Intel's Capital Budgeting Decision in 2013

Topics: Computer, Intel 4004, Thomson Reuters Pages: 3 (708 words) Published: January 21, 2013
Nguyen Thanh Tuan – MBA06043
Dr. Ann Ericson
Financial Management
18 January 2013

An arguable capital budgeting decision in Intel’s Financial Plan 2013 Thursday 17 January 2013, Thomson Reuters, the world’s largest international multimedia news agency, has highlighted some concerns about Intel’s Financial Plan 2013. Noel Randewich, the report’s writer, thought Intel Corporation's current-quarter revenue forecast disappointed Wall Street analysts. The reason behind is Intel will spend more $2 billion of its increased spending on expanding researching facility. This action is a controversial one because it has feedbacks from different sides. Essentially, one major worry is probably that the predicted personal computer market size is going to be smaller in 2013 while Intel lays a bet on very huge investment. However, Chief Executive Paul Otellini said that modern long-term assets could help Intel maintain the lowest cost as possible. On the other hand, some other Wall street analysts advocate Intel’s decision due to fact that it would be a plus for company ‘s operating efficiency.

Intel was founded in 1968 with a vision for semiconductor memory products. It is best known for producing the microprocessors found in many personal computers. The company also makes a range of other hardware including network cards, motherboards, and graphics chips. Yet Intel became reputed after Wintel alliance with Microsoft Corporation, which enabled Intel to possess 80% of personal computer chip market.

Back to the new event in the 2013 first quarter, the $2 billion investment on long-term assets belongs to capital budgeting decision type. Undoubtedly, it is very important decision because Intel has to face a great number of effects. The first clear limitation could be that Intel would run the operation under its capacity due to unused space of new plant as well as to the reduced market size. At the same time, another stumbling block might be that its higher fixed cost...

Cited: Noel Randewich, Liana B. Baker. “Intel CEO to retire as chipmaker struggles with mobile.”, 19 Nov 2012. Web. 18 Jan 2013.
Noel Randewich. “ Intel weak outlook, spending hikes unnerve Wall Street.”, 17 Jan 2013. Web. 18 Jan 2013.
Patrick Darling. “Intel Reports Full-Year Revenue of $53.3 Billion, Net Income of $11.0 Billion.”, 17 Jan 2013. Web. 18 Jan 2013.
Discussion Questions
1. Are there any different pros and cons for Intel’s capital budgeting decision apart from ones said in the analysis?
2. With this new investment, give the probability that Intel can raise its share more 1% in smart phones chip making market.
3. How can Intel stabilize the profit margin after a huge investment in 2013 first quarter?
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