Author Topic: INTC - Intel  (Read 61017 times)

Liberty

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Re: INTC - Intel
« Reply #230 on: January 25, 2019, 08:23:05 AM »
I don't think INTC being cheap is just because of "Buffett doesn't like tech".

The bear narrative is:
- PCs are flat to down
- INTC lost mobile
- Fabs possibly falling behind TSMC and Samsung
- Most growth is in GPUs, not CPUs
- Most of their growth/diversification initiatives were bungled
- They may lose data centers (I think this the weakest claim compared to ones above.)

What is the bull narrative? OK, INTC might be a valuation-based buy - I won't argue with that. But assuming a long term hold: where do bulls see INTC in 5-10 years? What will be different from the last 10+ years? INTC sales growth has been 6% annual starting from 2008, and pretty zeroish starting from 2012... Similar with OCF (I eyeballed that one though).

Not what I meant.

I meant that value investors don't seem to look much at the stock, possibly because it's tech, and value investors have a cultural baggage that makes them less interested in tech (that's been changing a bit in recent years).
« Last Edit: January 25, 2019, 08:52:01 AM by Liberty »
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Liberty

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Re: INTC - Intel
« Reply #231 on: January 25, 2019, 08:24:03 AM »
There is a perception that they are falling behind TSMC and Samsung in the next node, and may start to lose market share in data centers, where they are currently almost a monopoly.

Yeah, Intel has been a SNAFU after the other lately... Missed all their roadmaps, lots of process trouble. Most of Apple's Mac troubles in recent years have been because of Intel, pushing Apple faster torward making its own ARM desktop and laptop chips, which won't be good for Intel..
« Last Edit: January 25, 2019, 08:52:20 AM by Liberty »
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HJ

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Re: INTC - Intel
« Reply #232 on: January 25, 2019, 08:49:35 AM »
The bull narrative would be they bought Altera, they are in networking now, they ventured into DRAM memories, and are in a good position to re-architect chips for the future where deep knowledge across the functionality is likely necessary, and not simply compete on the basis of going to the next node.  If they can get the Apple guy over to be their CEO, they might yet get back into the mobile game, where they are already manufacturing modems for iphone.

But the bull thesis seems to be much less tangible and measurable than the bear case that can be made.  If the interim CEO doesn't really want to be the permanent CEO with no obvious reason, there might be deeper problems that is not revealed from financial statements.

I don't think it's that hard to imagine AMD taking 10%-15% share in data centers on the basis of Intel's problematic migration to 10nm node.  Last time AMD is perceived to have gained a step with Athlon in 2006, their market share in servers went into 20+%.


JayGatsby

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Re: INTC - Intel
« Reply #233 on: January 25, 2019, 12:07:40 PM »
Bull narrative is they have a monopoly in their core markets, which 1) have a fairly rapid replacement cycle, and 2) are mostly long term grown industries (I'm pretty certain in 20 years the world will be consuming more data than today, and more of that data will be in the cloud).

I think sometimes people get so focused on finding the "bull thesis" and having a story, that these sorts of things just get neglected. People want quick money and a story for why they'll double their money tomorrow. Here you have a monopoly business, that's also a cannibal and a pretty solid track record of capital allocation / value creation. There isn't really a story... thesis is that next year will be basically the same as this one.

It's the same reaction as when I talk to value investors about Kinder Morgan. Next year will be basically the same as this year. They'll either keep generating a 12% FCF yield or the price will go up. It doesn't matter which one.  It's almost the anti thesis.

Maybe AMD gains 20% despite a massively smaller R&D budget. You'd still have a pretty reasonable valuation.

Liberty

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Re: INTC - Intel
« Reply #234 on: January 25, 2019, 12:28:51 PM »
Bull narrative is they have a monopoly in their core markets, which 1) have a fairly rapid replacement cycle, and 2) are mostly long term grown industries (I'm pretty certain in 20 years the world will be consuming more data than today, and more of that data will be in the cloud).

I think sometimes people get so focused on finding the "bull thesis" and having a story, that these sorts of things just get neglected. People want quick money and a story for why they'll double their money tomorrow. Here you have a monopoly business, that's also a cannibal and a pretty solid track record of capital allocation / value creation. There isn't really a story... thesis is that next year will be basically the same as this one.

It's the same reaction as when I talk to value investors about Kinder Morgan. Next year will be basically the same as this year. They'll either keep generating a 12% FCF yield or the price will go up. It doesn't matter which one.  It's almost the anti thesis.

Maybe AMD gains 20% despite a massively smaller R&D budget. You'd still have a pretty reasonable valuation.

Do they have a monopoly, though?

Other fabs seem to have passed them in process.

