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Analyzing How Intel’s Financials Performed in 1Q15

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Operating performance and margins

As we saw previously in this series, Intel’s CCG (Client Computing Group) segment reported a decline in revenue that was offset, to an extent, by the Data Center Group and IoT (Internet of Things) segment.

In 1Q15, Intel’s gross margin stood at 60.5%—an increase of 0.9% over 1Q14, but down 4.9% from 4Q14. Modest expansion in the margin on a YoY (year-over-year) basis was primarily due to lower 14nm factory startup costs and higher platform volume. Lower platform ASP (average selling prices), driven by a larger mix of tablet and phones, offset this to a small extent.

With an ~$149 billion market capitalization, Intel (INTC) continued to lead the semiconductor space in 2014, according to a Gartner report in January 2015. Qualcomm (QCOM) and Micron Technology (MU) are some other leading players in the semiconductor space.

To gain diversified exposure to Intel, you can invest in the iShares US Technology ETF (IYW). It invests about 4.56% of its holdings in Intel.

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Intel’s cash, debt, and cash flow position

For 1Q15, Intel’s cash and short-term investments, debt, and FCF (free cash flow) stood at $14.05 billion, $13.7 billion, and $3.54 billion, respectively.

Intel’s dividends and buybacks

In fiscal 1Q15, Intel generated ~$4.4 billion in CFO (cash from operations) and paid dividends of $1.1 billion. It used $750 million to repurchase 21 million shares of stock. The amount spent on buybacks in 1Q15 was significantly lower compared to $4 billion spent in 4Q14.

Investments in capex and R&D

Intel spent ~21% of its total revenue on R&D (research and development) in 2014. Another company, Advanced Micro Devices (AMD) spends ~25% of its revenue on R&D. In its earnings release, Intel stated that it lowered the capex (capital expenditure) budget by $1.3 billion to $8.7 billion. The capex reduction was primarily to reuse capital on the 14nm process and sync the company’s overall capacity with the demand.

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