Intel Case Study 1992 Essay

Recapitalization seems to be the best alternative discussed in the case, mainly because of the underlying 39% IRR (discussed below). There are chances to expand the pie (through consolidation and/or operational improvement) and sell it at a higher price, taking the advantage of the potential market pick-up in 2003. Two potential risks are that the higher price is not guaranteed and that there is low interest from financial buyers and no powerful strategic buyer, future selling negotiations may take time again.

Intel’s capital structure dilemma was that it was holding too much cash on hand. Eventually, there were three available strategies or alternatives that Intel could undertake in terms of cash disbursement policies. First, it could continue or expand its market-repurchase program. Secondly, Intel could declare dividends to its shareholders on existing stocks. The last strategy is to put together a package of two unique securities: 1) A distribution of a two-year put warrant to its existing shareholders. 2) A distribution of 10-year convertible subordinated debentures to new

As shown in the financial income statement (Exhibit3), Intel Corp. (INTC) has a capital structure consisting most of equity. Intel has very little debt in its capital structure and the cost of debt would have only a marginal effect on the overall cost of capital. The current capital structure of Intel is not optimal yet since optimal capital structure is making minimum weighted-average cost of capital.

And these analyses will be done with the help of Porter’s 5 forces (see appendix 1, 2, 3). This analysing toll deals with issues which are from outside the industry that impacts the nature of competition within the certain industry. Thurlby, (1998) stated “Understanding the nature of each of these forces gives organisations the necessary insights to enable them to formulate the appropriate strategies to be successful in their market”1. The analysis of the three industry are given belowPC industry (See appendix 1) This competition within the PC industry is extraordinarily high consisting with top companies like Dell, HP, Apple, Gateway and Sony. In order to gain competitive advantage, the key factors are advancement in technology, custom built PCs, reliability and standard customer service. The life cycle of PC industry can be seen as mature (See appendix 6); however the growth of PC’s has not decline. The reason is due to the globalisation trends taking place within the major firms. The barriers very high where there are already five main firms that dominate the market. Therefore, the chances of new PC companies entering the market and get significant hold of market share is very slender. The main two factors that are making the entry level high are mainly cost and distribution and the top five firms also control 70 per cent of the global personal computer market. Another factor may be is that

2. Companies buy back shares on the open market over an extended period of time.

1. What are the lessons useful for their future microprocessor business that you think Intel should have taken away from their experience in the DRAM industry?

The repurchase program increases the shareholder’s value. This is because of a rise in the price of the shares of the original shareholders.

Intel, also known as Integrated Electronics, is a company that manufactures and sells various types of electronic equipment and hardware. It was founded by Gordon Moore and Robert Noyce in 1968 and has since grown to be a commonly used consumer brand. Intel must ensure that its products are consistently well-made, especially when its products affect the consumer’s experience with the technology he or she is using. Because Intel must implement quality in a wide variety of products, the best practice for the company is to have a physical separation between its departments and to focus on the quality of each individual aspect of its product creation; this will allow each department to specialize in their work functions and allow the company to separate each task effectively.

The large share repurchase should be recommended to Blaine’s board. The followings are advantages of share repurchase.

The team shall lead a class discussion for Intel Corporation 2010, with an analysis of Intel’s profitability. In addition to the presentation, a written report will be submitted onto Blackboard by May 2, 2011. The report shall contain the answers to the questions in the project handout.

In your judgment is Intel a “monopoly”? Did Intel use monopoly-like power, in other words, did Intel achieve its objectives by relying on power that it had due to its control of a large portion of the market? Explain your answers.

Intel excels at top-down innovation, where highly differentiated components and electronics command a high gross margin relative to competitors, enabling faster design wins with Original Equipment Manufacturers (OEMs) and development partners. This top-down innovation flow within Intel is so dominant, that the product design teams are significantly more productive than even the most advanced business process management teams (Segerstrom, 2007). Microprocessors and the follow-on Internet, networking, security and integrated motherboard products are all predicated on this top-down innovation cycle that leads to product line proliferation in Intel (Zimmerman, 2010). DRAMS were undifferentiated in structure, lacked industry standards that could create differentiated performance or compatibility based on adherence or alignment to standards or customer requirements (Nicholson, 1997). Intel chose to compete on the only other area of their core strength as a company, which is quality management and yield levels (Clark, Walz, Turner, Miszuk, 1993). Getting the yields for DRAMS to 60%, which for a brief period of time lead the global industry, only served to accelerate a very high level of commoditization in the industry (Voss, 1998).

Another way of achieving the profit of the added value is investment in software development to leverage the advantage of the high performance processors. And that was achieved by development of complementors, although Intel had a relationship with Microsoft, but it was enough, since it required Microsoft years to develop the software, were Intel is moving faster, by adopting the strategy of complementors, Intel build its capital. Intel strategy was to invest in companies that fit strategically into Intel’s business strategy as well as offered a financial return.

Complete analysis of Intel Corporation is based on the set of principles as stated in the United Nations Global Compact because it acts as a standard for all the sustainable growth. Apart from the previous, the analysis is aligned with the sustainable goals mentioned by United Nations in order to access the degree to which Intel satisfies these goals.

4- IBM and Intel have a strong position in the market of North America and Europe, and it is very difficult for the companies like Qualcomm to survive in these regions. It is merely impossible for the Qualcomm to compete with the strategy of lower prices and lower quality.