Amy,
I still don’t have a problem with Intel investing in new businesses. But from my shareholder perspective, I am very concerned with their choices of new businesses, with the extent that they gambled on new businesses, and with their execution in the new businesses.
(All data are profit/loss from operation)
Intel “other” losses over the last four quarters:
3Q00 - $600 million
4Q00 - $657 million (9.5% seq. increase)
1Q01 - $1.041billion (58% seq. increase)
2Q01 - $1.249 billion (20% seq. Increase)
Intel “other” losses as a percent of IAG profits
3Q00 - 17.6%
4Q00 – 35.5%
1Q01 – 61.9%
2Q01 – 85.2%
 If, in the 3rd quarter, “other” losses increase by 20%, and IAG profits remain flat, it will result in an Intel operating loss of $32.8 million.
 In the 2nd quarter, 19% of Intel sales reduced Intel profits by 85%.
 Since 3Q99, Intel has accumulated an operating loss of $5.911 billion in “other”. Coupled with over $10 billion original investments in the companies, total is over $16 billion.
Amy, the tail is wagging the dog. The microprocessor business is a profitable gem. Intel has never proven their ability to buy a company and then manage it to leadership and profit; yet they are wagering their entire profit structure on that ability. Mr. Barrett’s spending spree for these companies, and his tolerance of their losses, has removed Intel from the short list of the world’s most profitable companies. And if they go to a loss next quarter, they will immediately lose the long built confidence of the investment community. The Intel risk will always be higher, the PE always lower.
It’s time for Intel to exit the businesses that are less likely to be successful, and/or the ones that are losing the most money. It’s time to clean house. |
