Collapsing CapEx: Intel Edition

Tyler Durden's picture


By now regular readers should be aware that one of our favorite metrics on the state of not only the economy, but corporate viability in the New Normal centrally planned age, are not fudged, manipulated earnings which always find a way to "beat" downward revised expectations, not even free cash flow (which in far too many cases has ceased to exist), but capital expenditures for two reasons: i) it number can not be fudged, adjusted, recasted or in any other way modified, and ii) it represents the managements' own view of what the growth prospects of the company are. The logic is simple: if management itself is not confident on growth prospects, it will not replenish its asset base (already at a record old age across the world) and will not invest in projects that have a high hurdle rate but only after several years of gestation. Instead, management will merely opt to use the company as a cash cow in the here and now, extracting as much shareholder value is possible with dividends and buybacks while the future viability of the company... well, that can be some other management team's concern.

How long until Intel (and every other company's) ROA shrinks and shrinks and shrinks some more (as every last cent of "capital intensity" is extracted), before both its top line and cash flow starts getting crushed? That too will be some other management's team's concern. And yes, the current management team just cut the full year capex forecast from $13 billion to $12 billion.

Why is lack of CapEx spending a very big issue? The chart below explains best:

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Tue, 04/16/2013 - 16:37 | 3458031 FL_Conservative
FL_Conservative's picture

CapEx?  We don't need no stinkin' CapEx when we have levitation from the Fed.  Where the fuck have you been??????

Tue, 04/16/2013 - 16:46 | 3458078 Scarlett
Scarlett's picture



"Buying or selling dollars in the black market has been considered an act of TERRORISM since December 2011 and carries prison sentence of as long as eight years. The parallel rate is at a record 63 percent higher than the official rate."


That's the future, boys

Tue, 04/16/2013 - 16:58 | 3458117 TalkToLind
TalkToLind's picture

US Dollars flow faster and with less resistance in Argentina than they do in the United States.  No one in Argenina obeys that law.

Tue, 04/16/2013 - 17:02 | 3458137 Manthong
Manthong's picture

What?.. Doesn’t Moore’s Law apply to CapEx, too?

Wed, 04/17/2013 - 06:03 | 3459932 amusedobserver
amusedobserver's picture

There's no law that says CapEx has to increase every year.  There is a time to invest and a time to reap the profits.  It looks to me like management is doing its job: managing and turning profits.


A slowly declining market like the desktop PC is probably the most profitable kind to be in for the legacy players.  It makes the best moat around your business base because it discourages potential competition from trying to encroach on your turf, and the lessened competition allows for fatter margins.


All of the comments have been uncharacteristically weak, as was the article itself.  What does the average asset age in those 4 regions have to do with Intel specifically?  And the disappearing bars on the graph is misleading as it makes the changes look greater than they are.  The past 4 quarters total $10.3B and the previous 4 total $11.0B.  

Tue, 04/16/2013 - 16:58 | 3458119 SafelyGraze
SafelyGraze's picture

all my phones are less than two years old

Tue, 04/16/2013 - 17:24 | 3458194 agent default
agent default's picture

Wow, so there is a physical paper dollar market and a paper dollar paper market over there?  Wait, wut?  What the fuck?

Tue, 04/16/2013 - 19:44 | 3458671 thisandthat
thisandthat's picture

Dollar ETF?

Wed, 04/17/2013 - 09:18 | 3460356 Stuck on Zero
Stuck on Zero's picture

It's a big vault full of IOUs.


Tue, 04/16/2013 - 16:50 | 3458032 Yen Cross
Yen Cross's picture

    Ask Steve Liesman about employment? After he's done sucking bernankes' POLE.


     BoB piss-on-me, is BTFD!        I don't get mad,  I get whole! BITCHEZ  

Tue, 04/16/2013 - 17:07 | 3458150 yogibear
yogibear's picture

He ended up with a last name that tells you what he is. A lying man.

