| Intel is not profitable. They have negative eps and negative free cash flow. The cash flows from existing products can't be considered in isolation. If their R+D and Capex investments stopped, the sum total of the existing+legacy cash flows wouldn't nearly cover Intel's substantial liabilities. They also have 50 billion dollars in debt, and their cash flow situation has gotten so desperate that slices of future fab revenue have been pawned off to private equity, who now has a senior claim on the assets (as do the bondholders). An equity stake and Intel is not something that a TSMC would want without coercion. It's just not a very attractive place to be an equity holder. >Get rid of some dead weight, write off the bad investments, improve their foundry business and their value easily grows multiples of what it currently is. As if it was that easy. The company has now been through multiple CEOs attempting to mix up these ideas in various ways. The last CEO tried to do a Hail Mary to improve the foundry business, but the balance sheet can't support it. Now the new CEO is essentially writing off those investments and putting them on the back burner. Considering that, getting rid of the dead weight will be difficult, considering the company itself is largely dead weight... The quality of their employees is not good, or at least not nearly at the level that needs to be (18A yields are alarmingly low, and that's the critical product that basically determines the company's future. 14a is already looking more and more distant despite it being the purported savior not even a year ago). Realistically, their financial situation puts them right at the precipice of needing to shed the fabs, and/or permanently continue down the path of more Brookstone-like partnerships where they can spread the burden (which then caps the equity holder upside). There is nothing "easy" about the current situation. Maybe without the 50 billion in debt, but nearly all of remedial paths are running into nasty balance sheet constraints. There's no more room to spend quarters rejiggering the thing. |
Did I say they were? Google gross versus net margin.
> If their R+D and Capex investments stopped, the sum total of the existing+legacy cash flows wouldn't nearly cover Intel's substantial liabilities.
You sure? https://www.intc.com/financial-info/balance-sheet
Current assets are $43 billion. Total assets are $192 billion. $30 billion yearly in gross profit. Debt is only $50 billion. They still hold 75% market share. Repeat, they still sell 3 times more chips than AMD.
Yes, their balance sheet isn't as good as some fabless competitors but if TSMC helps them with their 14a yield then it looks like a good investment.
Also, having TSMC on board will surely help with their fab business. Again, between the US government needing them to survive, TSMC on board, plus the fact they still do have a decent core business, I think Intel (and TSMC's investment) will be fine.