What the Balance Sheet Tells us about Intel’s (NASDAQ:INTC) Stock
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Intel (NASDAQ:INTC) has been one great company which has played a central role in revolutionizing the technology industry. The most famous of its products is the “microprocessor” – a fundamental computer component. With the rise of the mobile industry, it was predicted that Intel would lose its market; however, against all odds it has performed exceedingly well and with a good timing it has discovered new applications for the older technology in the data-storage realm.
Thus, along the way it had sustained its financial strengths effectively. Part of Intel’s (NASDAQ:INTC) success owes its credit to the prudence that the company has shown to read the current capital-market conditions and act accordingly. Three points sum up the success story of Intel:
Unlike many of its peers, Intel avoids cash hoarding
Unlike similarly sized large technology peers Intel (NASDAQ:INTC) has the smallest backlog of cash and invests least on short-term projects. This is partly because it has a longer track record of paying dividends than most tech companies. To date, Apple’s and Microsoft’s dividend yield is smaller than that of Intel’s and that incorporates Intel’s recent share-price surge. Furthermore, Intel is reinvesting in its own growth by continuously financing on its plant and equipment assets. And that makes the balance sheet look a lot more normal than the cash-rich balance sheets of several other tech companies.
Intel doesn’t refrain from putting capital on long-term investments
Intel (NASDAQ:INTC) has always been confident enough to commit substantial capital on its long-term investments. In the third quarter of 2014, Intel had a total of $12.1 billion listed as long-term investment in comparison to $9.2 billion considered trading asset security. Long-term investment for some companies might largely consist of bonds and other income-producing securities. But, Intel had roughly $16.9 billion in marketable debt securities at the end of the third quarter, most of which are considered as long-term investments. Long-term investments, although, carry considerable risk; but have a better growth potential.
Intel has taken on greater leverage
Intel (NASDAQ:INTC) following the convention has increased its borrowing in recent years it had just $1.2 billion in long-term debt in 2008; afterwards it methodically raised its leverage levels and now sports $13.2 billion, including the current position of its long-term debt. Intel used much of that debt in order to buyback stocks; thus, whereas it was able to invest only $1.7 billion in 2010 for repurchasing stocks, it invested a huge amount of $14.3 billion in 2011. A rise in financing rates would result in a formidable scenario for Intel, at this stage, Intel (NASDAQ:INTC) has the cash on hand to pay down its debt if it wants to avoid higher interest rates.
Intel is much thoughtful about the future
Although skeptics worry that Intel’s (NASDAQ:INTC) recent perfection is a one-time effect which is a result of increase in demand of the PC which will soon flare out. But, Intel has systematically taken initiatives to drive growth and stability for years to come.