Intel slips following TV service reports, Bernstein note


Intel (INTC -2.1%) is selling off a bit after multiple reports emerged indicating its Web TV service plans are in jeopardy, and Bernstein's Stacey Rasgon (Underperform) declares his existing views on slowing cash-return growth are playing out.

Variety has joined Bloomberg and AllThingsD in reporting on Intel's TV service woes. Sources tells the magazine Intel has pushed back its launch date to 2014, and held talks with Netflix and Liberty Media that went nowhere.

Rasgon, who in the past has pointed out Intel's dividend/buyback efforts have led its net cash position to fall below $5B, now states Intel "has little headroom" to raise its cash-return rate above current levels of 45%-55% of TTM free cash flow, giving revenue pressures and rising capex.

He also thinks interest rates are a concern, given high-yield stocks tend to underperform during periods of rising rates. Intel's yield is currently at 3.8%.

Earlier: Intel invests in Google Glass rival, talks up wearables

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Comments (15)
  • Arthur Fisher
    , contributor
    Comments (346) | Send Message
     
    This news should be bullish, not bearish. Over the years Intel has wasted a lot of money on these ventures beyond their basic competencies. Whatever forces them back to a concentration on circuit design and low-cost manufacturing should be good for the stock. Pretty much anyone could have foreseen that TV would be a boomerang coming back around to clip them on the back of the head. Let's hope that this was a part of the old management's style and that the new management will kill it
    27 Sep 2013, 02:26 PM Reply Like
  • Windsun33
    , contributor
    Comments (4431) | Send Message
     
    I agree - Intel was a very latecomer to this game, and it is way out of their area of expertise. It looks to me like they would be better off avoiding this money pit.
    27 Sep 2013, 03:35 PM Reply Like
  • ScottArt
    , contributor
    Comments (39) | Send Message
     
    Raise your hand if you were long INTC because you were counting on the TV business succeeding... I really doubt that has anything to do with today's decline.
    27 Sep 2013, 02:30 PM Reply Like
  • Justin Jaynes
    , contributor
    Comments (3152) | Send Message
     
    Intel's CTO made a comment one time about some ridiculous amount of Intel's R&D spending going to things not related to their core business. I would prefer to see things like TV be put on the back burner.

     

    "In 2012, Intel spent $10.1 billion on research and development, making it one of the biggest R&D spenders in the world.
    Half of that money goes to wildly experimental tech, Justin Rattner, Intel CTO said Monday on stage at the Bloomberg Next Big Thing Summit. "

     

    http://yhoo.it/19Mgldn

     

    I would rather see them focus that spending and drive top line growth through things like an integrated radio into their mobile SoCs, and bottom line growth by trimming some of the weird R&D spending.

     

    *Raises hand to waive good bye to TV*
    27 Sep 2013, 02:48 PM Reply Like
  • Windsun33
    , contributor
    Comments (4431) | Send Message
     
    I can see them spending money on experimental tech that is related to their core, but the TV thing was a bit way out there and I hope they drop it. I recall that at one time LCD research was considered "weird".
    27 Sep 2013, 03:37 PM Reply Like
  • scorpion.bullfrog
    , contributor
    Comments (91) | Send Message
     
    I've been wondering how they, Intel, or any other large corporation, for that matter, manages an R&D budget. Then I saw the movie "Jobs", where Steve Jobs gets assigned to a basement project called Macintosh. He walks in and finds one guy playing solitaire and another asleep. I imagine Intel is paying a lot, make that, a ton, of six figure salaries, for people to play to video games and surf social networking sites. How the heck does an R&D budget work? Seriously? Here's $100k/yr, now, go invent something? Apple was started in a garage, with an R&D budget of ZERO. Intel BETTER penetrate the tablet - smartphone markets BIG or theyve clearly burned a ton of our cash on nothing.
    28 Sep 2013, 03:01 PM Reply Like
  • Windsun33
    , contributor
    Comments (4431) | Send Message
     
    The movie "Jobs" is not 100% factual, it has a lot of the usual "embellishments" that most docu-dramas do. I was in R&D at Honeywell and at Motorola many years ago, and I never saw anything at all like what the movie shows for that.
    29 Sep 2013, 04:30 PM Reply Like
  • Camellia Capital Management
    , contributor
    Comments (220) | Send Message
     
    "He also thinks interest rates are a concern, given high-yield stocks tend to underperform during periods of rising rates. Intel's yield is currently at 3.8%."

     

    This is common sense and something I've pointed out a few times now. It was never something that concerned me until the party line on Intel became "I just own it for the dividend" (oddly, even as some others on this website were tossing out $50+ price targets). The dividend is the most cited reason for holding the stock, and that element of the thesis is now facing pressure both internally from Intel's unwillingness to raise it and externally from rising rates and opportunity costs.
    27 Sep 2013, 03:37 PM Reply Like
  • jimandsandymas
    , contributor
    Comments (263) | Send Message
     
    Time to dump this dead money stock .
    27 Sep 2013, 04:05 PM Reply Like
  • cvdag
    , contributor
    Comments (3) | Send Message
     
    Bernstein's comments are right on the money. No chance of increase in dividends for next year (unless PC improves in a big way)
    27 Sep 2013, 05:05 PM Reply Like
  • LeonadoTH
    , contributor
    Comments (24) | Send Message
     
    This is actually a good news?
    27 Sep 2013, 05:06 PM Reply Like
  • LeonadoTH
    , contributor
    Comments (24) | Send Message
     
    The whole chain of management who started and advocated this TV thing should be fired, --- from "Intel Still Inside"!
    27 Sep 2013, 05:06 PM Reply Like
  • Arthur Fisher
    , contributor
    Comments (346) | Send Message
     
    Along with whoever advocated this obviously-too-high payout ratio.
    27 Sep 2013, 05:38 PM Reply Like
  • medzjohn
    , contributor
    Comments (490) | Send Message
     
    They fought the law of big numbers and the law won.
    28 Sep 2013, 03:04 PM Reply Like
  • Windsun33
    , contributor
    Comments (4431) | Send Message
     
    Hehe.. that reminds me of a movie I saw once, where some bad guy runs out of a building on fire, and the hero says "he fought the law of thermodynamics, and the law won".

     

    But surely Intel could find more promising things to invest in than something a dozen other companies are already way ahead on.
    29 Sep 2013, 04:25 PM Reply Like
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