Intel Corporation did not hesitate further with the publication of the annual report Form 10-K, studying this document allowed her, in the chase, to understand what problems she has in the financial sector due to the need to increase capital spending in the face of falling revenues and revenues. It is becoming increasingly difficult to finance activities from one’s own reserves, and there are at least two years left before the ambitious goal of restoring technology leadership.
The first chart in the annual report shows how free cash has declined over the past five years as a result of Intel’s operations. More specifically, they started falling in 2020, but historically they were down from $35.9 billion to $15.4 billion. Free cash flow turned generally negative late last year, reaching modulo $4.1 billion. USD.
As you know, under Patrick Gelsinger, who took over as CEO about two years ago, the company’s investments began to increase. At the same time, spending on research and development increased. While they were still at $15.2 billion in 2021, they have risen to $17.53 billion in the past.
If we look at the capital expenditures separately, then they amounted to $18.7 billion in 2021 and increased to $25 billion in the past. When combined with R&D spending, that amount reached an impressive $42.4 billion at the end of 2022 on revenue of no more than $63 billion. Year over year, total spending increased by a quarter while revenue fell by 20%. In the coming year, according to some estimates, Intel will allocate about $20 billion for capital expenditures, down 20% year-on-year, though it will exceed the corresponding figure for 2021.
In the year before last, Intel returned $8 billion to shareholders through share repurchases and dividends, but in 2022 it stopped issuing share repurchases despite dividends totaling a decent $6 billion, up slightly from 2021 (5, 6 billion US dollars). At the quarterly report conference at the end of this week, Intel management made it clear that it will keep the dividend level at a competitive level again this year. From the outside, this use of funds may not seem entirely rational, but management may be hoping such a policy will attract investors to their stock.