27 Comments
Aug 2, 2022Liked by Dylan Patel

I remember during the height of GFC, one of the conditions for FED to rescue big Wall Street banks is that they were not allowed to pay dividends or buy back shares until the payout is paid back in full. I guess tech companies (and their shareholders) are treated with special favour.

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This article is so damn accurate! The thirst for quick executive handouts will be the undoing not only of Intel, but America as a country as well.

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Wow! I have never seen Dylan as animated as he is with this article. Clearly shows his frustration with Intel. Pat probably spent too much time in DC to get the CHIPS act done and lost focus on his company's trajectory in Q2'22. I think Intel is having too many balls in the air here. I'm wondering if Intel would be better off by spinning off its Fabs just like AMD did with Global Foundries. Or perhaps its too late for that now.

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I'm re-reading this now and would also like Intel to invest more instead of paying out dividends. But can anyone comment on what what happen to intel's stock if they suspended their dividend? They're price over earnings is already very low (Intel hovers around 9, while AMD is around 40). Couldn't Intel (and their employees) lose some, perhaps more, in market value than than they're paying out if their stock wasn't paying a dividend. I honestly don't know, but that must be a consideration of the board and Pat.I'm re-reading this now and would also like Intel to invest more instead of paying out dividends. But can anyone comment on what what happen to intel's stock if they suspended their dividend? They're price over earnings is already low (Intel hovers around 9, while AMD is around 40). Couldn't Intel (and their employees) lose some, perhaps more, in market value than than they're paying out if their stock wasn't paying a dividend.

I'm no fan of the financial engineering culture of buy-backs and what not, but that must be a consideration of the board and Pat.

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I'm re-reading this now and would also like Intel to invest more instead of paying out dividends. But can anyone comment on what what happen to intel's stock if they suspended their dividend? They're price over earnings is already low (Intel hovers around 9, while AMD is around 40). Couldn't Intel (and their employees) lose some, perhaps more, in market value than than they're paying out if their stock wasn't paying a dividend.

I'm no fan of the financial engineering culture of buy-backs and what not, but that must be a consideration of the board and Pat.

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Sadly, I am not surprised by Intel's "financial" trajectory. This is another sign that the good ole' system of American Capitalism does not work for tech companies who are actually making a physical piece of technology. Just ask Lucent Technologies how it all worked out for them. With the French and now the Finns holding on to what was once one of the USA's most prestigious industrial labs and manufacturers.

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As the great Charlie Munger said of people like Gelsinger, "I think I've been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I've underestimated it. And never a year passes, but I get some surprise that pushes my limit a little farther".

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Further nobody here should be surprised. There were many indicators leading up to this, specifically intc missing manufacturing milestones, but the most damning and resounding alarm should have been PG depegging Intel's manuturing process size from the name of the process:

Intel 12nm

Intel 10nm becomes "Intel 7"

Intel 7nm becomes "Intel 4"

Intel 7nm '+' becomes "Intel 3"

..

why? (Rhetoric)

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They've been selling out for at least a few decades, as they ignored calls to evolve away from x86 and design CPUs based on engineering principles rather than repeating the past over and over. Apple's new CPU technology may well be the nail in the coffin for their incessant short-term fixations.

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Frankly speaking, some heads should roll now !!! Pat and David Z. have lost their face badly. The quarterly results are miles away from their "conservative" projections (made already one month into Q2). This would be totally unacceptable even for a micro cap company. What kind of information are they getting from the executive team in each division?

What is going on with DCG and Sapphire rapids (in my opinion the most dramatic in Q2)? And ARC and Ponte Vecchio?

The lack of execution with the massive amount of talent and personnel hired in the last 14 months is just unbelievable. Of course, this is an industry in which products are designed years before they hit the market, but are their engineering and operations teams so extremely inefficient?

Cutting the dividend just now would have probably taken the share price even in a more dramatic tailspin, so I don't think this is a wrong decision at this time.

The big question is if this is really the bottom and things start to turn around with INTEL being serious about execution and product timelines. I really hope they can do it and quickly because the Western World really needs a strong INTEL. Would be interesting to get to know an insider's view.

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Well and passionately said. While I'm not personally a shareholder, I would certainly support the story of cutting the dividend for the sake of funding their capex plans.

Wondering if there is language in the CHIPS Act that specifically addresses the potential scenario of use for shareholder dividends.

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Totally get the emotion Dylan, this result was surprise and I feel similar to you as I read through the call transcript. Like I was expect AXG to not start great but wow.

"Operating loss was $507 million versus an operating loss of $168 million in Q2 2021 with the increase driven by inventory reserves on Ponte Vecchio and Alchemist products and increased investment to deliver the roadmap of Visual, Super Compute and Custom Accelerated Graphics Products"

Are there really inventory reserves of Ponte Vecchio??

As if that CHIPS Act wasn't long enough, it keeps referencing the "WILLIAM M. (MAC) THORNBERRY NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2021" for sections 9902, 9906, ....yadda yadda. Gonna need more coffee, wish I had started reading this sooner x.x Looking forward to your thoughts on it.

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They cut capex but does that automatically imply capex regarding the Fab buildout?

Also, the CHIPs act was just accepted which will boost Intel’s effort for the fab buildout.

Intel is retiring some products and department which eventually leads to a decrease.

Adding food for thought here.

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Spot on. Rick Santelli made a similar criticism on the CHIP act.

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I'm not surprised. Pat came on board with great promises on too many fronts. That always raises skepticism. The talent left before the market leadership lapsed. TSMC pulled way ahead in process. AMD and NVIDIA pulled ahead in design. Intel is a conglomerate, a portfolio of assets. But unlike a true portfolio, they're stuck with the holdings and the top management of 'yes men' for each group. Prioritizing short-term shareholder return over investment in the future shows weakness. Harsh? Yes.

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