INTEL CASE STUDY

PROF.ALOK THAREJA

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 COMPARISON WITH AMD
CURRENT
INTEL (US $ M) AMD (US $ M)
ASSETS
DECEMBER 02 DECEMBER 01 DECEMBER 02 DECEMBER 01
CASH / CASH
10,786 10,326 428.7 427.3
EQUIVALENTS
NET
2,574 2,607 395.8 659.80
RECEIVABLES
INVENTORIES 2,276 2,253 432.6 380.50
OTHER CA 3,289 2,447 762.5 885.60
TOTAL CURRENT
18,925 17,633 2019.7 2353.10
ASSETS
CURRENT
LIABILITIES:
ACCOUNT
1,543 1,769 352.4 305.0
PAYABLES
SHORT TERM
436 409 161.7 331.7
DEBT
OTHER
CURRENT 4616 4392 857.90 677.20
LIABILITIES
I TOTAL CURRENT
6595 6570 1372.10 1313.90
LIABILITIES
B
NET CURRENT
S ASSETS
12,330 11,063 648 1039
 ANALYSIS
CURRENT
INTEL AMD
ASSETS
DECEMBER 02 DECEMBER 01 DECEMBER 02 DECEMBER 01
NET SALES US $
26,764 26539
NOTES 2697 3892
M
IN THE ABSENCE
SALES / NET CA OF AMD DETAILS OF P & L A/c, SALES & NO. OF DAYS SALES
2.17 2.40 4.16 3.74
HAS BEEN
(TIMES)EMPLOYED FOR CURRENT ASSETS.
FOR CASH.
CURRENTNO. OF
LIABILITIES,
147.10 THE CONTRIBUTION
142.02 BY DIFFERENT
58.02 ELEMENTS
40.06
DAYS SALES
THERE OF TO TOTAL CURRENT ASSETS HAS BEEN CONSIDERED. THIS IS THE
DEBTOR. NO. OF
OBVERSE 35.10
OF CURRENT RATIO. 35.85
FOR EXAMPLE 100% 53.56 61.88
DIVIDED BY CURRENT
DAYS SALES
RATIO FOR INTEL
INVENTORY. NO. 2002 i.e. 2.87 EQUALS THE TOTAL C.L CONTRIBUTION TO
31.03 30.98 58.54 35.68
OF DAYS SALES
CURRENT ASSETS AT 34.84%.
OTHER CA NO.
44.81 33.65 103.19 83.05
OF DAYS SALES
TOTAL CA NO.
258.09 242.51 273.33 220.68
OF DAYS SALES
CURRENT RATIO 2.87 2.68 1.47 1.79
% TO CURRENT
ASSETS:
A/c PAYABLE 8.15 10.03 17.45 12.96
OTHER C
I 24.39 24.90 42.48 28.78
LIABILITIES
B SUB TOTAL 32.54 34.93 59.93 41.74
S S.T. DEBT 2.30 2.32 8.01 14.10
TOTAL 34.84 37.25 67.93 55.84
 OBSERVATIONS
 CURRENT ASSETS:
WHILE AMD IN 2002 ROTATED IT’S WORKING CAPITAL 4.16 TIMES, INTEL
COULD MANAGE ONLY 2.17 ROTATIONS.
A CASH & CASH EQUIVALENTS:
CASH IS THE SINGLE MOST CONTRIBUTION TO INTEL’S EXCESS WORKING
CAPITAL
2002 2001
AMOUNT (US $ M)* 7404 7970
NO. OF DAYS- ACTUALS 100.98 109.61
- TARGET 40.00
CASH AT TARGET LEVEL 2933.04
POSSIBLE REDUCTION 4470.96

EXAMPLE SHORT TERM INVESTMENTS

IN CASE TARGET CASH LEVEL AT 40 DAYS (ACHIEVED BY AMD IN 2001) IS SET, US
$ 4471M COULD BE INVESTED IN SHORT TERM INVESTMENT OR ANY OTHER
I LUCRATIVE INVESTMENT.
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 OBSERVATIONS (contd)
B DEBTOR LEVELS ARE CONTAINED AT LOWER LEVELS THAN AMD & APPEAR
REASONABLE.
C INVENTORY
2002 2001
AMOUNT (US $ m) 2276 2253
COSTS OF SALES 13446 13487
NO. OF DAYS 61.78 60.97
TARGET NO, OF DAYS 45
INVENTORY AT TARGET NO. OF 1657.72
DAYS
POSSIBLE REDUCTION 619

