A 5% year over year increase in dividends that are a Very Big Deal to institutional investors that likely make up a large majority of their shareholders and hold the stock BECAUSE of those dividends.
Meanwhile, capex is still ongoing and the reduce in spending could just as easily be seen as a bearish response to potentially poor new development plans. What if project costs were exceeding mid-term profit projections? Or potentially never going to be profitable? What if... ad infinitum.
Responsible stewardship of a company like Intel requires accounting for a great many variables that do not get conveyed directly to shareholders. That dynamic is why representatives are a thing. That is why there are boards of directors.
The fact that the government is handing them a subsidy, the fact that they cut some new development projects, and the fact that shareholder dividends saw a 5% increase can, and from my layman's perspective, probably are completely and totally unrelated, and questioning the validity of any one of those things due to the presence of the others goes into the territory of "need more info".
Now Intel has been forced to use an accounting trick to avoid losses that would have been the double of those reported:
"In the quarter ended in June, which we expect to be a very good one for AMD and Nvidia, Intel did not do so good. Revenues were down just a smidgen under 22 percent to $15.32 billion, gross margins were off 50.1 percent to $5.58 billion, and even with a $455 million benefit from taxes that Intel was keeping in its back pocket for a rainy day it posted a $454 million net loss. This is real red ink, and if it didn’t have that benefit and it had to pay some taxes, it could have easily been over $1 billion in losses."
From:
https://www.nextplatform.com/2022/07/29/intel-let-the-chips-...
It looks like now it should have been the time to prioritize saving their future over dividends.
Does anyone believe Intel's problems are a lack of capital?
Prudent leadership would be lowering dividends, as ATT did. For Intel to grow them, implies a diversion, IMHO.
They are about to receive billions for their Ohio project from the public. Instead of using their own funds, they are paying out more money to their fat cats while taking money from the public.
They should be completely ineligible for public money now.
It makes sense to cut back on investment if they think there will be an oversupply of chips. In which case, returning the money to shareholders doesn't seem wrong, if they don't have a good way to invest it?
It doesn't show much confidence in their ability to succeed and regain market share, though.
https://appleinsider.com/articles/21/10/18/intel-ceo-hopes-t...
Something is deeply wrong with our economic/legal system.
Why do semi-making jobs pay so poorly when they literally underpin everything? But kids out of college make 150k mashing NPM packages together?
I blame free trade and the fact that the fed is allowed to engage in quantitative easing for a lot of these issues. Why care about the country when you can just play financial games instead?
Also yeah QE, billions and trillions with no place to invest so why not give few billions to startups with charismatic CEO and a good story.
Congress passed the act.
Congress allied with Intel and the other companies. As representatives of the American people, of course.
Congress has exceptional results with investing.
If Americans considered Congress an ally…
With representation like this, who needs a ruling class?
That's not a law, just a moderately recent convention: Milton Friedman in the 70s claimed that a company existed only for the good of its shareholders. And of course we've seen examples of this attitude from time immemorial.
But remember the famous 1950s quote from the then CEO of GM: "what was good for our country was good for General Motors, and vice versa.” People usually twist it around the other way and claim that the company was saying it was more important than the country, but that's not what Wilson said. He made that statement as part of a speech (congressional testimony IIRC) saying that business needed to serve society.
But every publicly available statement made by a CEO is PR. Like it or not. Not always done with that intent, but usually with it in mind.
Sure, the impact to employees has been felt more recently. But the attitude has been there before they were companies and employees. Kingdoms and subjects, plantations and slaves, whatever the case may be. Very old. This is just the latest skin. There’s always those parties that go against the current.
So to respond to your CEO reference, I’ll throw out a more modern one. I’m having to go on what little I’ve gathered from the media, but Dan Price seems like the real deal. Even with what I said above. Can’t know, but the look is good. I buy it. I want to believe, even after learning I shouldn’t.
Good companies can exist. Good people exist, and can lead companies. All of which can serve society, and benefit all individuals.
“Can” isn’t enough. And there are far too few that ARE.
That is the nominal one. But I feel more ofent than not the real alligience is to the board and lower manager class.
Beyond that? Loyalty is to the biggest investors. Other companies. The CEO answers to the board, and the board tends to answer or connect to those companies. Sure, they profit, but that’s a pittance compared to the real money. Managers below that get their fraction of a fraction. And everyone else drools because that’s still real money to an individual.
We have to either change this, or rely on a different kind of entity for economic activity. Because abandoning companies to be cannibalized by the financial class, or colonized from abroad, does not lead to prosperity.
"Abandoning a company to be cannibalized" means stunting growth which is useless to greedy shareholders. If the shareholder was okay with not having growth they wouldn't be invested in the first place.
The main problem with allegiance to shareholders is the craving for financial growth at any cost, including deviation from the company's goals or disregard for users in profitable ways. A paper-clip maximizer.
If you're holding for 10 or 20 years, you may well be considering things like "If we spend a dollar in R&D today, we get back twenty later", but the guy who's bailing after the next earnings report wants that dollar on today's books. We do a questionable job serving tha long-term investor.
On a long enough term, most of the social-ethical-envrironmental investment strategies that are seen as niche can also be seen as prudent-- are you sacrificing the value of investors in 2050 by keeping a cavalier attitude on climate change today, or paying your contractors so poorly that they'll be unable to buy your future products?
We have the short/long term capital gains tax divide, but there's no reason we couldn't tax short term gains at a much higher rate than conventional income, explicitly to force people to demand long-term corporate perspective.
