Forty-three years ago, a vision to bring advancements on how people work and live through silicon and technology innovations was born. Intel, derived from Integrated Electronics, was founded in 1968 by Gordon E. Moore and Robert Noycee in California. By 1989, they decided to reincorporate in tax friendly Delaware. Intel has since expanded globally to levels they probably only dreamed of. They created Intel in the tough times of the late 60s and since have seen so many evolutions come about which they have been a part of or influenced it through their creations and maintaining their vision. ie personal computer (PC), internet, the evolution of globalization and outsourcing, financial crisis’s) Intel is an accomplished award-winning organization from both a business and financial perspective. Furthermore, it incorporates into a mix of corporate responsibility, together with environmental, health, and safety (EHS) compliances. “Intel was named to Fortune’s 2009 list of World’s Most Admired Companies. Intel was ranked #1 in the semiconductor industry (1). We will assess Intel by taking into account an in-depth overview within their industry from a business and financial perspective; how the internal and external environments affect Intel; and lastly, a detailed analysis of its stakeholders and recommendations on how they should approach short and long-term strategies. With its humble beginnings in the semiconductor industry, creating the first commercial microprocessor chip, the 4004 in 1971, Intel has not stopped since creating the “brains and nervous systems” of computers.
By achieving goals, acquiring talent and building a lot of capital they are able to uphold three operating segments. It was not until the PC boom of the 1980’s that they had the ability to recognize the opportunity at hand and were eager to strike into this from a marketing and financial aspect in order to rise above their competitors. This lead Intel to explore various market segments such as Bluetooth and recently into mobile phone advancements where they have integrated suites of digital computing technologies. Just this year, in an article in Business Week, Intel confirmed its acquisition of security software maker McAfee, Inc. or $7. 68 billion in an all-cash deal (2), which helps build up and diversify their portfolio such as Intel Capital program. “Since 1991, Intel Capital has invested more than USD 9. 5 billion in over 1,050 companies in 47 countries. In that timeframe, 175 portfolio companies have gone public on various exchanges around the world and 241 were acquired or participated in a merger. In 2009, Intel Capital invested USD 327 million in 107 investments with approximately 50 percent of funds invested outside the U. S. and Canada (3). Yet even with this mindset, Intel maintains a global uniformity in their values, goals and employee practices for which they are known. “As of December 26, 2009, we had 79,800 employees worldwide, with 55% of those employees located in the U. S (4). ” According to the 2009 annual report. With sales offices, R&D and test facilities throughout the U. S. , Asia, Europe, Middle-East, Russia and Latin America, it is easy to see that Intel embraces cultural diversity and world-class benefits, yet takes a risk to adapt to local laws and in some cases with a watchful eye on subcontractors. Last year 6,000 employees took advantage of the most generous sabbatical program in American business: eight paid weeks every seven years (5). ” Nature of the Business The semiconductor industry is significantly affected by market fluctuations and during uncertain times consumers gravitate towards value for their money. The nature of the business needs to respond quickly to the demands of the market (hot electronics, so being flexible in creativity of computing systems and communications is key to achieve business and financial success).
The microprocessor market is dominated by Intel, AMD, and Texas Instruments respectively which will be further discussed in the external environment section. There is a direct relationship between the prices of personal computers fitted with Intel components, just take a look at any PC or laptop and most likely it is Intel inside, with the exception of Apple products. With a keen eye on marketing campaigns and objectives, Intel is able to connect the public and business audience with brand awareness…generating demand for its products to stay on top.
Furthermore, with a strong investment in Research and Development and intellectual property rights such as licenses and trademarks enhances their competitive edge within the industry. Intel is in a great position looking forward. The future for companies in the semiconductor industry is unlimited as we expect continued growth and advancement boasting the demand for cloud computing, chipsets for motherboards, video, graphic cards, multimedia products, microprocessors, and embedded microprocessors for use by individual and business customers.
According to the Semiconductor Industry Association (SIA) press release of January 31, 2011, “Representing United States leadership in semiconductor manufacturing and design, and the heartbeat of American innovation, today announced that worldwide semiconductor sales for 2010 reached a record $298. 3 billion, a year-on-year increase of 31. 8 percent from the $226. 3 billion recorded in 2009 (6). ” Financial Conditions When analyzing a company’s strategies, profit maximization is of utmost importance as it translates to maximizing value for their stakeholders therefore strategic investments are of essence to stimulate added growth.
A comprehensive look at Intel’s 10k 2009 annual report is crucial as it influences their business approach whether short or long term. “For companies that are performing well, financial analysis allows us to understand the sources of superior performance so that strategy can protect and enhance these determinants of success (7). ” Upon examination, Intel’s operations over a 3-year period from 2007 to 2009 as well as an analysis of a mix of ratio metrics as the best means to appraise Intel’s performance and referencing to various financial data reports and charts under 10k report (see exhibits).
