Intel increases dividends
After announcing a Q406 dividend, which I discussed here:
http://sharikou180.blogspot.com/2006/09/intel-announces-dividend.html
To further raise the dividend is not the sign of a company worrying about their cash position. What's going on here? Something has happened to give the board confidence that they can not only afford a dividend, they can increase it.
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26 comments:
Guess the motherboard sale declines and people waiting 'til Vista aren't hurting them?
It could also just be a show, since they have enough extra funding laying around. They may just be trying to stimulate stock activity.
Greg - you could be right. But that's what baffles me:
1. They just laid of a few thousand people. Ok...that's a long term cost you want to avoid so let's not beat that to death any more.
2. They are seeing fierce competition and this last Q3 was the first time they beat the Street...though not by much so nothing to crow about.
3. Finally - wouldn't it be better to sustain your stock re-purchase program instead and whittle down the 5.8 bln shares outstanding to boost EPS?
This announcement just seems contradictory to the situation they're in and unless they think they are going to blow their Q4 numbers away, they have committed to an incremental cost nobody expected them to.
I don't know man...it's weird. A dividend increase really doesn't drive Intel's stock price...as we see in trading today.
Surely these are signs of Intel going bankrupt. Sharikou must be correct:
> Intel increasing dividend payout
> Stocks buy back
> Building additional Fabs (Israel) and assembly sites (Vietnam)
> Increased market share
> strong cash flow
> positive outlook
> Ramping devices 40-100% faster than the competition
> 100% acceptance from the OC community, system builders
> Ahead in process technology by almost 2 years
> strong product roadmap
> strong product offering on all market and within market segments
Yep, these surely are the signs of a pioneering company in decline. Especially when the competition has:
> Declining market share
> Declining ASP
> Poor product offering with its top bin relegated to main stream low ASP market
> Poor roadmap with frequent delays
> Poor mobile offering
> Huge debt payout
> Reduce capacity to transition to 65nm which is 2 years behind
> Taken on a company that will lose 80% of its market in the coming quarters
Yep, in Q208 Intel will be bankcrupt and a company who’s lagging in technical and manufacturing capability will try to supply the global demand which is 5 times its capacity.
Happy days are coming!
Hi,
having and showing confidence are 2 things, i think.
Unrelated to this posting, but nonetheless needed.
Why do the morons from the Dark Side keep posting replies to Sharky's idiotic theses?
From my perspective, his primary concern (secondary being his outright hatred of Intel), is to bring pageviews and ultimately some revenue in ads. He apparently doesn't care about fact, only controversy.
And that's why I post this here.
If you would kindly do so, create a post with this topic in mind, then you too can benefit from controversy and pageviews! :)
Ashenman - I'm baffled too...unless they are ahead of their plans in ramping either their server or mobile Conroe lines which gives them a margin uplift I cannot think of any reason for this. Specially at this point in time when they seem to be recovering but the job is far from done.
Anonymous - I would have agreed with you a year ago. But having eaten so much humble pie publicly of late, they really don't have to display any flase bravado. And if they did want to...a dividend increase doesn't necessary make the same ripples in the markets as a stock buy back would.
Xfabricator - I did try something
conterversial" (just for fun) here:
http://sharikou180.blogspot.com/2006/09/is-amd-giving-dell-their-processors-for.html
http://sharikou180.blogspot.com/2006/09/power-of-sensationalism-learning-from.html
Being ahead of their schedule would be bad for Intel as well, because distributors would not be expecting it, and if they were expecting it, they'd be telling us. The last time this happened with a major technological advancement was with one of sega's systems, which was a huge part of their leaving the console business.
One thing though...mobile and server are not really disti businesses. Channel who buy from distis do not really do a lot of mobile and mostly lower end servers so distribution may not hold the key. Also, if they are accelerating either of their sales ramps (I'm not talking manufacturing) then it would probably be through OEM deals.
I guess my point is, anyone who was buying Intel products would already know about a sudden production ramp, and it would've probably already been leaked. If they weren't, then Intel would have more stuff that would have to sit in a warehouse, while they waited for HP, Dell, Gateway, and everybody else to reapportion their sales efforts to correctly reflect what's available from Intel, and this could take a while. Also, this would mean that Intel would suddenly be shifting away from their current pentium lineup, which would either drastically reduce their excess product in that area as they filled demand they could no longer meet from production, or that they would eat through that too quickly while everybody adjusts to the new supply.
Yup - those are all very real possibilities. Though one thing to factor into the thinking is I do believe Intel has excess capacity which they would be trying to fill. So the upside of a big deal is good but the downside is during times when demand is not excessive, your margins and inventories take a big hit which is the situation I believe they are in now.
But...they may not have to dial down Pentium production to get more Conroes if they do have spare capacity.
Ashenman - I'm not sure what point you're making and to whom. Could you clarify please.
thx
Ashenman - actually no. My comment was not at all about their manufacturing. I actually think the situation is as follows:
1. Server and mobile Conroes are moving and they can't produce them fast enough.
2. Desktop Conroes are not moving as fast they'd like and this is a chunk of what is sitting in their inventory. I think one possible (though unlikely) explanation is they have manged to close a deal with one of the big OEMs (perhaps HP) to move the parts.
My other related (but only peripherally) thought is right now they probably have too much capacity (with some of it not being used) and if they have indeed closed a large deal for Conroes...that will allow them to start loading the factories again which helps drive margins up.
However, I actually think this is an unlikely explanation and am as baffled as you are by this move.
