Replies to post #63885 on Advanced Micro Devices Inc (AMD)

[alan81]

Regarding INTC shares...
UpnDown said:
That problem appears to be Intel's options program and the related share buyback program.
The stock option program actually increases book value, as INTC sells shares at market, which is a bit more than book these days. In terms of the buy-back program, INTC says (your choice on if you believe them) that it is NOT related to the option program. If you look at this:
http://download.intel.com/intel/finance/presentations/IntelQ32005final.pdf
and specifically foil 10
you see that the number of outstanding INTC shares has declined by 10% since 1998. The graph shows a decline of over 400M shares, or about 6% since early '03. INTC is buying back significantly more shares than is required to offset the dilution created by the options program.
--Alan

[wbmw]

Re: No, we're not talking about cash flow here. We're talking about shareholder's equity (stockholder's equity), which includes retained earnings. When a company is making money for its shareholders, that value should rise.

Cash flow and shareholder equity are intimately related. The change in assets and liabilities is what affects the equity, and that is defined by the cash flow. Intel is making billions of dollars in operations, but they invest that back into the company at the decree of shareholders. That's right, shareholders vote on items such as stock buyback, and they vote on the officers who make decisions such as CapEx. Those are the two largest negative contributors to the cash flow and should by far be the most well understood.

Re: Shareholder's equity is the amount by which the assets in the company exceed the liabilities. It is also known as book value. If the book value is not increasing (after adjusting to be on a per-share basis) when the company claims to be making money, there's a problem hidden in the books.

No, no, no! Intel is playing by the same rules as every other company out there. They derive their EPS by totalling up the inflow of money due to operations (revenue) minus the operational costs to make it, including taxes, etc. They are not required to count CapEx spending or stock buyback as part of operational expenses, because they are not operational expenses. Likewise, AMD doesn't count the costs going into Fab36 as part of their earnings number, or else they would have appeared to be losing money every quarter this year.

At any rate, you asked for an explanation of how the change in shareholder equity is related to their earnings, and I showed you the entire set of adjustments leading from one to the other. If you choose not to accept this, then it's due to your own closed mindedness. And the fact that you single out Intel when every other company on Wall Street does the same thing speaks volumes towards your double-standards.