Personal Finance

Busting This Intel Corporation Myth

Capital Trends
Capital Trends

Image source: Intel.

Intel's capacity related spending dropped sharply in 2013 relative to 2012 (when it became clear that tablets were eating into the personal computer market) and stayed about flat in 2014. Intel then reported a large drop in capacity spending in 2015 and is expecting to see a modest increase in 2016.

The trend, however, is clear: spending on capacity has come down quite a bit over the last several years.

This reduction in capacity-related spending is indicative of Intel right-sizing the amount of capacity it puts in to make sure that it can keep its factories at reasonably high utilization rates. And, given that the company's gross profit margins over the last couple of years have been quite high (higher utilization usually means better margins, lower utilization hurts margins), it's quite unlikely that Intel has substantial amounts of capacity sitting there idle.

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Ashraf Eassa owns shares of Intel. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls and short January 2018 $95 calls on Apple. The Motley Fool recommends Intel. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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