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Actionable news in INTC: Intel Corporation,

Inside Intel's Inventory

Summary

Inventory as percentage of sales at high levels.

GAAP operating income below last year's levels.

Intel is just a "Beta" stock.

Intel, INTC, reported earnings after the close on April 19th, and investors were disappointed by low revenues and lowered Q2 guidance. Intel sold off about -2% in after hours trading.

Source: Yahoo Finance

I have previously reported that Intel's climbing inventory levels were helping the companies bottom line.

Here is a graph of the data.

Source: Intel's SEC fillings, I-metrix & author's calculations

I wrote:

The amount of ending inventory impacts Intel's gross margin as shown in the following formula:

COGS=Beginning Inventory + Purchases (Cost to Manufacture) - Ending Inventory

Hence, with a higher ending inventory, this lowers the COGS, which results in a higher gross margin.

In December of 2015, Intel closed its aquisition of Altera, so inventory levels should be nominally higher compared to a year ago. However, by measuring as a percentage of sales this should be mitigated to some degree; if Altera brought in a lot of sales then as a percentage of sales the ratio would not move the needle that much.

This acquisition of Altera should also "help" Intel's cash flow metrics in the near term. Below is the best description I found for what happens to the cash flow statement when a purchase of another company is made :

"... although current assets and liabilities have increased, the change is not reflected in cash from operations (NASDAQ:CFO)...


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