Mr. Rizzo
Nobody here said MAC wasn't smart. He is a good operator. But he has a fatal flaw. Check Noorda for a reference.
When did Intel do their BiG bath? Was it in this decade? No, it was 10 years ago.
Please tell me where you read or heard that Java revenue will be $200 million next year. The 10K, 10Q? I will be generous. Even if a company would pay the absurd sum of 10 times next years revenues for the Sun Java business, they would need $200m in revenue to justify it. Show me.
To compare Sun's bookings to Intel's is unfair. Apples to Oranges. You should know that Intel does not break out their bookings by customer. To be fair, you need to compare the growth in bookings at Sun to to the growth in bookings of Intel's Server and Workstation customers, and you don't know that rate. My educated guess is that Intel is taking share from Sun.
Your depreciation example is wide of the mark and here's why. Thumb through the S & P 500 Guide for 1995. In it you will see that most companies spend more on capital items then they record in depreciation. Most Companies. It makes SENSE that there is a lag because Capital Expenditures are usually growing, along with inflation. In fact, In 1989, sun spent $205m on capital items, but only recorded $103m in depreciation. Were Sun's earnings overstated that year?
I used to believe that a business is ALWAYS better off when they don't have to reinvest earnings in plant and equipment. Then I read this statement from the chairman of Berkshire Hathaway, Inc., who has looked at a few financial statements in his time. He said "the best business to own is one that over an extended period can employ large amounts of incremental captial at very high rates of return." Though he wasn't talking about Intel at the time, Intel fits the bill nicely. For that is THE secret to its current success. It is able to employ large amounts of capital at high rates, 30% plus rates. In short, they COULD return it to their shareholders, but they have such outstanding opportunities to deploy that capital, it would be counterproductive to do that. Indeed, their shareholders would be financially harmed by such a decision.
Mr. Rizzo, I fully respect your attempts to go beyond the everyday hype of technology investing. But your characterization of Intel's capital deployment problems is way off base. |