Ashenman wrote:
My point is, wont this drastically effect yields on the parts they haven't used? And if they try for a massive increase (one that warranted a stock dividend) wouldn't they stretch their workforce that is devoted to production?
Core2 ramp is not a process transition where Intel needs new equipment to qualify. They're simply converting some of the same 65nm netburst processes to create Core2.
Yields are more a factor of die size rather than circuit layout in a similar 65nm process like from Netburst to Core. Therefore they should roughly be the same.
The workload for the workforce should be the same. You're simply using the same equipment to process a different product. There may be some differences but Intel is very careful in direct labor requirements.
Its the poor process engineer who needs to qualify one tool after the other that is i'm sure overworked.
Dr Yield - I think your reasoning holds a lot of water. They did a similar thing with dual core. Move hard to constrain AMD's capacity.
But I'm still struggling...why the dividend increase. Someone - put me out of my misery
-:)
Great Blog! It seems to me more intellectual that other blogs..
Did anybody notice that Intel Stock has been on the rise recently?
http://itkitty.blogspot.com
The anti-Sharikou wrote:
But I'm still struggling...why the dividend increase. Someone - put me out of my misery
-:)
I think there is no single reason why Intel is increasing their dividends. For all we know they could be pressured by most of its shareholders to do so as this stock wants to transform itself from a less volatile stock and at the same time gain the interest of dividend-looking fund managers while keeping its current shareholders.
Or maybe it could be as simple as wishing to re-align their debt-equity ratio with the industry sector. We don’t know. But one thing is for sure, a company in a highly cyclical technology industry with very aggressive R&D and capital purchases, giving away dividends is the last sign of impending bankruptcy. If anything, it shows long term confidence.
If anything, it shows long term confidence.
This I agree with...!
I'm sorry but this article is silly. It's like announcing that General Mills will buy more flour.
Intel moves the vast majority of its earnings via stock buyback, not dividends. Intel could reduce stock buyback by a tiny fraction to afford the dividend increase. In other words, this is only news if Intel increases dividends and maintains its current stock buyback rates.
Hey Sha'360 you became what Sharikou is right now: an Intel funboy:
Sharikou = AMD
Sharikou 180 = Intel
It's so funny ;)
Scientia - the question is why has Intel done this. There seems to be no obvious upside. Even if they retain stock buy backs...why wouldn't they just accelerate those since that seems to have more of an impact on the stock price than a dividend increase.
Anonymous - yes...you're right. I'm taking the position that Intel will regain market momentum over the next 6 months. However, I've also said that when I see things changing I will be more pro AMD. I also do not blindly believe my opinion is the only opinion and is always the right one.
Scientia - the question is why has Intel done this. There seems to be no obvious upside.
Intel has done a lot lately to shake confidence. I'm thinking that with their market shrinkage they can't just count on steady growth the way they used to. Raising the dividend is a good confidence builder if growth is slower.
Anonymous - yes...you're right. I'm taking the position that Intel will regain market momentum over the next 6 months.
My position is that there is no momentum nor will there be in six months or a year from now. What we will see is that Intel will continue to grow but will also begin to lose market share to AMD again as we move into 2007. This isn't really bad for Intel because it will grow, just not as fast as AMD.
However, I've also said that when I see things changing I will be more pro AMD. I also do not blindly believe my opinion is the only opinion and is always the right one.
Sharikou is a nutcase. I have no idea what he is going to do in 2Q 08 when Intel not only doesn't go bankrupt but has more revenue than they have now. I can understand why someone would be confident about Intel because almost all of the analysts are biased in Intel's favor however this is not the way things are going to go. Intel should begin slowly losing marketshare again by 2Q 07.
"180, aren't you saying that they've ramped parts of the fabs on core2, then quit using those portions of the fabs and moved on to other portions in order to ramp those, and repeated that."
Intel uses (as do all I believe all other logic manufacturers)the same equipment within a technology node regardless of product - there are tools that require changes and some setup, but "part of a fab" is not dedicated to one product or another. There are some subtle paths where this is not exactly the case (litho obviously has to change masks and some technologies require lot to lens dedication, implant has some specifics as well) but in general ramping up a product within a fab means verifying yield, addressing any product/bin split issues (for example critical speed path issues which may limit bin split, etc...) but once this is verified "ramping a product" simply entail assigning more of the starting Si to one product vs another - something done through planning and factory automation.
In Intel's case for 65nm this means starting less Si for P4 and more Si for Core Duo - it DOES NOT mean re-tooling a fab or building another part of the fab out as many believe (espacially on the Sharikou sight). The reason for the "slow" ramp is to iron out product, yield, and binsplit issues and I'm sure there are sales/marketing factors as well.
Sorry for the verbosity...
An additional reason to push 4 core product if you are Intel is the same reason they pushed dual core....
AMD is capacity constrained right now, forcing any of AMD's capacity to quad core limits what they can sell. This was especially true with dual core I suspect it will be less of an effect with quad core as it will remain a niche prodcut in 2007 (maybe not so in the server space?).
AMD is now effectively selling 2 FX's for one system at a lower price/chip (top of line FX74 is, what, 500/processor vs a 700-800 FX62 processor)? This eats margin and capacity.
The other reason to increase dividend is when your company's growth matures and stock price is not ramping like the old days there is no reason for investors to buy (or hold onto) the stock.
Also from PR perspective many folks read a company raising its dividend as the company having confidence in itself (which doesn't necesarily have to be true)
For someone who owns Intel stock this is news (especially as prices has been flat/declining)...
Intel is spending tomorrow's money to increase today's investor confidence.
It says nothing about Intel's own confidence on their business. I agree with Scientia's view that this article is silly.
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