Fool Radio Roundtable: Intel Desperation and Potash Potential

Motley Fool Money is a one-hour weekly business radio show syndicated to radio stations across America. On our most recent show, host Chris Hill talked with our analysts about a potential PotashCorp (NYSE: POT  ) purchase and got their take on Intel's (NYSE: INTC  ) new addition. You can catch this week's show online at motleyfoolmoney.com. This transcript has been edited for clarity.

Chris Hill: The world's biggest mining company is trying to buy the world's biggest fertilizer company. BHP Billiton made a $39 billion offer for Potash this week. According to reports, Chinese companies may enter the bidding as well. China has a limited amount of potash, a nutrient crucial to raising crop yields -- or at least that's what my research tells me. James, you're our resident environmentalist.

James Early: The name "potash" comes from, arguably, the process of burning wood -- taking the residual ash in a pot, and using it as fertilizer, because it has potassium. Potash comes from basically organic sources like that, and it controls what are called guard cells that help open and close stomata in plants. These are the water-absorbing and holding cells. So it's more of an enhancement. It's not a super-essential fertilizer. It's basically a luxury item; but you're right. China does not have a lot of it, and they're going to want it going forward.

Hill: Well, and just so we don't confuse our listeners, potash is the name of the product and it's the name of the company.

Early: That is correct, yeah.

Hill: Charly, Potash [the company] is reportedly looking for another bidder. Why?

Charly Travers: I think to make more money, which is the pretty simple reason. Potash is actually a name that had been out of the news for a while, after being all over the place in 2008 when its stock took a hockey stick upwards. This was one of the best performing stocks of the last decade, and you made about 15 to 20 times your money if you bought this stock 10 years ago. So obviously, people are a little attached to this when you come out ahead like that, and they did not like BHP's $130-per-share offer, and they immediately instituted a poison pill which we kind of frown on at the Fool. But with the stock trading at $148 dollars now, the market's kind of saying a better offer is going to come along.

Hill: Intel is buying computer security software maker McAfee (NYSE: MFE  ) for more than $7.6 billion. It's the biggest acquisition in Intel's history. James Early, McAfee shareholders are getting a 60 percent premium for their shares. Should Intel shareholders be just as happy about this deal?

Early: Intel is a stock that's gone nowhere for the past decade, unlike my hairline. And it's paying a dividend. It pays a nice 3 percent yield. I think before dividend taxes go up, it should have just paid this money in a form of a special dividend. I think this is a classic example of a hardware company trying to regain its glory. Semiconductors are pretty much a commodity business now. If you look at Intel, you look at the Taiwanese makers, the stocks are flat.  They're trying to latch onto some growth, arguing that they can embed security into the hardware, but it's not that new an idea, and it really hasn't caught on. It might work, but I don't know that it's worth a 60 percent premium.

Hill: Seth, you've got your entire house wired. What do you think?

Seth Jayson: Well, my notes here have the letters W, T and then another letter and a question mark.

Hill: So you're saying the Intel purchase of McAfee didn't make sense to you?

Jayson: It doesn't make a lot of sense to me. It sounds like a company that is really straining for growth and wasting cash. And that's a bummer, because I was looking at Intel as a possible personal portfolio buy recently, but not now.

Travers: It's a classic empire building move.

Hill: From chip maker to computer makers. HP (NYSE: HPQ  ) and Dell (Nasdaq: DELL  ) both reported earnings on Thursday. Both companies reported increased revenues compared to a year ago. Seth, the earnings were pretty much in line with Wall Street's expectations. What did you make of the results?

Jayson: There's actually decent demand for computers from businesses right now, and I think that's interesting. Well, it's interesting to tech investors, in general, because it means that there's a fairly solid upgrade cycle. So at a time when a lot of other businesses really aren't doing much spending, they seem to be spending on technology equipment and computers, so that's good.

But maybe it bodes well for the economy, in general, in the sense that you have to have people using these computers for something.

Charly Travers, Seth Jayson, James Early, and Chris Hill may own stocks discussed during the course of the weekly radio show. To see the stocks they own, follow the links above to view their profiles. Mac Greer doesn't own any of the stocks mentioned.

Intel is a Motley Fool Inside Value recommendation. The Fool owns shares of and has written puts on Intel. Motley Fool Options has recommended buying calls on Intel. Try any of our Foolish newsletter services today, free for 30 days.

The Motley Fool has a disclosure policy.


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  • Report this Comment On August 21, 2010, at 5:36 PM, Dalevid wrote:

    This is just another way for Intel to abuse it's power. The mobile market is a challenge for them, but this is a distraction to what they can also do with the PC market. They own 80% of the PC market, and to customize their processors to work with the security software will probably render the other security software from the likes of Symantec and Trend Mirco to work slower or be completely incompatible with 80% of the PCs in the market.

    In addition, this appears to be another way for Intel to apply other types of pricing pressure to AMD and other security software makers with unwritten pricing packages for their security software and server chips now that the exclusivity arrangements to supply chips have been knocked out by anti-trust.

    I would be very surprised if Symantec and other security software makers along with AMD do not raise this as an anti-trust issue.

  • Report this Comment On August 21, 2010, at 5:53 PM, Dalevid wrote:

    This has anti-trust written all over it and should not be allowed to happen. The fact that Intel says it is to gain in the mobile space is a distraction to the PC and server market they serve.

    If they own 80% of the PC market, their security/anti-virus software and chips together will be designed to work best with each other. The changes they make to their chips will render the remaining security software makers incompatible with 80% of PCs or at least make them work slower.

    It also provides another pricing tactic to package the security software and chips to OEMs that will lock out any other competitor in the processor and security software market.

    I would be very surprised if Symantec and others do not claim anti-trust here.

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