sd current wifi and 4g wimax offerings. The acquired tech willbe used in intel core processor based laptops and intel atom process based devices including smart phones netbooks tablets and embedded computers.
Intel Corporation (INTC) Stock Pitch
Intel Pitch October 21, 2012Michael Karp | TMT Portfolio ManagerJawwad Siddiqui | Senior AnalystAnson Kwok | Junior AnalystThis presentation is for informational purposes only, and is not an offer to buy or sell or asolicitation to buy or sell any securities, investment products or other financial product orservice, an official confirmation of any transaction, or an official statement of LimestoneCapital Investment Club. Any views or opinions presented are solely those of the authorand do not necessarily represent those of Limestone Capital.
1 Company Overview Company Description Business Model: World’s largest and highest valued multinational semiconductor chipmaker based on revenue and shipments. Intel designs and manufactures advanced integrated digital technology platforms. These platforms are sold primarily to original equipment manufacturers (OEMs), original design manufacturers (ODMs), and industrial and communications equipment manufacturers in the computing and communications industries. Revenue Sources: Most of revenues are from PC & data storage sectors but has been looking into future sources of revenue, purchasing a variety of software and services while developing new tablet technologies. Acquisition of McAfee (gaining McAfee’s DeepSAFE technology platform), Intel’s 2011 revenue for its software and services sector shot up 608%. Expansion Plans: Intel is also expanding their market share in the smartphone and tablet industries, building multi-year partnerships with Motorola and Google, optimizing the Atom chip for Android compatibility. Revenue by Segment Revenue Growth by SegmentOverview Thesis Macro/Micro Catalysts/Risk Valuation s
2 Company Overview Key Financials Management (MM except per share data) Name Position Background Share Price: $21.45 Paul S. Otellini CEO Managed several Intel businesses, including the company’s PC and server microprocessor Market Cap: 107,910 divisions. Past COO, Became CEO 2005. EV: 111,030 Revenue LTM: 54,530 David Perlmutter EVP, GM & Responsible for Intel’s platform solutions for all Chief computing segments including datacenters, Gross Profit Margin: 63.36% Product desktops, laptops, handhelds, embedded devices, Profit Margin: 20.94% Officer and consumer electronics Debt to Equity: 0.1473 Stacy J. Smith CFO Leads the worldwide finance organizations, and Dividend Yield: 4.14% oversees finance, accounting and reporting, has Historical Beta: 1.01 previous experience in Finance, Sales and Marketing, and Information Technology Intel Annotated Performance YTD Q3: Stock price has sustained decline due to lowered revenue forecast by Intel due to economic uncertainty. Q4 & Onwards: High CAPEX on new products being released. Aug. 12, 2012: FY2011: Beat all-time earning Buffett sells stake in records, $12.9 MM net Intel. Share price income, $54 MM revenues. dropped negligibly. Overview Thesis Macro/Micro Catalysts/Risk Valuation s
3 Investment Thesis Argument 1 : Stability and industry dominance unaffected by macro factorsMacroeconomic uncertainty does not bar rapid growth in global semiconductorindustry. Intel consistently has best gross margins, strong dividend yield, and astrong balance sheet from extremely low debt. Argument 2: New products pave the way for partnershipsClover Trail opens opportunities for new partnerships with companies such asLenovo, HP, Dell, Samsung, Acer, ASUS – leading to increased market share.Haswell architecture release in 2013 will help to increase efficiency and grossmargins for Intel as it releases future platforms and semiconductors Argument 3: ValuationUndervalued on a EV/EBITDA, EV/Forward EBITDA, and EV/EBIT basiscompared to peers.Overview Thesis Macro/Micro Catalysts/Risk Valuation s
4 Macro & Micro Outlook Macroeconomic Concerns• Despite global macroeconomic uncertainties (Eurozone crisis), global GDP growth, and economic slowing in BRIC countries, demand remains strong for semiconductors in applications such as smartphones, media tablets, and automotive electronics• Short term spending fueled by QE3 in the United States leads to higher sales in luxury goods such as electronics. This effects demand for Intel’s products positively. Industry Outlook: Industry Growth: According to IDC (International Data Corporation), semiconductor revenues will grow 4.6% in 2012 to $315B. From 2011 through to 2016, revenues are projected to grow at a CAGR of 4.8%, reaching $380 billion in 2016. Revenues from computing industry segment projected YOY growth of 1.5% for 2012 and CAGR of 3.7% for 2011-2016 forecast period Semiconductor revenues for mobile PCs projected YOY growth of 5.9% & 2011-2016 CAGR of 9.6% Windows 8: High expectations for the launch of Microsofts Windows 8 operating system and next- generation smartphones later this year, will accelerate semiconductor revenue growth in 2013 and beyond Supply constraints on semiconductor products are easing as foundries are bringing more capacity onlineOverview Thesis Macro/Micro Catalysts/Risk Valuation s
5 Catalysts & Risks Catalysts Clover Trail (new chip): Intel’s eventual release of Clover Trail will allow them to retain a higher portion of the tablet market share Prior to Clover Trail’s release, Intel has already secured deals with Samsung, Dell, Lenovo, HP, Acer, ASUS and other firms are already in the process of building Clover Trail tablets. Clover Trail is already present in hybrid laptop tablets such as the Dell XPS Duo 12 and Samsung Series 5 Slate. Intel says over 20 tablets are in the works right now, which will greatly increase Intel’ future profits. New Architecture for Chip Production: The Haswell release in 2013 could help to greatly increase efficiency and gross margins for Intel as it releases future platforms and semiconductors High FCF & Revenue Growth: Will allow them to produce architecture effective enough to dominate the smartphone and tablet markets Acquisitions: Intel’s recent acquisition of McAfee gives them access to a brand new sector of revenue, as they can continue to expand their presence in the security software market with various forms of integrated platforms Risks High start-up costs with Haswell Architecture: Initial start up costs with the 14nm ramp, capital expenditures costs associated with the Haswell microarchitecture and the release of Clover Trail Market Forces: Material slow-down in data centre demand could lead to reduced profits Cannibalization: Increasing tablet cannibalization of the PC market, specifically tablets running ARM microprocessors and architecture ARM: Competing with ARM, who still dominates both the smartphone and tablet market, could lead to degrading margins and profits or an inability to effectively enter the market Overview Thesis Macro/Micro Catalysts/Risk Valuation s