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Intel Case Study Essay

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Intel Corporation, 1992
Case Study

Describe the characteristics of the industry in which Intel operates. How is Intel positioned in the industry? Intel operates in an industry, which is comprised of products involving high research and development costs, continuous product improvement and new innovations. The companies in the industry are having high economies of scale and are knowledge based. It helps both the service and manufacturing sectors in the growth process. Intel is positioned as a leading company with its ability to adapt to technological changes and its strong relations with other businesses who are major buyers of integrated circuits. The industry in which it operates is very competitive and comes with high risks as …show more content…

Further, keeping in view the strong competitive environment and fear of “Clones” by others, Intel is constantly required to look for innovative products, which would need more funds for upfront expenditures. In these situations, large cash positions would help Intel to avoid taking loans from outside, and in turn interest costs, by using its own cash balances. A disadvantage of having large cash position would be that cash has an opportunity cost. In other words, Intel could be forgoing profitable investment opportunities. However looking at the data provided in the case, we can see that the cost of holding cash was small as they yield high returns, above 170 bases points above U.S treasury bills, through investing in securities rated above AA. Further, a cash rich company runs the risk of being careless as there may be reduced pressure on the management team to perform better. Observing Intel’s growing performance over a period of time, it seems that currently it has no such problem. However in future, it may become a cause of concern for the company.

Compare the three methods of repurchases: open market repurchase, fixed-price tender offer, and Dutch auction. In the open market share repurchase, the firm may or may not declare the repurchase. Depending on the market condition and the firm’s position in the industry, the firm can decide when and how many

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