Intel Case Study 1992
Intel Corporation, 1992
Case Study
Describe the characteristics of the industry in which Intel operates. How is Intel positioned in the industry? Intel operates in an industry, which is comprised of products involving high research and development costs, continuous product improvement and new innovations. The companies in the industry are having high economies of scale and are knowledge based. It helps both the service and manufacturing sectors in the growth process. Intel is positioned as a leading company with its ability to adapt to technological changes and its strong relations with other businesses who are major buyers of integrated circuits. The industry in which it operates is very competitive and comes with high risks as failure to produce a viable product can permanently lead them to exit the market. Intel has built its reputation as a company having consistency in innovation. They were the major innovators in the 70’s where they had major breakthroughs in microelectronics. It has also positioned itself as the major player which sets benchmark for others to follow such as the Moore’s law. However being in a competitive industry, Intel faces potential threats from other companies who imitate its innovative products and therefore, affecting part of Intel's future revenue.
Describe the current capital structure of Intel. Discuss the pros and cons of the large cash position. The current capital structure of Intel is mainly equity oriented. As observed from Exhibit 3 of the case, the long-term debt portion of Intel was 5.77% of total liabilities and equity as of December 1991 whereas the equity portion was 72.44%. Further, Intel prefers to have debt only if terms are most favorable to the company. Again, the company is cash rich. This can be observed from the fact that as of December 1991, Intel cash and equivalent ratio was about 36.19% of total assets. An advantage of having large cash position is that it offers protection during tough times
Case Study
Describe the characteristics of the industry in which Intel operates. How is Intel positioned in the industry? Intel operates in an industry, which is comprised of products involving high research and development costs, continuous product improvement and new innovations. The companies in the industry are having high economies of scale and are knowledge based. It helps both the service and manufacturing sectors in the growth process. Intel is positioned as a leading company with its ability to adapt to technological changes and its strong relations with other businesses who are major buyers of integrated circuits. The industry in which it operates is very competitive and comes with high risks as failure to produce a viable product can permanently lead them to exit the market. Intel has built its reputation as a company having consistency in innovation. They were the major innovators in the 70’s where they had major breakthroughs in microelectronics. It has also positioned itself as the major player which sets benchmark for others to follow such as the Moore’s law. However being in a competitive industry, Intel faces potential threats from other companies who imitate its innovative products and therefore, affecting part of Intel's future revenue.
Describe the current capital structure of Intel. Discuss the pros and cons of the large cash position. The current capital structure of Intel is mainly equity oriented. As observed from Exhibit 3 of the case, the long-term debt portion of Intel was 5.77% of total liabilities and equity as of December 1991 whereas the equity portion was 72.44%. Further, Intel prefers to have debt only if terms are most favorable to the company. Again, the company is cash rich. This can be observed from the fact that as of December 1991, Intel cash and equivalent ratio was about 36.19% of total assets. An advantage of having large cash position is that it offers protection during tough times