Tue, 04/16/2013 - 17:26 | 3458205 forwardho
forwardho's picture

Or... a man who tells lies

Tue, 04/16/2013 - 16:38 | 3458033 Poetic injustice
Poetic injustice's picture

I can see MSM headline "Investors cautiously positive", "Beats expectations".

Tue, 04/16/2013 - 16:38 | 3458037 ghandi
ghandi's picture

Where are the blue guys when you need them?

Tue, 04/16/2013 - 16:42 | 3458038 Mercury
Mercury's picture

Actually, this might just be a reflexion of the decline of the desktop computer.

Tue, 04/16/2013 - 18:16 | 3458344 MarsInScorpio
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Actually, I'd suggest that this is a reflection of CEOs and their cronies looting a company for all they can get during their tenure and not giving a rat's fanny about what happens to either the company of its employees after they leave.


I'd also like to suggest that as the squeeze gets tighter, it will do well for the Enron and Corzine types to go way underground when things collapse for the employees - if nothing else, our culture is becoming less inhibited about fringe members extracting revenge for their life being destroyed by these people.


And if you happen to live on a tiny island whose GDP is "irrelevant" to the whole of your money-denominated economic zone - you better leave that island and become invisible before your close-knit neighbors decide that you need to die for your crimes againt their humanity.


And I wouldn't feel particularly safe if I were part of killing an investigation into who got out of the confiscation first - killing it off when it turns out that not only were the mobsters cleaning out their accounts before they could have their wealth stolen, but that it turns out your kindly old ex-president was just another mobster himself . . .


I really don't think these people realize that when you are over 60, and you believe you have nothing left to lose because everything you worked for all your life is now stolen property in someone else's bank account, then you also believe that you have nothing left to lose by blowing the banksters, and their criminal crony politicians, away.


You have to admit that setting off a couple of bombs on the combination Tax Day / Patriot's Day does make for a rather unmistakable meme . . .


Tue, 04/16/2013 - 18:38 | 3458415 Mercury
Mercury's picture

Really now, if you have evidence that one of the greatest corporate successes in the history of the world, a company that, unlike Enron's energy trading outfit and MF Global,  actually makes physical stuff that people buy and use, is being looted by insiders, do share.

Tue, 04/16/2013 - 19:46 | 3458656 MarsInScorpio
MarsInScorpio's picture



Thank you for your question.


First, my remarks were not narrow-focuised on Intel, but rather speaking generally about the genre of mega-corps intersecting with CEO / corporate offricer / major shareholder / financial contoller / political power broker ethics and amoralality.


The first evidence is the chart itself, showing that Intel's CapEx is shrinking. Your theory is that the decline of desktop PCs as a share of the market is the cause; that theory is deficiant because it is completely wrong about where and how Intel is making its money. (Intel ceded the home / soho desktp market to AMD about 5 years ago, for example).


Next, I'd like to suggest that moving from an engineer to a marketing exec as the CEO removes the drive needed for extensive CapEx funding - their worldviews are significantly different defining what constitutes success - breakthroughs for the former, and acclaimation of payouts and so-called "earned" bonuses for the latter.


Third, the drive to invent has not lessened - even if desktop PCs are fading as a category, there are new technology replacements that need CapEx to support them. So the mere decline of desktops is irrelevant to explaining CapEx deeclines because the CapEx monies would be transferred to technologies such as the Atom, wireless, TV set boxes, games, and so on. In short there is plenty of innovation still fundable.


Forth, the need to dry-up CapEx to fund buy-outs, buy-backs, pay-outs, bonuses, overall compensation, health care funding, and such is very well documented. That money had to come from somewhere, and CapEx is the easiest line item to loot.


Fifth, you need to understand that these people - when you get up to their compensation levels - are not motivated so much by money per se, but rather by the power in our world that the money brings. Cut Bill Gates compensation in half, he still shows up for work (All Atlas Shrugged theory aside).


But cut his power over the world's IT infrasturucture and its future, and Bill may decide to take a walk if his controlling personality is not controlling things.


