Intel's Best Buy: Itself?

What would Intel (Nasdaq: INTC  ) CEO Paul Otellini do with $25 billion? How about buy back Intel stock? That's what he has planned. Thursday morning, Intel's board authorized the mammoth buyback, plus an increase in the company's quarterly dividend from $0.08 to $0.10 per stub.

You can read the news a number of ways. Here's one, which Otellini offers in a statement issued Thursday morning: "Today's announcement signals our confidence in the growth, earnings, and cash-generating potential of our business."

There's little doubt that Intel has been a cash machine in recent years. It should continue to be, even in the face of increased competition from rival Advanced Micro Devices (NYSE: AMD  ) . Have a look at the trailing-12-month free cash flow totals compared with the three last fiscal years.

Metric

TTM*

FY 2004*

FY 2003*

FY 2002*

Cash From Operations

$15,209

$13,119

$11,515

$9,129

Capital Expenditures

$5,490

$3,843

$3,656

$4,703

Free Cash Flow

$9,719

$9,276

$7,859

$4,426

Dividends Paid

$1,728

$1,022

$524

$533

*Numbers in millions. Data provided by Capital IQ, a division of S&P.

This makes a pretty simple and easy case for the fact that the repurchases and dividend are sustainable. The news has been well received, of course: Intel's shares are trading higher by a little more than 1% as of Thursday afternoon. Investors are right to be enthusiastic, and it's nice to see the company finally put more of its moola in their hands.

Some critics will be tempted to dismiss this strategy as a ploy to dust over other problems at Intel. And they could be right. After all, AMD shipped more retail units in October than Intel did. And according to News.com, Dell (Nasdaq: DELL  ) is now selling AMD processors at Dell.com. Such momentum is indeed startling. But it still doesn't detract from the attractiveness and sustainability of Intel's dividend and buyback plans. Not yet, at least.

So color me cautiously optimistic. After all, Intel has deked investors before by boosting buybacks to hide options dilution. If that's the case here, too, then by all means, investors should run for the hills, screaming all the way. Till then, this news makes Intel appear as generous as it has ever been. And that's awfully tough for this Fool to ignore.

Get the latest dish on related digital Foolishness right here:

Dell is aMotley Fool Stock Advisorrecommendation.

Biotech. Nanotech. Info tech. Any tech. David Gardner and his merry band of Foolish analysts cover it all forMotley Fool Rule Breakers, and, as a result, they've crafted a rebellious portfolio that's smashing the market by more than 11% as of this writing. Take a risk-free trial to Rule Breakers, and you'll get access to all 28 buy reports and numerous insights into the latest index-busting ideas of tomorrow today. All you have to lose is the prospect of better returns.

Fool contributor Tim Beyers actually recommended shorting Intel last Halloween. Whoops. Tim didn't own stock in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile. The Motley Fool has an ironclad disclosure policy.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 498083, ~/Articles/ArticleHandler.aspx, 8/20/2014 5:00:02 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement