Paul, re:Did it ever occur to you that P/E's are lower in capital intensive industries for a reason.
Hint: It has something to do with the incredible amount of investment required to build
all of those FABS. Those billions have to come out of earnings.
One could easily make the arguement that capital intensive segments, like Intel's, serves as a deterrent to entry, thus reducing the industry segment to an oligopoly, or possibly even natural monopoly.
This should eventually lead to monopolistic rents, according to theory.
However, what I think the Street is missing with Intel's PE is that Intel is perceived as only having physical assets, and not intangible assets. This is a big mistake. Intel intangible assets include: enormous brand recognition, large customer accounts, huge R&D investments, technology leadership and standards setting, and employee expertise and experience. For example, Intel employees have experience and expertise in advanced manufacturing processes which has led to a seamless transition to .25m, while competitors are having big-time problems. Just because Intel is not a software company does not mean intangible assets (things not on the balance sheet) should not be used to represent its value. Once the Street starts to realize this, I believe Intel's PE will go up.
joey |