So undrstanding the deeper psyhcological needs of these people explains why they will place short-term self indulgence over long-term CapEx.


The rest of my post stands as well - people who believe they have nothing left to lose, and that it can't be replaced with a so-called fresh start, wiill also believe vengence is due - destroy their American Dream with the Bankster Nightmare, and murder becomes an acceptable option for them.


In fact, if you didn't notice, more than a few people supported the ex-cop who blew away the other cops in California. As the economic theft destroys more lives, there is an increasing likelyhood that blowing away the banskters, and the politicians, will gain public support as well.


Tue, 04/16/2013 - 20:58 | 3458984 thisandthat
thisandthat's picture

I'm not sure how correct your claim home market being left to AMD is, after all Intel is the increasingly undisputed performance leader in desktop chips in the post-Athlon era.

Also, this:

Intel gained share in all segments this quarter, with mobile gaining two full points of share. AMD lost share in all segments.

and this:

AMD is predicting another 10% decrease this quarter, which should put AMD below 15% market share. Death spiral has definitely begun.

Insightful comment:

It's funny how back in 2001, back when we still had a somewhat real market, this type of dropoff in PC sales was met with a 30% decline in the stock market. Nowadays, the stock market goes up, because everyone knows they will just print more money to buy $500 smartphones and $600 tablets to replace all those $400 desktops, in addition to $999 notebooks. Ah the wonders of debt fueled consumption...

Wed, 04/17/2013 - 00:27 | 3459602 WillyGroper
WillyGroper's picture


Tue, 04/16/2013 - 16:38 | 3458039 Zodiac
Zodiac's picture

Capex can't be fudged?  How about capitalizing a large portion of your expenses (as did Worldcom - remember them?) or capitalizing unsuccessful R&D or dry holes?  A wide lattitude for creating the number you want.

Tue, 04/16/2013 - 16:54 | 3458099 ParkAveFlasher
ParkAveFlasher's picture

You can call it capex, you can expense it, you can depreciate or appreciate, you can charge it to your Visa rewards card, you can pay in product, you can pay next year, you can pay last year, you can pay in another country for stuff you haven't started using yet.  

What's important is that you are happy with what you've done, and that the audit firm checks the math for you.  Because that calculator you use looks a little sketchy, if you ask me. 

And that's how we account, boys and girls.

Tue, 04/16/2013 - 17:42 | 3458271 CrashisOptimistic
CrashisOptimistic's picture

You forgot no more mark-to-market.

Tue, 04/16/2013 - 16:38 | 3458040 NeedleDickTheBu...
NeedleDickTheBugFucker's picture

The one-year price chart would seem to reflect the declining capex thesis.

Tue, 04/16/2013 - 16:43 | 3458064 Duke Dog
Duke Dog's picture



Monday, Regal Entertainment Group, the largest movie theatre chain in the country, announced that thousands of employees will have their work hours cut -- as a direct result of the added cost of the new ObamaCare mandates that become effective later this year.

In a memo to employees, management was blunt: “To comply with the Affordable Care Act, Regal had to increase our health care budget to cover those newly deemed eligible based on the law's definition of a full-time employee.”

Fox News reports that, as a result of cutting employees' work hours (which is, of course, the same as a pay cut), full-time Regal managers have resigned in "a wave" after their hours and pay checks were slashed by as much as twenty-five percent.

The manager told ObamaCare has had the unintended consequence of taking food off his table.

“Mandating businesses to offer health care under threat of debilitating fines does not fix a problem, it creates one," he said. "It fosters a new business culture where 30 hours is now considered the maximum in order to avoid paying the high costs associated with this law.

“In a time where 40 hours is just getting us by, putting these kind of financial pressures on employers is a big step in a direction far beyond the reach of feasibility for not only the businesses, but for the employees who rely on their success," he said.

In order to avoid the added cost of providing health insurance for employees working 30 hours a week (as ObamaCare mandates), it only makes sense for companies to schedule employees for 29 hours. So anyone who was working full-time is now being hit with a 25% pay cut.