In the following summary, we can observe that though there were some legal drawbacks, Intel makes short-term savvy decisions looking out to improve long-term relationships such as with their stockholders. “From a financial condition perspective, we ended 2009 with an investment portfolio of $13. 9 billion, consisting of cash and cash equivalents, debt instruments included in trading assets, and short-term investments. During 2009, we generated $11. 2 billion in cash from operations despite paying the A1. 06 billion ($1. 47 billion) European Commission fine recorded in the second quarter of 2009, and the AMD settlement recorded in the fourth quarter of 2009. During 2009, we issued $2. 0 billion of convertible debt and utilized the proceeds from the convertible debt to repurchase $1. 7 billion of common stock through our common stock repurchase program. In addition, during 2009 we returned $3. 1 billion to stockholders through dividends. In January 2010, our Board of Directors declared a dividend of $0. 1575 per common share for the first quarter of 2010, an increase of 12. 5% compared to our fourth quarter dividend (8). To truly look ahead on the evaluation performance measures in maximizing profits, we need to consider cash flows. The trouble of cash flows is that we cannot predict them after certain period of time however in public companies such as Intel, we can look at the stock market valuation to help us with a firm’s future earnings relatively. Under the Stock Performance Graph (page 23 in Form 10k – see exhibit) a five year comparison was done starting at $100 in 2004 and remained somewhat steady with ups and downs until dropping to $65 during the financial crisis of 2008 and then recovering back to almost $100 as of 2009.
Even with this drop, Intel maintained healthy considering the type of business it is in with of only dropping net revenues of $748 million between 2007 and 2008. There are imperfections in expectations of future earning within such a volatile industry, Standard & Poors 500 rates Intel to hold on to your stock as well as a medium risk stock to invest in according to their February 2011 stock report. Intel Ratios Analysis The foundation of our financial analysis is based on various ratios to furnish a better understanding of Intel’s capacity to make profits from its operations.
The following diagrams explain the structure of some of the most important set of ratios from liquidity, leverage but most profitability: When evaluating a liquidity of Intel, we take a look at page 41 of its Form-10k (exhibit) Sources and Uses of Cash of its cash flow. In 2008, was a drastic negative number of -$3,957 million due mostly on the effects of the financial crisis yet with such low figures, Intel bounce back in 2009 to a positive $637 million. This indication reflects their savvy competitive advantages to external environment where applying a more cost efficient worked to be at plus number again.
Strategies such as keeping low inventories, longer account payable and shorter account receivable though do not guarantee more profits in the short-term, it aids in the long-term success. where we ratio such as current ratio it gives future stockholders, creditors and suppliers useful information about Intel’s financial position. Bases to measure is the higher the value of the ratio, the greater the margin of security to cover short-term debts. A good indicator is two. Intel is well over two in all three years.
Leverage ratios look that the long-term condition of a company which includes the ability to pay debts at maturity, how to pay dividends, and if they have the capacity to expand its operations. We see no change in the Debt to Total Assets Ratio for 200 and 2008 for Intel which reflects the high level of debt to cover their total assets however with a two point decrease in 2009. In this industry where majority of assets are operating, high-levels of inventory and investments it is hard to tell if Intel could be debt free as they cover the majority of the assets with the operating income brought about by the high volume of sales.
This nonetheless though not the best of cases at such high numbers, should not scare investors away as Intel is the leader in the industry and reacts quickly to obligations and is in good standing as we will see in the profitability ratios. In profitability ratios which aid in seeing the bottom line of a company, we felt are the ones to focus on best from a strategic perspective decision making. We consider the gross profit margin, return on assets, earnings per share and price-earnings ratio.
The gross profit margin shows the relation between the selling price and the cost of goods sold. In hi-tech companies such as Intel, it is common to have a high gross profit, because there are innovations and patents that allow the company to control the market and the selling price of its products. The Return on Assets Ratio (ROA) is crucial measure on how companies use their assets for sales and how they have an impact on net income. Intel is able to have a profit in their net income from their investments in assets.
Here we see a slight drop which short-term strategies must take place in order to see long-term successes: 1) In 2009, Intel took into consideration a restructuring to better align their divisions to be more competent around their core families for long-term positive results. 2) Also, in 2009 a legal settlement reached against them from AMD which that lowered Intel’s profitability and AMD had a gain in their net income. The earnings per share decreased in all three years 2007 to 2008 from $1. 18 to $0. 7, which is not a good indicator for shareholders as consecutive low earnings per share are not attractive to investors. Stockholders typically think in terms of number of shares they own or plan to buy or sell. Expressing net income earned on a per share basis provides a useful perspective for determining profitability. This leads us to consider the price-earnings ratios. As mentioned, the industry’s margins and revenues are very vulnerable to the market. Intel has been affected with the market downfall in 2008 and legal matters.
In 2008 the ratio decreased which will lead to investors to believe that future earning will not be strong however in jump slightly with a more optimistic ratio of 26. 36 in 2009. Intel’s assessment of its external environment: Intel’s two main competitors are Advanced Micro Devices, Inc. Co, (AMD) and Texas Instruments Incorporated (NYSE: TXN ). AMD, Advanced Micro Devices, Inc, is a semiconductor company, which provides processing solutions for the computing and graphics markets in the United States, Canada, Europe, and Asia.
