Intel Corp (INTC)

[Nitt]

re:"I presume that the fab depreciation had to be amortized over a smaller number of units. Then why was this not factored into the September guidance?"

I think Bryant's answer was that they were expecting to get even more cost out in the quarter but it didn't happen.

Bryant said you could shut a line and take a one time write off for the remaining depreciation... but they prefer to risk underutilization in order to have capacity available for an up tick (the investor view versus the trader). The good news is the capacity can still be used for saleable products. This puts Intel in a very good position for an upturn, but they do have to deal with the potential for underutilization charges each quarter. But remember, this underutilization reduces EPS, but it does not eat into cash since the cash has already been paid in capital expenditures. Not a bad place to be when you didn’t borrow any money to buy the stuff. While Intel appears better prepared than most for an extended downturn. It appears they will be doubly rewarded if and when there is an upturn in technology spending… Dollars can go up faster, and margins go up faster because underutilization charges go away. If there is no upturn in the next 12 months… Intel may still be the last one standing.

Nitt