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 |
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.
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Dell is aMotley Fool Stock Advisorrecommendation.
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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.
