The Real Story – A Column
My friend Bagger shared with me something that I think the Intel and Hillsboro faithful will find interesting, as I did. When the title of our new story, “Intel’s $4.46 Billion Disappearing Act — and Why Some Think a Secret Ohio Partnership Is Hiding in Plain Sight – INTC RISING,” landed on my laptop, I was stoked. This relationship that the great Caddy and I have developed has been eye-opening and right on the money. The MAIA 2-story we broke 6 months before the best tech analysts even sniffed that partnership out was our first effort working together. No one saw that blip on the screen- he did. Article 2 proved the theories right about 18A, Intel’s predicted comeback, and the stock’s rise, so far ahead of tech media releases that certain Federal agencies wondered whether my newfound guru was holding down an INTC Board seat (smiley face). So when Mr. Vance messaged me, he was picking up signals from deep space- where the field is tracking things beyond even 31 Atlas, I had to listen.
Much was covered at Intel’s recent earnings, but what wasn’t included yet this quarter was the typical 10Q, typically published the day of or day after earnings are released. The 10Q is where all the explanations exist for what’s really going on in a company’s business. Outside of the public earnings call, Intel offered some guidance on why the 10Q was delayed, citing troubles with the various financial moves made in the quarter that required SEC direction, which was unavailable in time for the typical 10Q release due to the Government shutdown. Good, solid excuses for not releasing their 10Q.
As a result, what Bagger shared lacks context from the company beyond what was provided in their formal earnings release and subsequent one-hour analyst call. It is still worth considering.
Intel showed a $4.46B drop in Total PPE from Q225 to Q325. PPE has several moving parts each quarter; depreciation, capex and impairment charges. The net impact of these three items in Q3 was a $798M reduction in PPE. The last time PPE dropped Q/Q for Intel was during COVID in Q32020. And the Q325 drop is only the second time PPE has dropped Q/Q in the past 15 years for Intel.
Bagger reminded me that Intel has been spending aggressively on Capex (capital expenditure), nearly doubling its PPE over the past four years from a total on the books of $59B mid-2021 to $109B before this reduction. Total Capex spending over the past 4 years was significantly greater than this $50B increase due to the ongoing impact of depreciation and impairment charges.
Reviewing this story, I had to ask Bagger, where did this missing $4.46B in PPE go?
Without the 10Q, it is anyone’s guess. But a closer look at the balance sheet shows $4.95B appearing last quarter in the Other Long Term Assets category, which wasn’t there in the prior quarter. The Altera and Mobileye Q325 divestments were clearly moved, noted by the Q/Q increase of $2.5B in the Non-Controlling Interests category (the home on the balance sheet for this type of capital).
Why is this important? If accounting bores you, stay with me.
All these financial moves on the balance sheet and in cash flow from last quarter indicate that the $4.46B reduction in PPE shifted Fab resources from Intel asset ownership into a Joint Venture structure. And $4.46B aligns with reports on Intel’s total spending in Ohio to date, possibly indicating that Intel has placed its Ohio Fab into a JV.
If so, with whom and why the secrecy?
As Bagger is known to this audience to do, he’s connected these loose bits of data into a potential game-changing move by Intel. One that hides in plain view until we have confirmation on these details from the 10Q or possible pre-market announcements in the near future. Until then, Bagger suggests there is only one partner capable of doing this JV with Intel, and you need to look no further than what is going on in Asia this week to understand the secrecy behind it at earnings and the missing 10Q.
Could there be another reason behind these changes? Of course, but none come to mind while also solving so many of Intel’s perceived problems. This explanation also explains why, on the most recent conference call, Lip Bu Tan was nearly giddy about the prospects of 14A, while just 90 days ago, he stated that if he didn’t find a customer for 14A, he might be forced to abandon Intel’s efforts on that node.
Please take a moment and review the impact of my coverage of Gambit 1 and Gambit 2 in light of this, which Bagger called Gambit 3 in his note to me.
If all three are right, Intel is back in a way no one thought possible. L e t T h a t S i n k I n. S.e.e T h e F i e l d …..
Everything in his article may be true, false, or speculation. But Bagger is 2-for-2— and the field is speaking to him. Enjoy your Monday, folks!
Intel’s (INTC) Big AI Breakthrough Began in Hillsboro, Oregon — The Hillsboro Gambit II
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