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Technology Stocks : INTC
INTC 34.50+2.6%Nov 21 3:59 PM EST
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To: John Hull who wrote (453)6/16/1997 10:48:00 PM
From: exhon2004   of 990
 
John:

Don't know if anyone at intc puts any credence in this but CFO magazine ranked 1000 companies on their efficiency of use of working capital. Intel ranked 176th, which on the surface seems pretty good. However, of the ten companies listed in electronics intc was 9th, scoring behind the likes of AMD and Integrated Device Technology.

Intc was particularly weak in Days Payables outstanding, (850th). On average, Intel paid suppliers in 18 days vs an industry average of 34. In turn Intel was paid in 63 days by it's customers, which was about the industry average. (Though with it's leverage I think Intel could do better).

Certainly, there could be other issues involved that positively affect profit yet reflect poorly in the cash flow, (eg earning discounts and better delivery for raw materials by paying sooner). Just-in-time delivery of materials does not appear to be present as Intel turns inventory just 5 times a year, compared to 8 times a year for AMD.

I have heard the argument that due to the huge working capital requirements, Intel's PE is lower than the likes of Microsoft, which doesn't tie up as much cash. For this reason it is all the more important Intel focus on improving it's cash management by continually improving on results like those posted by CFO magazine. This would increase shareholder value regardless of what happens with market share.

Best Regards

Greg Gimelli

PS Packard Bell receivable may have still been mucking up the results in 1996.
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