What Makes Intel One of America's Best Companies

Intel (NASDAQ: INTC  ) is the world's largest microprocessor manufacturer, and has been on the leading edge of this technology since 1971. Its mission revolves around "relentlessly delivering the platform and technology advancements that become essential to the way we work and live." Today, Intel's largest business segments are PCs and servers, but it hopes to soon crack the mobile market and become the world's preferred processor for smartphones, tablets, and any other super-portable devices yet to come.

The case for Intel
Intel remains one of the most coveted workplaces among hardware engineers in the world. Fortune ranks Intel 68th on its latest list of the 100 Best Companies to Work For, citing a $50,000 tuition reimbursement, on-site medical care, and an eight-week paid vacation offered on top of normal vacation time every seven years. Last year, over 4,000 employees took this extended sabbatical. Glassdoor ranks Intel 31st on its list of the 50 Best Places to Work, and over 2,000 of the company's employees have offered opinions -- 82% would recommend the company to a friend, and 88% approve of retiring CEO Paul Otellini. Intel's average salaries (primarily for tech positions) often approach or exceed six figures. Intel's fourth-place rank on Corporate Responsibility's 100 Best Corporate Citizens list for 2012 is boosted by its first-place ranking in the employee relations category.

Intel possesses one of the world's top brands, according to consulting firm Interbrand. The company ranks eighth on the list, thanks in part to marketing efforts and strategic shifts that are moving it from "a technology first mind-set to one of user first." Intel commands greater than 80% market share in notebook and server processors and greater than 70% in desktop processors.

Lately, Intel's shareholders haven't been rewarded with gains much greater than those earned by index investors. Over the past five years, Intel's total return has been 34%, which is better than the 14% return of the Dow Jones Industrial Average to which it belongs. However, the Dow's total return, with component dividends included, pulls it up to a 31% five-year gain and into a virtual tie with Intel. Intel's revenue (37%) and net income (75%) have both grown in excess of its returns, and the company's P/E ratio now rests near all-time lows.

Intel's corporate citizenship goals are, to put it mildly, ambitious. The chip maker's social vision is to "connect and enrich the lives of every person on earth." Intel matches philanthropic grants from its employees, and also pursues a variety of global good-citizen initiatives, which range from maximizing energy efficiency to providing educational materials in developing countries through over 7 million PCs delivered via nonprofit collaboration. Intel also ranks seventh on Newsweek's latest rankings of America's Greenest Companies due to its use of more green power than any other U.S. company and its 60% reduction in greenhouse emissions since 2007. Corporate Responsibility ranks Intel third for positive environmental stewardship.

Foolish bottom line
No company is perfect, and even one as well-run as Intel has its shortcomings. Intel, like many global high-tech companies, evades many millions in local taxes through complicated legal schemes. Intel has also been one of the weaker tech companies from an investing standpoint in recent years despite a strong dividend, and has been a particularly terrible acquirer. In 2010, before its more recent buys were fully digested, Business Insider discovered that Intel's 15 largest acquisitions since 1999 had all been complete flops.

Even though Intel may have flaws, its positive contributions to the world appear to substantially outweigh its well-known shortcomings. After considering the totality of its performance, we believe Intel belongs among the best companies in America.

Click here to read about the rest of The 25 Best Companies in America.

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  • Report this Comment On February 28, 2013, at 5:46 PM, moneytrail wrote:

    The criteria presented in this article used to select Intel as one of America’s top 25 public companies are unhinged from the basic principles of business enterprise. Ironically, the article makes the case for how the obfuscation of fundamental, business principles – making money for a company’s investors, invariably leads to the dismemberment of the mightiest of enterprises, over time.

    The article’s thesis for Intel’s inclusion in the “Top 25” is predicated upon Intel’s alleged collectivist social “achievements” which, actually, are leading to the destruction of shareholder and societal wealth. A quick review of the article’s list of Intel’s “socially enlightened achievements,” as viewed by social-responsibility, “investment analysts,” interestingly, an increasing trend at MF, will illustrate the unsoundness of this perspective regarding wealth creation, both for investors and society, at large.