Moreover, in a jobless "recovery" like the one we've been suffering under for four long years now, employers hold all the cards. And even if someone is able to find another job, what are the chances that employer won't be making the same decision to avoid the expense of ObamaCare?

The most under-covered story in the media this year is and will continue to be the effect ObamaCare is having on America's working class -- those who are losing their health insurance and the crucial work hours that can make all the difference when you live on the margins. "

Tue, 04/16/2013 - 16:50 | 3458087 McMolotov
McMolotov's picture

When Bam-Bam talks about "creating" jobs, he means passing legislation that hopefully forces people into working three part-time jobs instead of one full-time job.

Tue, 04/16/2013 - 16:55 | 3458106 ParkAveFlasher
ParkAveFlasher's picture

+1 Right on the head, McM.

Tue, 04/16/2013 - 17:48 | 3458290 eatthebanksters
eatthebanksters's picture

For big corporations...gone are the days where the small entrepreneur with a work ethic can be successful and carve out a good life...

Tue, 04/16/2013 - 18:43 | 3458447 kchrisc
kchrisc's picture

So true.

And in the spirit of "government always accomplishes the opposite of the stated goal":

Only government could cause people to have to work two or three jobs for lees than one full-time job and call it progress.

The next minimum-wage increase just may push that to 3 to 4 part-time jobs.

Just boggles the mind.

Or is that the red-pills talking?!         hujel

Tue, 04/16/2013 - 18:45 | 3458455 Pareto
Pareto's picture

+1 for Bam Bam creating jobs.

Tue, 04/16/2013 - 17:04 | 3458138 azzhatter
azzhatter's picture

This fucking child in the white house, this shitstain on the american people could fuck dead animals on TV during a press conference and his brainwashed, braindead supporters would cheer him on.

Tue, 04/16/2013 - 17:25 | 3458195 RSBriggs
RSBriggs's picture

He does that every time he mentions "we the people" or otherwise opens his mouth and mentions the sheeple....

Tue, 04/16/2013 - 18:41 | 3458434 eatthebanksters
eatthebanksters's picture

He creates the problems and blames them on conservatives (read 'rich white people) and then says that the only solution is the the sheeple buy his bullshit as he destroys our country.  He's an affirmative action baby who has never suffered like the poor blacks he is supposed to represent, yet he has never had a long term real job where he has added value.  His adult career has been spending taxpayer money and living large...he has no fucking clue what it is all about except that he is special. If you don't have to be a critical thinker to survive and you don't need to work to survive, then why do it?  He has expanded the nanny state so people with low (or no) ambition don't need to think, government provides them with food, shelter, clothing , Obamaphones, videogames and cable tv. Just like teenagers in rich families...why grow up?  The problem with all these dumb fuckers on the government tit is that they don't know its not sustainable and its going to get taken away from them at some point. But then, they aren't crtical thnkers, how could you expect them to understand.  This is what Obama and his cronies are counting on...and its working.

Tue, 04/16/2013 - 17:31 | 3458228 enloe creek
enloe creek's picture

i fuck the dog at work whay can't he

Tue, 04/16/2013 - 17:29 | 3458218 object_orient
object_orient's picture

Right now it looks too easy for companies to avoid Obamacare by cutting employee hours. Expect a new provision like "businesses that have >40% part time employees are assumed to be skirting the law, and must pay a fine of $$$ per part time employee beyong the maximum allowed, etc." Then when all employees are fired and replaced with independent contractors, the games can begin again.

Tue, 04/16/2013 - 18:40 | 3458427 W74
W74's picture

Yep, of which "temp" workers are a part.  Oh, and people will have to re-apply to their jobs monthly.  So much for homeownership, hello perma-renting.

Tue, 04/16/2013 - 17:44 | 3458279 slightlyskeptical
slightlyskeptical's picture

If you can't afford to treat your workers fairly, you need to raise prices until you can, or you have no business being in business. The truth is that the government and us taxpayers subsidise all these poorly paid workers. They already qualify for food stamps and medicaid on their crappy wages, and now they will just qualify for more. This pretty much goes for anyone paying their employees $10/hr or less.We need to stop businesses from burdening the atxpayer with what is their responsibility.


