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Technology Stocks : Intel Corporation (INTC)
INTC 46.47-4.5%Jan 30 9:30 AM EST
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To: Jay Charters who wrote (2016)7/1/1996 10:35:00 AM
From: Joel R. Phillips   of 186894
 
Jay,

I would argue that Buffett values franchise businesses so highly
because they can continue to produce free cash flow with
little additional capital spending. His toll-bridge parable is
the textbook case.

In Intel's context, the franchise value shows up in high relative profit
margins, and high free cash flow relative to other semi manufacturers.

But the fact remains that semiconductor manufacturing is a very
capital intensive, capital-consuming business, even for Intel,
so accounting earnings overstate true profitability, thus Intel
commands a low(er) PE.

--joel
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