It offers microprocessor products, including servers and workstation microprocessors, notebook microprocessors, and desktop microprocessors; embedded processor products; chipset products, including IGP and discrete chipsets; graphics products, such as 3D graphics, video and multimedia products for use in desktop and notebook personal computers (PCs), including home media PCs, professional workstations and servers, as well as technology for game consoles. Another major competitor for Intel is Texas Instruments Incorporated.
This company engages in the design and sale of semiconductors to electronics designers and manufacturers worldwide. Its Analog segment offers high-performance products comprising standard analog semiconductors, such as amplifiers, data converters, and interface semiconductors; high-volume analog, standard linear and logic products; power management semiconductors and line-powered systems. According to Yahoo Finance this is how Intel compares to the two competitors listed above and the overall industry.
As exhibited above, Intel is a larger company when looking at the numbers of employees. In addition, their gross profit margin and overall net income was superior to that of its competitors for the period under review. As per Intel’s website, Intel’s major customers include: Original equipment manufacturers (OEMs) and original design manufacturers (ODMs) who make computer systems, cellular handsets and handheld computing devices, telecommunications and networking communications equipment.
As well as, PC and network communications products users (including individuals, large and small businesses, and service providers) who buy PC components and board-level products, as well as our networking and communications products, through distributor, reseller, retail and OEM channels worldwide; other manufacturers, including makers of a wide range of industrial and communications equipment. Intel’s suppliers include: Asymtek, a Nordson Co. ; Daewon Semiconductor Packaging Industrial Co. ; DISCO Corp. ; Grohmann Engineering; Hitachi High-Technologies Corp. Hitachi Kokusai Electric Inc. ; ICOS Vision Systems, NV; Moses Lake Industries (Tama Chemicals); Nippon Mining & Metals Co. , Ltd. , SUMCO Corp. and TXC Corp. Below is a brief summary of Intel’s main suppliers. -Asymtek, a Nordson Company is a world leader in automated fluid dispensing, jetting and conformal coating. They design and manufacture a full line of equipment for semiconductor package assembly, printed circuit board assembly, LED assembly, FPD assembly, life science product assembly and other precision manufacturing. Daewon Semiconductor Packaging Industrial Corporation is a leading supplier of plastic extrusion and injection molded products for the semiconductor industry. -Grohmann Engineering engages in designing and building production equipment and manufacturing systems. The company primarily serves the automotive, telecommunications, consumer electronics, and biotechnical industries. -Hitachi is a global company which manufactures and sells a broad range of products and provides services and solutions to meet the specific needs of customers.
Market sectors served includes: information systems, electronic devices, power systems, industrial systems, automotive systems, consumer products, materials and financial services. -ICOS Vision Systems Corporation NV, through its subsidiaries, engages in the design, production, and sale of inspection equipment for the semiconductor packaging and interconnect applications worldwide. The company offers equipment for inspection solutions of semiconductor components before they are used in various applications like personal computers, cars, or mobile phones. Moses Lake Industries (Tama Chemicals) is a fully vertically integrated manufacturer of ultra-high purity Tetramethylammonium Hydroxide (TMAH). TMAH is a key process chemical used in photolithography, wet etch & clean, CMP, and other critical processes in semiconductor, silicon wafer, and LCD manufacturing. -Nippon Mining & Metals Co. , Ltd. operates in the nonferrous metals industry. It operates primarily in the Metal Production, Metal Fabrication, Recycling and Environmental Services, and Engineering and Consulting Operations segments. SUMCO Corporation manufactures electronic-grade silicon wafers for the semiconductor industry. Our wafers are used by companies all over the world to make integrated circuits and semiconductor devices that power a myriad of electronic products, from computers to cell phones, digital watches to automobile engine systems. -TXC Corporation and its subsidiaries engage in the research, design, manufacture, and sale of frequency control products in Taiwan, the People’s Republic of China, Asia, Europe, and the United States.
The company offers dual inline package and surface mount device quartz crystal products, such as quartz unit crystal, automotive crystal, crystal oscillator, surface acoustic wave filter, and timing module. The general operating environment consists of the outer layer of the environment which affects the business. It has an international, technological, legal, political, economic and socio-cultural dimension to it. The state of the physical environment is also of concern to Intel.
Environment conservation and protection is an issue, which has gained importance because of deteriorating environmental condition. Today, the condition of the environment and being environmentally friendly is an incredibly relevant topic for a lot of businesses. Technological companies, like Intel, have taken key roles to solve some of the existing environmental problems. According to an article dated June 2007 named “Intel IT commits to the Climate Savers Computing Initiative”, the company has proclaimed the Climate Savers Computing Initiative.
The initiative’s goal is to reduce global computer CO2 emissions by 54 million tons per year, equivalent to the annual output of 11 million cars or 10-20 coal-fired power plants. This clearly shows that Intel is trying its best to reduce the pollution of the environment. Understanding Intel’s international environment is also essential. Intel being a multinational company has to operate according to different government policies of different countries depending on the stability of the countries. Politics has a serious impact on the economic environment of the country.
