Intel to face cash meltdown?
Merrill rules applied
By Mike Magee, 26/06/01 11:47:06 BST
The Register; RAeuter News
A FEW DAYS BACK we ran a piece based on a Merrill Lynch report, urging that we shouldn't look at quarterly results but instead closely examine cash flow figures as these were the factors that really determined the future of a company.
We have also been urged by a number of readers to closely examine a post on the Motley Fool message board which seems to suggest that Intel is burning cash like the UK is burning cows with foot'n'mouth disease.
Both INTC and AMD tables show the cash flow position in quarterly terms which do, indeed, suggest that the mighty Intel is burning cash at an alarming rate while AMD just seems to be restricting the number of paperclips people can use.
We are not talking insignificant amounts of money here. As far as we can gauge it, Intel's current cash pot and short term investments amounts to around $7 billion, while AMD has round about $1.6 billion to spare.
But the figures are compelling, showing that La Intella is spending around $3.5 bill a quarter while AMD banks around $200 mill a quarter.
The price wars continue to exercise their baleful influence on the bottom line too. Manufacturing costs for the current rev of the Pentium 4 are bigger because of its die size and in an ideal world, Intel should be charging around twice as much for its flagship processor as the competition.
The conversion of the P4 from a .18 process to a .13 micron process will help, but that presupposes that AMD won't ramp Dresden to full capacity and introduce its own .13 micron process in Q4 or Q1 next year.
Meanwhile, Intel is continuing to convert its .18 micron factories to .13 micron - we think it's done that with two of them so far - and this in itself is an expensive business.
AMD is not without its problems and may only have a year to eat up the market share it wants to. But, in the meantime, it looks as though La Intella's bank balance is hurting rather more than its much smaller competitor.
Here are the rounded figures for net change in cash, in the last four quarters for both companies. INTC and AMD report their results a day away from each other, quarter on quarter.
AMD (in 000s)
1st April 2001: 464,320
31st December 2000: 297,332
1st October 2000: 288,174
2nd July 2000: 415,398
INTC (in 000,000s)
31st March 2001: (115)
30th December 2000: (719)
30th September 2000: 2,739
1st July 2000 3,613
So are the wheels coming off the chip gravy train? However well the Pentium 4 and Intel's other products do in the second half of this year, it certainly looks, on the face of it, as though its shareholders ought to have some cause for concern.
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