Other architectures are getting close in their main market (and are better for certain application -- ie. ARM already better for mobile, and getting better on performance/watt for PC/datacenter, Google's TPU already better for machine learning), and the hyperscale cloud players have the resources to design their own CPUs and outsource fabbing and keep the margin that Intel would make for themselves.

They certainly have a monopoly-like market share, but that's backwards-looking. Looking forward, it seems to me like there are cracks in their moat. Maybe they can fix them, but maybe not and over time their operating leverage starts biting the wrong way.

I don't know, it's not a situation I follow too closely, but that would be my quick hypothesis to attack if I want starting work on it.
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JayGatsby

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Re: INTC - Intel
« Reply #235 on: January 25, 2019, 12:53:49 PM »
You could be right. I don't know a lot about the tech side. I am talking entirely backward looking. Seems like it's been the same story with Intel for 20 years though. It feels like one of those Howard Marks "this time is different" kinda things, but maybe this time truly is different if Intel trips and others pass them.

2014: https://www.fool.com/investing/general/2014/10/08/why-ibm-is-the-real-threat-to-intels-server-domina.aspx
2006:https://money.cnn.com/magazines/fortune/fortune_archive/2006/08/21/8383598/index.htm

I always think it's interesting that the only sticker on my computer other than Lenovo is "Intel".

Edit: I also think Peter Thiel's observation that monopolies downplay the fact that they have a monopoly is interesting here. From a regulatory perspective the constant perceived competition is ideal. It could be genuine competition this time though. I'm sure China would like a piece of that market share.
« Last Edit: January 25, 2019, 01:07:12 PM by JayGatsby »

Liberty

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Re: INTC - Intel
« Reply #236 on: January 25, 2019, 01:03:09 PM »
You could be right. I don't know a lot about the tech side. I am talking entirely backward looking. Seems like it's been the same story with Intel for 20 years though. It feels like one of those Howard Marks "this time is different" kinda things, but maybe this time truly is different if Intel trips and others pass them.

2014: https://www.fool.com/investing/general/2014/10/08/why-ibm-is-the-real-threat-to-intels-server-domina.aspx
2006:https://money.cnn.com/magazines/fortune/fortune_archive/2006/08/21/8383598/index.htm

I always think it's interesting that the only sticker on my computer other than Lenovo is "Intel".

The Wintel duopoly was very strong, one of the best money-making enterprise ever, but Windows isn't exactly what it was either, right? Things stay the same until they aren't. That's why this job is hard, you have to made judgement calls about uncertain things. But a lot should go into the too-hard pile...

If you look at it one way, you could say that Intel lost a ton of market share in the past decade. Smartphones and tablets are computers, regardless of what we call them. Basically none of them run on intel CPUs...
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gfp

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Re: INTC - Intel
« Reply #237 on: February 07, 2019, 06:23:53 AM »
Thought this was interesting if unsurprising - First Srouji was rumored to be headed to Intel as the next CEO, then no- he stayed on at Apple.  Intel has been rumored to be really struggling with their 5G modems and Qualcomm-competitor products.  This article claims Apple has moved modem / radio development in-house.  Presumably bad for Intel.  Not sure how Apple pulls it off without QCOM licenses but I suppose that IP will be available at a more 'reasonable' price after these court cases wind up.

https://www.macrumors.com/2019/02/07/apple-in-house-modems-johny-srouji/

Castanza

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Re: INTC - Intel
« Reply #238 on: May 09, 2019, 06:35:00 AM »
Between poor management, a stretch of poor manufacturing, AMD eating their lunch in the cloud/data center space, Qualcomm besting them in mobile chips........When does this become attractive to you? I've been wanting to take a position in this for awhile, but they have too many issues right now. 10nm would be big if they could roll it out (been delayed since late 15). But even that won't "fix" any of these issues.

walkie518

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Re: INTC - Intel
« Reply #239 on: May 14, 2019, 03:07:14 PM »
Between poor management, a stretch of poor manufacturing, AMD eating their lunch in the cloud/data center space, Qualcomm besting them in mobile chips........When does this become attractive to you? I've been wanting to take a position in this for awhile, but they have too many issues right now. 10nm would be big if they could roll it out (been delayed since late 15). But even that won't "fix" any of these issues.
it's highly likely that over a longer stretch of time, Intel will weather the storm though today's price is likely a fair one to pay for a good business in a slightly less favorable landscape than say 5 years ago

the trend will be on the side of those with scale...

then again the competition is growing from a couple to a handful of players, some of which might keep foundry in-house like Samsung or whatever the Chinese might develop, but the company with the largest Si wafer will win on cost! 

wonder how much of a moat one might be able to build w/the instruction sets?  guess would be somewhat marginal?