Political ideology and political stability or instability strongly influence the pace and direction of the economic growth. Politics consists of government stability, political values and beliefs shaping policies. Therefore, the politics of a country affect the investment decision of organizations in this country strongly. It is key for Intel to understand the countries they are doing business with and the risks associated. Intel’s social-cultural environment can also be analyzed. For example, social values like demographic factors play a role (i. e. opulation, age distribution, literacy levels, inter-state migration, rural-urban mobility). We also need to consider cultural factors like social attitudes, customs, beliefs and rituals business practices in a major ways. One of the main issues to consider prior to making an investment decision is the workforce of this country. Some of the countries that Intel has made investments in like China and Vietnam have young and plentiful supply of workforce. Thus, it is imperative that Intel have a clear understanding of the socio-cultural environment of the countries it invests in.
It is wise for Intel to have an understanding of the country’s cultural, and workforce because they will essentially become the backbone of the company. For Intel the most important of these general environmental factors is the technological facet. Technology is advancing rapidly and for a company based on technology, the company most keep up to date with the market and the changing environment. Technological factors represent major opportunities and threats which must be taken into account while formulating strategies.
Technological breakthroughs can dramatically influence the organization, including their products, services markets, suppliers, distributors, competitors, customers, manufacturing processes, marketing practices and competitive position. Technological advancements can open up new markets, change the relative position of an industry and render existing products and services obsolete. Technological changes can reduce or eliminate cost barriers between businesses, create shorter production runs, create shortages in technical skills and result in changing values and expectations of customers and employees.
This is especially important for an IT company such as Intel as it can be the key for the companies to survive or the reason which made the failure of some IT companies. For the reasons mentioned previously, it is vital that Intel be aware of the technological sector of the general environment. Intel can be analyzed using Porter’s five forces. Porter’s five forces include: potential new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitute products and rivalry among competitors.
These forces help determine the position of the company versus its competitors in the industrial environment. For Intel, the greater challenge is posed by the rivalry among competitors like AMD. AMD continues to hold a significant portion of the market share, thus Intel needs to continue produce competitive chips in order to capture even more market share. According to Intel, “The high-end, performance PC market is gripped by Intel due to their Pentium II and III line of microprocessors.
A faster chip that can outperform the Pentium line from Intel can prove to be very successful (9). ” It is important for Intel to be on top of their products in order to remain competitive, since stiff competition exists in this industry. There are only a few main competitors in this industry as mentioned previously. The threat of new entrants is into this market is very small due to the tremendous amounts of financial resources required. A new company must be able to allocate resources to both the design of the product and to the efficient manufacturing of that product.
The buyers in this industry have a great deal of power over suppliers because of the high amount of materials that they do buy and the low number of companies buying. Companies such as Intel and AMD can dictate their prices to producers. Furthermore, the buyers in this industry have a great deal of power over suppliers because of the high amount of materials that they do buy and the low number of companies buying. In the microprocessor industry there is no threat of substitute products, since a PC requires a microprocessor for all of its operations.
In summary, there are no outside threats – in terms of new entrants, suppliers, and substitute products for firms in this industry competition is very fierce. In the microprocessor line firms engage in heads-on competition – using benchmarks and other performance, compatibility, reliability and value calculations against the competitor. Consumers’ attitudes in the future will have the biggest effect on the industry. In the past two years consumers have demanded lower prices from the microprocessor industry – however not as far as to completely sacrifice performance. This can be supported with the tremendous growth in the sub-$1000 PC market and the growth of AMD’s market share, who marketed their processor as an equivalent to the Pentium II in performance, and the fact that Cyrix, producers of a low-priced, poor performing processor, did not do well. The continued emphasis on performance and not just low-price will yield the best results in the future – according to trends (10). ” In order for Intel to continue with its success in this industry it is essential for them to be aware of their general environment as well as the wants and needs of the consumer.
Assessment of the internal environment of Intel: Intel’s Goals: Intel’s long-range goals for environmental, health and safety (EHS) are embodied in their three EHS principles: prevent all injuries in the workplace; be an environmental, health and safety leader in our communities and our industry; and reduce the environmental footprint of our products, processes and operations. We also develop goals for EHS improvement and measure our performance against our established goals (11). A main focus is to prevent all injuries in the workplace; Intel’s recordable rate for injury and illness decreased 4% in 2009.
Intel’s days away case rate decreased 18%… their belief that all workplace injuries are preventable, and they continued to focus their efforts in 2010 on reinforcing a strong safety culture. Note chart below: Intel wants to be an environmental health and safety leader in their communities and industry; In 2010, they continued to work towards achieving the five-year goals that they set at the beginning of 2008, placing a strong emphasis on energy conservation, reducing water use and chemical waste.
They focused on identifying opportunities to increase chemical waste recycling rate. Intel continued collaborations with external organizations on sustainability issues, particularly in identifying the role that information computing technology can play in addressing global environmental challenges. As 2012 draws nearer, they are looking beyond their 2012 goals as part of our strategic planning process, to identify environmental trends, threats, and opportunities, and to proactively address them as we plan our future technologies.
