INTEL : MANAGING
WORKING CAPITAL
INTRODUCTION
• Intel was the leader in the microprocessor
industry in early 2004.
• Launched over 450 products & services.
• Intel’s success attributed to technology,
management & its unbroken leadership chain.
• Realized the increasing importance of
WORKING CAPITAL MANAGEMENT.
HISTORY
• 1968 – Bob Noyce and Gordon Moore found Intel
• 1971 – A new era in integrated Electronics
• 1974 – The Intel 8080 microprocessor
• 1981 – Intel wins the IBM PV Account
• 1989 – Advancing Human Welfare
• 1991 – Intel is a household name
• 2000 – Pentium 4
• 2003 – Introducing Intel Centrino mobile technology
PRODUCTS
• About 450 different products
Processors
Chipsets
Memory chips
Boards and platforms
Optical devices
Software
NET REVENUE
ADVANCED MICRO DEVICES
(AMD)
• AMD was founded in 1969, headquartered at
Sunnyvale, CA.
• AMD is a customer-centric innovation company, a
processing solutions powerhouse.
• AMD works with computing, wireless, and
consumer electronics companies to create smarter
choices for customers—from individual consumers
to the largest commercial enterprises.
Cont…
• Combined revenue by segment
• FY2007 $6,013mn
Computation Products 68.1%
Graphics and Chipsets 22.6%
Consumer Electronics 7.3%
Embedded Products 2.0%
CONFLICT BETWEEN INTEL & AMD
• Intel licensed technology to AMD
to make their own version of the
80286 chip.
• Intel made attempts to protect
technology of its highly
successfully 386 & 486 chips when
AMD captured 52% of that
market.
• AMD sued Intel for breach of
contract.
• They later settled several court
cases.
• AMD got the micro code license
& Intel was awarded US$ 58 mn
in damages.
And the battle continues…
WORKING CAPITAL
MANAGEMENT
DEFINITION
• It is the difference between current assets
and current liabilities.
• The portion of current assets financed
with long term funds.
• Measure of liquidity.
OBJECTIVE
• To manage the firms current assets and
liabilities in such a way that a satisfactory
level of working capital is maintained.
OPERATING CYCLE
RECEIVABLES
Phase 3
Phase 2
CASH
INVENTORY
Phase 1
DETERMINATION OF OPERATING
CYCLE(INTEL)
Raw material holding period 2001 2002 2007
= 360*Stock of raw material 6.32 5.97 9.90
cost of raw material consumed
WIP holding period
35.13 36.55 28.52
= 360*stock of WIP
Cost of goods manufactured
Finished goods holding period 18.68 18.42 27.41
= 360*stock of finished goods
cost of goods sold
35.36 34.08 6.17
Debtors collection period
= 360*debtors
credit sales (47.22) (41.31) (46.17)
(-)Creditors payment period 48.27 53.71 25.83
= 360*creditors
purchases
DETERMINATION OF OPERATING
CYCLE(AMD)
Raw material holding period 2001 2002 2007
= 360*Stock of raw material 3.68 3.89 4.61
cost of raw material consumed
WIP holding period
32.90 43.59 42.30
= 360*stock of WIP
Cost of goods manufactured
Finished goods holding period
16.31 26.48 28.89
= 360*stock of finished goods
cost of goods sold
Debtors collection period 91.72 67.67 61.43
= 360*debtors
credit sales (42.40) (60.26) (96.84)
(-)Creditors payment period 102.21 81.37 40.39
= 360*creditors
purchases
WORKING CAPITAL
RATIOS
CURRENT RATIO
3 2.86
2.68
2.5
2.13
1.93
2 1.71
1.47
1.5 Intel
Column1
1
0.5
0
2001 2002 2007
QUICK RATIO
3
2.34
2.5 2.52
2 1.79
1.62
1.5
1.5 Intel
1.16 Column1
1
0.5
0
2001 2002 2007
INVENTORY TURNOVER RATIO
6.8
7
5.98 5.9
6
4.86 5.01
5
4 3.25 Intel
3 Column1
0
2001 2002 2007
SUGGESTIONS
• The recent financial crisis has led to :
Tightening in credit markets
Low level of liquidity in financial markets
This could result in insolvency of key
suppliers leading to product delays. Hence
Intel should maintain higher inventory
levels to avoid stock outs.
• Proper risk management policy.
Cont...
• Improvement in creditors payment period.
• Proper planning of production schedule.
• Maintenance of debtors credit policy.
• Constant innovations.
THANK YOU