Tue, 04/16/2013 - 18:14 | 3458356 One of We
One of We's picture

First step is to stop buying cheap shit made by Indians who make $.50/day sold by $10/ hr workers at Walmart.....

Tue, 04/16/2013 - 19:12 | 3458558 yogibear
yogibear's picture

You better believe Wal-Mart would love to pay it's store employees $.50/day if they could get away with it.

Bring back debtors prisons and there would be all sorts of low-cost labor. Maybe it's the globalist plan.

Tue, 04/16/2013 - 18:15 | 3458360 object_orient
object_orient's picture

What incentive does a business have to pay employees 20/hr instead of 10/hr, when the government will subsidize the gap instead?

Are you in favor of ending food stamps and Medicaid? That might pressure higher wages, or bring in younger/more desperate workers. I'm not sure what "mission accomplished" looks like here.

Tue, 04/16/2013 - 18:38 | 3458418 W74
W74's picture

Here's how you fix the system.  Employers pay NO benefits whatsoever, unless they choose to.  That way companies can focus more on WAGES to incentivise workers and retain quality.  They can also focus on product and cut down on a lot of legal red tape (costing time and labor and oftentimes whole new departments; are companies going to have "healthcare departments" or an "office of healthcare compliance"  in coming years?  Something tells me this'll be the case.

When the focus is on wages people can then choose to do what they want with them, which will oftentimes be more if the company doesn't have to pay benefits.  Want to get a tax refund? Then buy health insurance for you and ALL your children.  Boom.  Fixed.  All the ghetto dwellers and "new Americans" will then want "their" tax refund checks and will buy health insurance.  We could even offer to take it out of people's checks and put it into some kind of accumulating fund so that it's not like another bill people have to worry about.  Simple.

Tue, 04/16/2013 - 19:31 | 3458620 Diogenes
Diogenes's picture

Job creation, Obama style:where there were 3 40 hour a week jobs Obama has created 4 29 hour a week jobs. Winning!

Tue, 04/16/2013 - 16:44 | 3458065 buzzsaw99
buzzsaw99's picture

Love the sub penny beat.

Tue, 04/16/2013 - 17:01 | 3458133 yogibear
yogibear's picture

Every time I go to the store I notice another item shrinking for the same price or it's more expensive.

People are being forced to cut back on expenditures. It will soon be understood.



Tue, 04/16/2013 - 17:21 | 3458191 RSBriggs
RSBriggs's picture

Any one here remember when Frosted Flakes used to come in a box a LOT larger than three servings?  At the same price?

Sat, 06/08/2013 - 22:49 | 3458301 Palladin
Palladin's picture

I remember when they were called "Kellogs Sugar Frosted Flakes" because it's what they were.

The fat police got after Kellog and they caved, so now the are called Frosted Flakes, Along with a waiter being called waitstaff. and a Fireman being called Firefighters, and a Businessman being called a Businessperson and a Chariman being called a Chairperson, or worse just a Chair.

Smokey the Bear used to say, "Only you can prevent forest fires", now it's wildfires.

There's more if you look hard enough.


Tue, 04/16/2013 - 17:33 | 3458235 enloe creek
enloe creek's picture

peanut butter just went down almost 10% in volume, choosy mothers chew dick

Tue, 04/16/2013 - 17:19 | 3458182 RSBriggs
RSBriggs's picture

So, let me get that second chart straight....  In Japan, 14 year olds are considered assets?

Tue, 04/16/2013 - 17:32 | 3458237 teolawki
teolawki's picture


Tue, 04/16/2013 - 17:44 | 3458280 orangegeek
orangegeek's picture

Intel revenue shrank 2%.  After hours market?  Up. 


Today's action?  Up 2.5%.


Anemic CapEx.  Bullish for everyone.


And the gong show continues.

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