IN CASE INVENTORY IS REDUCED FROM EXISTING 62 DAYS LEVEL TO 45 DAYS, A

REDUCTION OF US $ 619 IS POSSIBLE.
DTRADING
OTHERASSETS
CURRENT ASSETS COMPRISE: 1801 1224
DEFERRED TAX ASSETS 1136 958
OTHER ASSETS 352 265
I TOTAL 3289 2447
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DEFERRED TAX ASSETS: INTEL MUST MAKE ALL OUT EFFORTS TO LIQUIDATE THESE
 OBSERVATIONS (contd)
2002 2001
ACTUAL 2002-US $ M 3289 2447
NO. OF DAYS SALES. ACTUAL 44.81 33.65
- TARGET* 30.00
US $ M 2200
POSSIBLE REDUCTION 1089
*IN CASE OTHER CURRENT ASSETS ARE REDUCED FROM EXISTING 45 DAYS TO 30 DAYS,
CONSIDERING ACHIEVED LEVEL IN 2001 AT 33.65 DAYS, THE RESULTANT REDUCTION WILL BE US
$ 1089.
2 CURRENT LIABILITIES:
IN 2002, INTEL’S CURRENT RATIO WAS 2.87 Vs AMD’S 1.47. THIS MEANS THAT CURRENT
LIABILITIES ACCOUNTED FOR ONLY 34.84 % OF GROSS CURRENT ASSETS, AGAINST AMD’S 67.93
E ACCOUNT PAYABLE:
2002 2001
AMOUNT US $ M 1543 1769
COST OF SALES 13446 13487
NO. OF DAYS – ACTUAL 41.88 47.87
NO. OF DAYS –TARGET 90.00
NO. OF DAYS US$M 3303
POSSIBLER INCREASE 1760

I  POSSIBLE INCREASE IN CURRENT LIABILITIES & DECREASE IN NWC IF SUPPLIER CREDIT IS

INCREASED FROM CURRENT 42 DAYS TO 90 DAYS IS U S $ 1760.
B  *AT THIS LEVEL, INTEL’S PAYABLES WILL FINANCE 17.45% OF GROSS C.A (AS IN AMD’S CASE IN
S 2002),Vs PRESENT 8.15.
 OBSERVATIONS (contd)
F OTHER CURRENT LIABILITIES:

2002 2001
AMOUNT IN US $ M 4616 4392
% OF GROSS CA. FINANCED:
- ACTUAL 24.39 24.90
-TARGET 30.0
AMOUNT US $ M 5677.50
POSSIBLE INCREASE IN CL 1062

 IN DECEMBER 2001, AMD’S OTHER CURRENT LIABILITIES FINANCED 28.78% OF ITS

CURRENT ASSETS. A TARGET OF 30% BY INTEL WILL ACHIEVE AN ADDITIONAL
AMOUNT OF US $ 1062 M.

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 SUMMARY

ACTUAL 2002 CHANGE PROPOSED

CASH/ CASH
10,786 4470 6316
EQUIVALENTS

NET RECEIVABLES 2,574 - 2574

INVENTORY 2,276 613 1657
OTHER CA 3,289 1089 2200
TOTAL CA 18,925 6178 12,747
ACCOUNT
1,543 1760 3303
PAYABLE
S.T. DEBT 436 - 436
OTHER C
4616 1062 5678
LIABILITIES
TOTAL C L 6595 2829 9417
NET CURRENT
12330 9007 3330
ASSETS
I CURRENT RATIO 2.87 1.35
B SALES / NET CA
S 2.17 8.04
(TIMES)
 CONCLUSION
 INTEL’S 2002 NET CURRENT ROTATION AT ONLY 2.17 TIMES IS VERY LOW
COMPARED WITH AMD’S 4.16. WHILE CASH IS THE MAIN CULPRIT, A SERIOUS
LOOK NEEDS TO BE TAKEN AT IT’S INVENTORY AND OTHER CURRENT ASSETS
LEVELS.
 AT THE SAME TIME INTEL’S CURRENT LIABILITIES FINANCE ONLY 34.84% OF
CURRENT ASSETS AGAINST AMD’S 67.93%. CONSEQUENTLY TRADE CREDITOR
LEVEL & OTHER CURRENT LIABILITIES REQUIRES A SERIOUS LOOK.
 BASED ON CERTAIN ASSUMPTIONS, IT MAY BE POSSIBLE TO SEEK A REDUCTION
OF US $ 6178 IN CURRENT ASSETS & INCREASE CURRENT LIABILITIES BY US $
2829 i.e. A TOTAL REDUCTION OF NET CURRENT ASSETS AT US $ 9,000
 THE OVER ALL EFFECT WILL BE:
 INVENTORY ROTATION AT 8.04 TIMES (VS 2.17 TIMES IN 2002).
 CURRENT RATIO AT 1.35 ( US 2.87 IN 2002).

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 QUERIES
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