Case | HBS Case Collection | February 1992 (Revised March 1993)

Intel Corp.--1992

by Kenneth A. Froot

Abstract

Intel Corp., the world's dominant designer and manufacturer of microprocessors (the "brains" of the personal computer), has accumulated a large amount of cash (net of debt). Furthermore, it expects to continue to accumulate cash at an unprecedented rate. Has the company grown up to the extent that it can begin disbursing cash to its shareholders? What kind of disbursement policy should it choose? Intel will continue to face competition from imitators of its processors in the future, yet it is not clear whether its cash holdings can or will be a competitive weapon in this competitive battle. The case focuses on financial policy issues and on how they then interact with a very unusual and dynamic form of product-market competition and innovation. Can be used as a one- or two-day exploration of the following issues: complementarity externalities and costs of finance, appropriability of returns on investments, the role of finance in high-tech and rapidly innovating sectors, the strategic uses of cash, analysis of capital structure and cash disbursement policies, the use of financial policy as a competitive weapon, and timing in the sale and purchase of equity-linked instruments.

Keywords: dividends; Financial Management; Competition; Multinational Firms and Management; Cash; Technological Innovation; Capital Structure; Investment Return; Equity; Financial Strategy; Corporate Finance; Semiconductor Industry; United States;

Citation:

Froot, Kenneth A. "Intel Corp.--1992." Harvard Business School Case 292-106, February 1992. (Revised March 1993.)