    In contrast to Intel’s precipitous market decline due to its diminishing growth prospects, the article applauds the Company’s lavish “feel good” expenditures and actions. Although these expenditures, in themselves may not be responsible, totally, for Intel’s woes, they represent the corporate giddiness that led to Intel’s strategic decline in the tech market, as manifested by management’s failure to identify the mobile communication device tidal wave.

    The expenditures identified as examples of justification for Intel’s heady top 25 rank include: (i) $50k tuition reimbursement; (ii) 8 week employee sabbaticals every 7 years; (iii) some of the highest, average technical worker salaries in the industry; and, (iv) corporate matching of employee philanthropic contributions totaling $26 million.

    The non-expenditure “achievements” referenced as selection criteria for Intel’s inclusion on the Top 25 Corporate Hit Parade List are: (i) 88% of employees endorse CEO Ortellini’s performance (a sanguine view of the bright, affable CEO not shared by investors); (II) Intel’s mission to “connect and enrich the lives of every person on earth” (perhaps not missing the next high-tech mega-wave, thereby touching the brokerage accounts of Intel investors would be more appropriate for a high-tech company); (III) “due to its use of more green power than any US company leading to a 60% reduction in green house gases… [Intel has won]… an enviable 7th place among Newsweek’s rankings of America’s greenest companies” (Unless it helps reduce corporate expenses, thereby increasing shareholder value, how does this help sell or produce Intel’s next generation microprocessor?) (Thankfully, Newsweek done its part to save our beleaguered planet by having ceased publication of its print copy); (iv) Intel is 4th among the 100 top “corporate responsibility” citizens (How about 1st of the top 100 investor responsibility citizens?).

    Indeed, an impressive list of corporate attributes for a Berkeley sociology major.

    The mission drift represented by these “socially responsible” corporate “achievements” have resulted in Intel’s growth barely keeping pace with the S&P 500 over the past 5 years. The Company is currently trading at P/E’s below 10; even though revs and net inc have increased by 37% and 75%, respectively, over the past 5 years.

    Why? Because investors know the Company has missed the mobile device mega wave and will have to spend massive amounts of investor capital to eke out a toehold in that market by creating a new, substantially superior chip to ARM’s; or, it will have to create a new product for a yet unidentified tech market; and, while undertaking these two significant challenges, it must fight (spend additional capital) to fend off increasingly, financially robust high tech competitors who are eyeing Intel’s dominance in a shrinking PC market, as well as an expanding mobile device server market.

    This corporate conundrum developed over more than 5 years, while Intel and its “corporate responsibility” minions were arm-in-arm singing “We Are the World.”

    Corporations contribute to society by creating products and services we all need and desire, along with productive jobs that increase wealth for new investment while promoting economic growth. And yes, let’s not forget tax revenues for our unwise, hapless government bureaucrats and politicians to dissipate?

    There seems to be a profound disconnect by the “social responsibility” crowd regarding a corporation’s role in society when responsible capital preservation is referred to as the evasion of “many millions in local taxes through complicated legal schemes.” (It appears the SR crowd isn’t even satisfied when companies comply with the law, unless they pay ALL the taxes they can beyond what is required by the law! I guess that’s ok since its other peoples’ money.)

    Ironically, this LEGAL reduction of tax liability is one of the few responsible actions Intel has taken on behalf of its beleaguered investors over the past five years, in its race to become the best buggy whip company in the high tech industry.

    Expenditures for employee and global brand enrichment must be viewed as investments (real investment, not the government euphemism for spending). The sole purpose of which is to increase investor wealth by incenting employees to achieve superior results when compared to their less prosperous peers at similar companies; or, by increasing investor wealth through brand enhancement.

    Smart investors understand these obvious fundamentals, which is why Intel is being hammered in the investor marketplace. With its massive R&D budget Intel may yet be able to innovate its way out of this self created morass. It may prove to be a sound value buy at this time; however, its soon to arrive new corporate leadership team needs to rededicate itself to its charter mandate: firstly, to increase investor wealth. The wealth of company employees should follow the achievement of that primary goal. As for the global population, it will be best served by the jobs, innovative products and services successful companies produce.

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