Summary: OVERPRICED
Score: 8/20
MOS: 27%
Share Price: $55
Sticker Price: $75
Is Intel a good buy?
Intel is a technology company that was founded in 1968 and is is headquartered in Santa Clara, CA. They manufacture microprocessors, motherboards, network interface controllers, flash memory, graphics chips, and other computer parts.
Here are some fun facts on Intel…
- Intel’s first big success came in 1971 when it launched 4004 micro-processors. It was fingernail sized but offered same computing power as the room-sized computer.
- Intel was initially named “Moore Noyce” after the two founders, Gordon Moore and Robert Noyce but this name sounds like “More Noise,” so they decided to change it to “NM Electronics.” After a year with this new name, it was replaced with the name “Intel” which is short form of “Integrated Electronics.” But for this name, they had to pay Intelco hotel chain $15,000 for exclusive use of this name.
- In the 1980s Intel was among the top ten sellers of semiconductors in the world.
- In 1992, Intel became the biggest semiconductors maker by revenue.
- In 1994 the iconic Intel “jingle” was created which most of you would probably recognize.
And then 2000 hit…
New competitors started to gain serious traction. With semiconductors this included Nvidia and AMD. With networking components this included NXP, Infineon, Broadcom Limited, Marvell Technology Group, and Applied Micro Circuits. With flash memory this included Spansion, Samsung, and Toshiba.
So what happened to Intel? They were once a tech powerhouse but haven’t made much progress in the last 5 – 10 years.
I did some homework and couldn’t land on a definitive reason why Intel has not performed well other than the obvious rise of competition.
If you’ve ever read the book “Good to Great” it talks about how important it is to be GREAT at one thing as opposed to GOOD at multiple things. Based on my homework, this may have been the issue with Intel.
Now keep in mind, there are some companies that can be great at many things (Microsoft and Apple come to mind) but this is rare.
Intel also has a lot of competitors and their products aren’t overly complicated to manufacture today. In other words, they have a narrow moat. When you have a lot of competition and a low barrier to entry you will either separate yourself from that competition based on QUALITY or PRICE.
If you want to match quality, you have to be highly focused on that product. If you can’t match quality, then your only option is to drive the price lower than any of the competitors and that’s not a good place to be.
Intel has released good news…
As of 10/21/2020, Intel announced that it will be discontinuing its NAND memory chips. NAND memory chips are solid state drives for smart phones. From what I’m reading, they are a commodity. They are cheap and relatively easy to manufacture. Essentially, cell phone manufacturers are looking for the lowest priced components for their phone and the technology of solid state hard drives has advanced to the point where one solid state brand can be just as reliable as another brand. Why compete? Drop the product and turn your attention to other products that will move you from GOOD to GREAT.
To answer the question is Intel a good investment? The answer is NO. Aside from the numerous competitors, when you take a look within Tykr you can see the score is 8/20, which shows the financials are too weak. Also, with a MOS of 27% (share price of $53 vs a sticker price of $75) we can see this stock is ON SALE slightly but it’s not at the 50% MOS we desire.
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