A snap shot of their goals are 2012 Environmental Goals •Reduce water use per chip below 2007 levels by 2012. (Assuming a typical chip size of approximately 1cm2 [chips vary in size depending on the specific product]). •Reduce absolute global-warming gas footprint by 20% by 2012 from 2007 levels. •Reduce energy consumption per chip 5% per year from 2007 through 2012. •Reduce generation of chemical waste per chip by 10% by 2012 from 2007 levels. •Recycle 80% of chemical and solid waste generated per year. Achieve engineering and design milestones to ensure that Intel® products maintain the energy-efficiency lead in the market for our next two product generations. Intel focuses on reducing the environmental footprint of their products, processes and operations. For example, Absolute CO emissions were down 33% and per chip CO emissions were down 9% in 2009 compared to 2008. Absolute NOx emissions were down 7%, but per chip NOx emissions were up 25% due to lower manufacturing volumes. A look at Intel’s Values will help understand why they made Fortune’s 2009 list of World’s Most Admired Companies.
Intel was ranked #1 in the semiconductor industry: Taken directly from their employee website: “Our values define who we are and how we act as employees and as a company. More than simply words, they are something we live by each day. They speak to everyone within our diverse workforce. These are our ideals, the Intel Values (12). ” Customer Orientation: They strive to listen and respond to their customers, suppliers, and stakeholders; clearly communicate mutual intentions and expectations; deliver innovative and competitive products and services; make it easy to work with us; and be a vendor of choice.
Discipline: Intel strives to conduct business with uncompromising integrity and professionalism; ensure a safe, clean, and injury-free workplace; make and meet commitments; properly plan, fund, and staff projects; and pay attention to detail. Quality: They also strive to achieve the highest standards of excellence; do the right things; continuously learn, develop, and improve; and take pride in their work. Risk Taking: Intel fosters innovation and creative thinking, embraces change and challenge the status quo, listen to all ideas and viewpoints, learn from our successes and mistakes, and encourage and reward informed risk taking.
Great Place to Work: They are open and direct, promotes a challenging work environment that develops our diverse workforce, work as a team with respect and trust for each other, win and have fun, recognize and reward accomplishments, manage performance fairly and firmly, and be an asset to our communities worldwide. Results Orientation: Intel strives to set challenging and competitive goals, focus on output, assume responsibility, constructively confront and solve problems, and execute flawlessly.
After seeing the image Intel sets for forth for its work force it is no surprise that they have one of the most knowledgeable and creative workforce. That is why their employees are one of the most important resources for Intel. With them fostering a creative environment, it is no wonder why they are seen as such a great place to work. Intel’s Capabilities: Intel’s semiconductor fabrication facilities are seen the best in the semi conductor industry. With the emphasis on employee performance, when you provide your employees with the best facilities…becoming an industry leader will not be far behind.
Eliminating waste, focus on environmentally friendly facilities, and reducing energy costs, it is not surprising to have top facilities. Intel Systems: Supply, Trading, Logistics; reducing delivery costs; Inventory management are all seen as systems in which they are leaders, however, one must look back are their value system as a system. They hire the best and brightest talent they can find. Nurture this talent from the beginning and set up an environment in the company that creates brilliant thinking. This is their best system.
Intel Structure: CEO based; outside persons sit on board of directors; employees encouraged to improving all processes. They encourage free thinking of ideas and listen to all ideas. Intel is the inventor of the x86 series of microprocessors found in personal computers, they also makes motherboard chipsets, network interface controllers and integrated circuits, flash memory, graphic chips, embedded processors and other devices related to communications and computing (13). Intel’s Primary and Secondary stakeholders and the effect on each stakeholder group for any articular strategic decision will be looked. A primary stakeholder is one whose financial or personal situation is correlated directly with the performance of a business. Examples of primary stakeholders are: stockholders, customers, suppliers, creditors, and employees. Secondary Stakeholders: individuals or groups not directly affected by the outcome of a project or business, but still have an interest in it. Examples of Secondary Stakeholders: government agencies, money-lending institutions, or monitoring agencies (14).
Intel’s effect on its primary stakeholders is positive, Intel stockholders are paid millions in dividends and their employees enjoy a great working environment with benefits that surpass the average health and dental plans of average companies. Intel offers its employees preventive care, as well as proactive wellness programs and access to mental health and fitness resources (15). Intel provides assistance in finding quality childcare and priority access to childcare centers near our sites.
Programs include access to summer camps, tax deferral options for childcare services, and prepaid backup care. Intel also offers on-site caregiver training and other services for elders. Intel University offer in-person and online opportunities for the employees that are interested in learning and applying new skills…Intel employees have access to an extensive online library of the latest management, leadership, business, and technical publications. Employees also benefit from a wealth of personal development seminars and opportunities (15).
