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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Paul Engel who wrote (67018)	10/19/1998 2:06:00 AM
From: Joseph Pareti	Read Replies (3) \| Respond to of 186894

Is Intel overvalued ? The question is provocative on purpose, however I am not sure I am using the right data. Hopefully this will trigger a discussion. The model I use calls for a comparison of the market cap with the company "market value" as defined in the book "The Warren Buffet way", by Robert G. Hagstrom, Jr. - Jon Wiley& Sons, Inc. pages 106-107. The market value is a function of the company cash-flow, diminished by the capital expenditures, that according to Warren are necessary to sustain the business of a manufacturing company. This term is also called "owners' earnings " by Warren. The key equation, showing the owners' earnings as the right-hand-side (RHS) is as follows : Value * interest_rate = cash_flow - capital_expenditures or Value * interest_rate = net_earnings + depreciation+ amortization -cap_expI use the following data based on 1997 financial statements : cash_flow = $10 B capital_expenditure="addition to property, plants and equipment" = $4.5B (Note: this could be wrong, comments please ) interest_rate= T-bond yield = 0.05 (Warren does the same) One determines from the above that the value is $110B. This is lower than Intel market cap of approx. $150B, based on $84 per share and 1795 M outstanding shares,assuming dilution. Hence the valuation question. If however, capital expenditures were to diminish overtime, the "owners' earning" term of the equation (RHS) would be larger and the company may be fairly valued or even undervalued (note that was the case for the Washington Post Company discussed in the book). Also, Intel may be able to control prices, which would affect the interest rate term, in a way that is however unknown to me. Note : this is not the only cryteria in Warren's method, but it's kind of an important one. It looks like Intel would score very well on the other cryteria outlined in the book.

To: Paul Engel who wrote (67018)	10/19/1998 2:52:00 AM
From: Scumbria	Read Replies (2) \| Respond to of 186894

Merced endorsed by EVERYBODY INCLUDING SUN ? Paul, They had a Merced centerfold in this weeks "Vaporware News." non-existent-hardware.com Scumbria

To: Paul Engel who wrote (67018)	10/19/1998 5:08:00 AM
From: tepli	Respond to of 186894

Paul, I don't know if this has come up before on this thread, but do you happen to be THE Paul Engel who was given a whole chapter in the book "Inside Intel"? Just curious. Regards, tepli