Intel Case Analysis Case

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1. In 1992, the microprocessor industry was highly competitive. In this type of knowledge industry, the costs of design, development, and production costs were rising at a rapid pace. Although Intel had gained a substantial market share by consistently innovating and creating new products, imitations were becoming an enormous problem. Competitors were able to imitate Intel’s products with much lower production costs because they were able to skip expensive product life-cycle phases, such as development and marketing. Skipping these phases also allowed competitors to adapt the product features to more recent changes in demand. Yet another threat in the industry arose from a growing number of companies developing CPU’s that did not attempt compatibility with Intel products. In order to strengthen its competitive position, it is important that Intel continue to legally defend its intellectual property rights in order to reduce competition from imitators. Intel also must continue to aggressively spend on R&D, equipment and fabs to strengthen its process technology and production capacity. From an operational standpoint, Intel seems to be doing quite well. The company’s revenue has nearly quadrupled in the past 5 years to $4.059 billion in 1991. As can be seen in Exhibit 1, Intel’s Gross Margin has continually increased over the past 4 years to 60.28%. The company’s ROE and ROA have also continued to increase, which suggests Intel is using its assets and funding from equity wisely. The company’s current ratio suggests it has more than enough money to pay off its liabilities over the next 12 months. Although slightly decreasing from 1990 and 1989, Intel still has enough cash to fund 2.7 years of current investment expenditures wi... ... middle of paper ... ...d an increase in equity by 13.3 million. If both of these options are exercised there will be decrease in assets by $1.02 billion, a decrease in liabilities of $1.02 billion and an increase in equity of 7.6 million. It would be in the company’s best interest if the convertible bond is exercised alone. 6) Intel management should go with the Dutch auction because Intel will be able to choose how many shares they want to buy back and at what price they are willing to do so. This guarantee Intel to later on repurchase their shares at an advantage price compared to its demand. Intel would be smart to take this option over the regular cash dividends, onetime special dividend, open market repurchases and fixed-price self-tender offer because of the fast process and the luxury of giving their shareholders the option of selling their stock at a price of their choosing.

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