By Neland Nobel

Written by Neland Nobel

Estimated Reading Time: 2 minutes

This hallmark corporation with soon-to-be six plants in Arizona needs to get its act together

President Trump calls for the CEO to resign.

The Intel Corporation has a significant commercial footprint in Arizona. It currently has four fabrication plants in Arizona and is adding two more.

It has also been the recipient of billions in government money through the CHIPs Act. No single company received as much as they did, some $8 billion.

The firm has come under some criticism for needing government money for capital investment, since the firm has spent $152 billion in stock buybacks. Stock buybacks reduce the supply or “float” of a stock, which helps promote stock price appreciation. While this may benefit shareholders and help management that have leveraged stock options, one wonders why more money was not used on new plant and equipment. After all, why should taxpayers finance expansion when the company had ample funds to fund its own expansion?

When a company engages in massive buybacks, management is essentially saying: We prefer the supposed immediate gratification of reducing the supply of stock to the long-term goal of investing in the business and driving stock prices eventually higher through robust organic growth.

This does not suggest a company that has been exceptionally well run, and that they may have been more concerned about juicing their stock values as opposed to being the most advanced company in its sector. But if that was their intention, they even failed at that.

True, this is a personal opinion. But the more critical observation is what the market thinks. Despite hundreds of billions of stock buybacks, the stock has still been a poor performer.

Thus, the verdict of the market is more critical and more comprehensive than our opinion.

Currently, INTEL trades for about $20 a share, about the same price it was back in 2012. That is a gain of less than 30% over 20 years, while the S&P is up 644% during the same period. One wonders what the stock price would be without billions in buybacks. This does not speak well of management.

How could a company in the technology sector, riding the waves of both breathtaking technological change and perhaps the greatest stock bull market in US history, fail so miserably to deliver shareholder value? Even a still boat rides with the tide, but INTEL’s share price has been unable even to do that.

Now, management seems to have gotten itself in hot water by hiring a new CEO who may have close ties to the Chinese Communist Party. This has drawn the ire of Senator Tom Cotton, and his letter to INTEL is below.  If this is true, and we don’t know why a prominent US Senator would bring the subject up if it were not, this is another black mark against a company that seems determined to disappoint.

If a Senator can discover this, one wonders what kind of due diligence the board performed before making this selection.

INTEL is a significant employer in the state of Arizona, so its mistakes have an impact beyond share prices.  We are sure many Arizonans presently work for, or have worked for, the company and have the stock in their 401(k)s.

Yet, this company can’t seem to walk without stepping on its own feet.

What is it going to take to get this company to live up to its potential?

Late Note: President Trump has called for the resignation of the INTEL CEO for his ties to China.

Sourced from PRICKLY PEAR