Editor’s Note: This story was corrected on May 26. 2019.
General Electric (NYSE:GE). JC Penney (NYSE:JCP). US Steel (NYSE:X). In investing, and business, a good name and a long history are worth precisely nothing. This is especially true in technology, where once-great names like Silicon Graphics, Wang and Novell never got a chance to grow old.
But Intel (NASDAQ:INTC)? Intel, the home of Moore’s Law, whose semiconductor chips practically invented the world we live in? Intel?
In the last month, Intel has lost over 23% of its value. That’s over $45 billion whacked off its market cap. At about $43.60, it’s selling for just 10 times last year’s earnings, just three times last year’s sales. Is it possible that Intel could join these other names on the scrap heap of business history?
Self-Induced Troubles for Intel Stock
It is possible.
Intel has been drifting for years. I worked on a project during the last decade about their problems with mobile chip technology. They’re still not fixed. CEO Bob Swan is just the seventh leader in Intel’s history, the second without a technology background. Today only two members of the company’s nine-member board are technologists.
As Adam Savage once said, “Well, there’s your problem.” Intel has lost its technology edge.
Intel stock is four years late with its 10 nm manufacturing process. Rival Taiwan Semiconductor (NYSE:TSM) is already rolling out 7 nm chips.
Advanced Micro Devices (NASDAQ:AMD), once Intel’s baby brother, has lapped it in this decade. Since the start of 2016, AMD’s stock is up over 800%. Intel is up 29% in that period. The average Nasdaq gain has been 53%.
Intel stock has been beaten in modem chips by Qualcomm (NASDAQ:QCOM), beaten in memory chips by Micron Technologies (NASDAQ:MU) and beaten in graphics by Nvidia (NASDAQ:NVDA).
AMD is now beating it in microprocessors.
Intel’s chips have been hit repeatedly with security flaws, and the fixes cost processing speed. AMD seems immune to the latest vulnerabilities.
Intel’s low prices and high volumes mean it has reclaimed its lead among semiconductor makers from Samsung Electronics (OTCMKTS:SSNLF). But that’s a function of the memory chip business, which will turn around with the rest of the market.
Intel is down to $3 billion in cash, down from $15 billion at the end of 2015. Long-term debt is over $25 billion, above the level listed on the balance sheet for common stock equity.
Bob Swan didn’t start this fire.
Former CEO Brian Krzanich tossed out rivals like a Game of Thrones character but was undone by his own sex life. Krzanich left the executive cupboard bare. Intel was unable to recruit any of the names he dumped for its top slot, settling on Swan the way Manchester United did on Ole Gunnar-Solskjaer.
Swan seemed to be doing OK as interim boss for Intel stock, bringing in an outside perspective his predecessors did not have, but since January the problems have piled up for the former eBay (NASDAQ:EBAY) executive, who started his career at General Electric. Swan has struck an attitude of humility but he’s still losing top tech people, especially top women, like cloud boss Raejeanne Skillern, now at Flex (NASDAQ:FLEX).
The Bottom Line
I must join those analysts who now wonder if Bob Swan has the technical chops to turn Intel around. Swan’s chief technology officer, Mike Mayberry, is an Intel lifer from the production side of the house. He’s not a visionary.
Intel needs a visionary. Technology companies are natural kingdoms. They can’t be led by committees. They require strong leadership of the kind Intel rivals have. But Andy Grove isn’t walking through that door. Gordon Moore is still around, but he’s 90.
Intel stock is continuing to drift toward the rocks. Investors have finally gotten the scent. While I hope I’m wrong, the company’s worst days may be ahead of it.
Dana Blankenhorn is a financial and technology journalist. He is the author of the mystery thriller, The Reluctant Detective Finds Her Family, available at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this article.