Intel customers include: Original equipment manufacturers (OEMs) and original design manufacturers (ODMs) who make computer systems, cellular handsets and telecommunications and networking communications equipment; PC and network communications products users who buy PC components and board-level products through distributor, reseller, retail and OEM channels and Other manufacturers of communications equipment (16). In 2010, Hewlett-Packard Company accounted for 21% of Intel’s net revenue and Dell Inc. ccounted for 17% of net revenues (16). Intel’s main competitors are advanced Micro Devices Inc. and Texas Instruments Inc. As we can see from the following chart Intel was superior in 2010 in terms on net sales and net income (17). Intel’s Secondary Stakeholders are the US government agencies, The European Union and their critiques. Intel Premier Providers are working with government agencies, to supplying scalable Intel technology and seamless integration to help maintain essential services and operations.
Intel Premier Providers are supporting the evolution of government agencies by: Delivering stable, upgradeable platforms, helping streamline operations and reducing costs through innovative technology solutions, helping to enable secure, private transactions, moving mission-critical business systems online (asset management, budgeting, planning, licenses, accident reporting etc. ) (18). Some government agencies are not thrilled with the work that Intel is doing, in 2009 the European Union accused Intel of breaking antitrust laws.
The EU ordered Intel to stop illegal sales tactics such as rebates to computer manufacturers (Acer Inc. , Dell Inc. , Hewlett-Packard Co. , Lenovo Group Ltd. and NEC Corp. ) for buying all or most of their chips from Intel and paying them to stop or delay AMD-based computers (19). The European Union said Intel used strong-arm sales tactics in the computer chip market to squeeze out Silicon Valley rival, Advanced Micro Devices Inc. As a result the European Union sanction Intel, Intel was force to pay a record $1. 45 billion fine for monopoly abuse (19).
The European Union has not been the only institution to file a complaint against Intel. A small group of Portland activists plan a protest at Intel’s Ronler Acres campus Monday afternoon seeking the company’s support for “Conflict Minerals Trade Act,” a bill written by Washington Congressman Jim McDermott. The bill sets rules for identifying whether the importing of minerals from overseas contributes to wars in Africa or elsewhere (20). Also in Jerusalem, Israel negotiations to reach a compromise between the ultra-Orthodox and Intel have taken a turn for the worse.
Dozens of protesters attacked Jerusalem’s deputy mayor Yitzhak Pindrus (United Torah Judaism), claiming that he has not done enough to prevent Intel from opening its plant and employing workers there on Saturdays, which they claim is a violation of the Sabbath. Religious Jews are forbidden to work on the Jewish Sabbath, and in recent months the ultra-Orthodox have become increasingly militant in enforcing the Saturday work ban (21). Reccommendations A business strategy is the foundation for success of a business, but there are many different types of business strategies to follow.
According to Andrew Grove from Intel, “business strategy models should not: just be statements of intent; come across like a political speech; have concrete meaning only to management; concern themselves with events far in the future or have little relevance to today (22). ” This is exactly what we are trying to accomplish in the following section, based on Intel’s success and market leadership we have decided to recommend the following strategies in order to continue to dominate the microprocessors industry and many others. I. Strategy to exploit Innovation Innovation is the initial commercialization of invention by producing and marketing a new good or service or by using a new method of production (23). ” Intel has always been able to produce throughout time a faster, better and more efficient microprocessor. Their R&D department has been able to set the standard to which all other competitors’ microprocessors are compared. Maintaining that status of market leader is what has allowed Intel to move quickly down its experience curve and cut prices whenever they have felt a need to pressure the profits of other competitors.
As a way to continue to innovate and to gather ideas with a different perspective we suggest that Intel starts a bank of ideas from new and different sources. The goal is to use all different types of engineers, students, professors, developers, and any technology enthusiast as a source of ideas for new products and processes. Intel should develop a team of “scouts” to explore and create new networks in different areas of the technological world. The goal would be to purchase this innovation, based on the possibilities the “scouts” see in the ideas and products these “outsiders” have.
Teams of scouts or idea brokers could be assigned by geographic and demographic locations and another set to do research on the web. Intel’s spectrum for new ideas will become more ample since their R&D department will be supported with new ideas from a global think tank. Procter and Gamble has already implemented this strategy with great success, with their Connect and Develop innovation model. In just five years from the first implementation of this program, 35% of the new products launched by P&G came from this bank of ideas (24).
Implementing a program such as P&G’s will provide Intel with opportunities for new business endeavors at a lower cost and risk. If an innovation from the global think tank were successful, Intel would pay royalties based on the success of this idea. The initial start up cost would be lower and Intel would only share the benefits of this innovation if it truly becomes profitable for all parties. II. Setting the Standard for the mobile device market Paul Otellini, Intel’s CEO recently said this about tablets: “On the scale of the PC industry, the tablet is relatively insignificant.
A tablet is fundamentally a consumption device. Notebooks and desktops, in contrast, are high-capability input devices (25). ” Business analysts have criticized Otellini’s perspective towards tablets and other mobile devices, tablet sales are expected to grow every year and that they will have a cannibalization effect in the PC market. (Please see chart on next page) There have been many rumors in the market that Intel’s approach toward tablets and other mobile devices has opened the door for AMD and other competitors to offer its products to manufacturers like Apple and Samsung.
Apple’s success with the Ipad has been such that on the first week of March of 2011 they announced the launch of the Ipad2, with the new A5 microprocessor. Apple has designed this chip and it is being manufactured by Taiwan Semiconductor Manufacturing Company, Limited or TSMC. The new Iphone 5 is expected to come out in the summer of 2011 with the A5 microprocessor. Motorola’s Xoom tablet and Samsung’s Galaxy tablet both come with the Nvidia Tegra processor. Unfortunately Intel is not participating in this fast growing industry with great a profit potential.
The strategy that we suggest for Intel to follow is the same that Matsushita followed with their VHS technology versus Sony’s Betamax technology. Intel already has the technology and “know how” for mobile devices; in the Netbook industry Intel’s Atom processor has become the industry standard. We suggest that Intel takes the same approach and join forces with key tablet and phone manufacturers like Apple, Samsung, HTC, Motorola and others. Intel should put these manufacturers their services and offer them a microprocessor to work smoothly with their phones hardware.
The other way to force hardware manufacturers to use their microprocessors is to manufacture a chip that enhances the function of the major operating systems’ for mobile devices. If Intel’s chip helps with the functionality of Google’s Android operating system, manufacturers like HTC, Samsung and Motorola will be forced by Google to use Intel’s microprocessor. The third way to force hardware manufacturers to use Intel’s microprocessor is by Intel working in conjunction with the top mobile application developers.
The goal is to entice to the application developers to promote the use of Intel’s chip with their mobile applications. Working on the three ends (hardware manufacturers, operating system developers, and mobile application developers) Intel will create a demand for their microprocessors and establish them as an industry standard for mobile technologies. In situations where microprocessors are developed in house like in Apple’s case, Intel should manufacture the microprocessors for them. This way we believe Intel will be able to dominate and set the standard for microprocessors in the smart phone and tablet market.
III. Purchase Intel Microprocessors and receive our Antivirus for free In 2010 Intel purchased MacAfee, Inc. , our recommendation for Intel to offer MacAfee security product software for free. Hardware manufacturers that use Intel microprocessors in their products should then include the anti-virus software as part of the package. The initial license payment will be sacrificed but since the license needs to be renewed on a yearly basis part of that initial cost could be covered by the renewal fee.
We believe that if Intel follows these recommendations they will be able to secure their leadership for the upcoming years. Intel should be able to reduce costs, have a broader and secured portfolio and will be able to maintain a competitive edge over other microprocessors manufacturers. Funny enough, Intel maintains a leading position today within the semiconductor industry and maintains a competitive edge logistically, with access to emerging and developing markets, latest innovations and access to diverse demographics and populations.
Intel takes satisfaction in its ability to innovatively create products by taking into account the needs of existing and potential consumers and not just from a financial strategy to be the best in the business and so rightfully so are achieving it. ? Works Cited (1) (N. D. ) Retrieved From (1) http://www. intel. com/intel/corpresponsibility/awards. htm (2) (N. D. ) Retrieved From (2) http://www. businessweek. com/ap/financialnews/D9LM2H1G0. htm (3)(N. D. ) Retrieved From (3) http://www. intel. com/about/companyinfo/capital/info/earnings. htm (4)Page 9, http://files. shareholder. om/downloads/INTC/1182741673x0x362680/18639185-2b2f-4f7a-ab11-1c429129f601/Intel_2009_Form_10-K. pdf (5)(N. D. ) Retrieved From (5) http://money. cnn. com/magazines/fortune/bestcompanies/2010/snapshots/98. html (6)(N. D. ) Retrieved From (6) http://www. sia-online. org/cs/papers_publications/press_release_detail? pressrelease. id=1869 (7)Page 48; Chapter 2 Goals, Values and Performance; Contemporary Strategy Analysis, Seventh Edition; by Robert M. Grant (8)Page 26, Intel Form-10k (9)“AMD vs Intel – Market Share and Revenue Comparative Study” Retrieved from http://www. robabdul. om/amd-vs-intel-market-share-revenue. asp on March 6, 2011 (No author) (10)“External Environment: Opportunities and Threats” Retrieved from http://rubalscsufdocuments. rubalsharma. com on March 6, 2011 (No author) (11)(N. D. ) Retrieved From (11) http://www. intel. com/intel/other/ehs/update. htm (12)(N. D. ) Retrieved From (12) http://www. intel. com/lifeatintel/values/ (13)(N. D. ) Retrieved From (13) http://en. wikipedia. org/wiki/Intel_Corporation (14)(N. D. ) Retrieved From (14) http://www. ehow. com (15)(N. D. ) Retrieved From (15) http://www. intel. com/lifeatintel/lifework/ (16)(N.
D. ) Retrieved From (16) http://www. intc. com/secfiling. cfm? filingID=950123-11-15783 (17)(N. D. ) Retrieved From (17) http://www. dailyfinance. com/company/intel-corporation/intc/nas/company-description (18)(N. D. ) Retrieved From (18) http://www. intel. com/buy/premier/government. htm (19)(N. D. ) Retrieved From (19) http://www. timesunion. com/business/article/Intel-protests-record-1-45B-fine-550293. php (20)(N. D. ) Retrieved From (20) http://blog. oregonlive. com/siliconforest/2010/05/protest_seeks_intels_backing_f. html (21)(N. D. ) Retrieved From (21) http://www. haaretz. om/news/jerusalem-haredim-protest-shabbat-opening-of-intel-plant-1. 4191 (22)”Business Strategy | Types of Business Strategies. ” Business Management | Business Development | Total Quality Management. Web. 09 Mar. 2011. . (23)Grant, Robert M. “Competitive Advantage in Technology-intesive Industries. ” Contemporary Strategy Analysis. Hoboken, NJ: John Wiley & Sons, 2010. Print. (24)Grant, Robert M. “Procter & Gamble’s Open Innovation Initiative. ” Contemporary Strategy Analysis. Hoboken, NJ: John Wiley & Sons, 2010. Print. (25)”Intel’s Big Strategy Shift and AMD’s Opportunity. Ars Technica. Web. 10 Mar. 2011. . ? EXHIBIT 1 Stock Performance Graph The line graph below compares the cumulative total stockholder return on our common stock with the cumulative total return of the Dow Jones U. S. Technology Index* and the Standard & Poor’s S&P 500* Index for the five years ended December 26, 2009. The graph and table assume that $100 was invested on December 23, 2004 (the last day of trading for the year ended December 25, 2004) in each of our common stock, the Dow Jones U. S. Technology Index, and the S&P 500 Index, and that all dividends were reinvested.
Cumulative total stockholder returns for our common stock, the Dow Jones U. S. Technology Index, and the S&P 500 Index are based on our fiscal year. Comparison of Five-Year Cumulative Return for Intel, the Dow Jones U. S. Technology Index*, and the S&P 500* Index 2004 2005 2006 2007 2008 2009 Intel Corporation $100 $107 $89 $120 $65 $97 Dow Jones U. S. Technology Index $100 $104 $114 $134 $73 $125 S&P 500 Index $100 $105 $122 $129 $78 $103 23 EXHIBIT 2 ITEM 6. SELECTED FINANCIAL DATA (In Millions, Except Per Share Amounts) 2009 2008 2007 2006 2005 1
Net revenue $35,127 $37,586 $38,334 $35,382 $38,826 Gross margin $19,561 $20,844 $19,904 $18,218 $23,049 Research and development $5,653 $5,722 $5,755 $5,873 $5,145 Operating income $5,711 $8,954 $8,216 $5,652 $12,090 Net income $4,369 $5,292 $6,976 $5,044 $8,664 Earnings per common share Basic $0. 79 $0. 93 $1. 20 $0. 87 $1. 42 Diluted $0. 77 $0. 92 $1. 18 $0. 86 $1. 40 Weighted average diluted common shares outstanding 5,645 5,748 5,936 5,880 6,178 Dividends per common share Declared $0. 56 $0. 5475 $0. 45 $0. 40 $0. 32 Paid $0. 6 $0. 5475 $0. 45 $0. 40 $0. 32 Net cash provided by operating activities $11,170 $10,926 $12,625 $10,632 $14,851 Additions to property, plant and equipment $4,515 $5,197 $5,000 $5,860 $5,871 (Dollars in Millions) Dec. 26, 2009 Dec. 27, 2008 2 Dec. 29, 2007 2 Dec. 30, 2006 2 Dec. 31, 2005 2 Property, plant and equipment, net $17,225 $17,574 $16,938 $17,614 $17,114 Total assets $53,095 $50,472 $55,664 $48,372 $48,309 Long-term debt $2,049 $1,185 $1,269 $1,128 $1,377 Stockholders’ equity $41,704 $39,546 $43,220 $37,210 $36,640 Employees (in thousands) 79. 8 83. 9 86. 94. 1 99. 9 1Beginning in 2006, we adopted new standards that changed the accounting for employee equity incentive plans requiring the recognition of share-based compensation. 2As adjusted due to changes to the accounting for convertible debt instruments. See “Note 3: Accounting Changes” in Part II, Item 8 of this Form 10-K. The ratio of earnings to fixed charges for each of the five years in the period ended December 26, 2009 was as follows: 2009 2008 2007 2006 2005 44x 51x 72x 50x 169x Fixed charges consist of interest expense, capitalized interest, and the estimated interest component of rental expense. 4 EXHIBIT 3 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Liquidity and Capital Resources (Dollars in Millions) Dec. 26, 2009 Dec. 27, 2008 Cash and cash equivalents, debt instruments included in trading assets, and short-term investments $13,920 $11,544 Loans receivable and other long-term investments $4,528 $2,924 Short-term and long-term debt $2,221 $1,287 Debt as % of stockholders’ equity 5. 3% 3. 3% Sources and Uses of Cash (In Millions) In summary, our cash flows were as follows:
