Stock pitch on Intel Corporation (INTC) focusing on their upcoming potential in the mobile computing market. [View Pitch for More Details]

1. Intel Pitch
October 21, 2012
Michael Karp | TMT Portfolio Manager
Jawwad Siddiqui | Senior Analyst
Anson Kwok | Junior Analyst
This presentation is for informational purposes only, and is not an offer to buy or sell or a
solicitation to buy or sell any securities, investment products or other financial product or
service, an official confirmation of any transaction, or an official statement of Limestone
Capital Investment Club. Any views or opinions presented are solely those of the author
and do not necessarily represent those of Limestone Capital.

2. 1 Company Overview
Company Description
 Business Model: World’s largest and highest valued multinational semiconductor chipmaker based on revenue and
shipments. Intel designs and manufactures advanced integrated digital technology platforms. These platforms are sold
primarily to original equipment manufacturers (OEMs), original design manufacturers (ODMs), and industrial and
communications equipment manufacturers in the computing and communications industries.
 Revenue Sources: Most of revenues are from PC & data storage sectors but has been looking into future sources of
revenue, purchasing a variety of software and services while developing new tablet technologies.
 Acquisition of McAfee (gaining McAfee’s DeepSAFE technology platform), Intel’s 2011 revenue for its software and
services sector shot up 608%.
 Expansion Plans: Intel is also expanding their market share in the smartphone and tablet industries, building multi-year
partnerships with Motorola and Google, optimizing the Atom chip for Android compatibility.
Revenue by Segment Revenue Growth by Segment
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3. 2 Company Overview
Key Financials Management
(MM except per share data) Name Position Background
 Share Price: $21.45 Paul S. Otellini CEO Managed several Intel businesses, including the
company’s PC and server microprocessor
 Market Cap: 107,910 divisions. Past COO, Became CEO 2005.
 EV: 111,030
 Revenue LTM: 54,530 David Perlmutter EVP, GM & Responsible for Intel’s platform solutions for all
Chief computing segments including datacenters,
 Gross Profit Margin: 63.36% Product desktops, laptops, handhelds, embedded devices,
 Profit Margin: 20.94% Officer and consumer electronics
 Debt to Equity: 0.1473
Stacy J. Smith CFO Leads the worldwide finance organizations, and
 Dividend Yield: 4.14% oversees finance, accounting and reporting, has
 Historical Beta: 1.01 previous experience in Finance, Sales and
Marketing, and Information Technology
Intel Annotated Performance YTD
Q3: Stock price has sustained
decline due to lowered revenue
forecast by Intel due to economic
uncertainty. Q4 & Onwards: High
CAPEX on new
products being
released.
Aug. 12, 2012:
FY2011: Beat all-time earning
Buffett sells stake in
records, $12.9 MM net
Intel. Share price
income, $54 MM revenues.
dropped negligibly.
Overview Thesis Macro/Micro Catalysts/Risk Valuation
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4. 3 Investment Thesis
Argument 1 : Stability and industry dominance unaffected by macro factors
Macroeconomic uncertainty does not bar rapid growth in global semiconductor
industry. Intel consistently has best gross margins, strong dividend yield, and a
strong balance sheet from extremely low debt.
Argument 2: New products pave the way for partnerships
Clover Trail opens opportunities for new partnerships with companies such as
Lenovo, HP, Dell, Samsung, Acer, ASUS – leading to increased market share.
Haswell architecture release in 2013 will help to increase efficiency and gross
margins for Intel as it releases future platforms and semiconductors
Argument 3: Valuation
Undervalued on a EV/EBITDA, EV/Forward EBITDA, and EV/EBIT basis
compared to peers.
Overview Thesis Macro/Micro Catalysts/Risk Valuation
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5. 4 Macro & Micro Outlook
Macroeconomic Concerns
• Despite global macroeconomic uncertainties (Eurozone crisis), global GDP growth, and economic
slowing in BRIC countries, demand remains strong for semiconductors in applications such as
smartphones, media tablets, and automotive electronics
• Short term spending fueled by QE3 in the United States leads to higher sales in luxury goods such
as electronics. This effects demand for Intel’s products positively.
Industry Outlook:
 Industry Growth: According to IDC (International Data Corporation), semiconductor revenues will
grow 4.6% in 2012 to $315B. From 2011 through to 2016, revenues are projected to grow at a CAGR
of 4.8%, reaching $380 billion in 2016.
 Revenues from computing industry segment projected YOY growth of 1.5% for 2012 and CAGR
of 3.7% for 2011-2016 forecast period
 Semiconductor revenues for mobile PCs projected YOY growth of 5.9% & 2011-2016 CAGR of
9.6%
 Windows 8: High expectations for the launch of Microsoft's Windows 8 operating system and next-
generation smartphones later this year, will accelerate semiconductor revenue growth in 2013 and
beyond
 Supply constraints on semiconductor products are easing as foundries are bringing more capacity
online
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6. 5 Catalysts & Risks
Catalysts
 Clover Trail (new chip):
 Intel’s eventual release of Clover Trail will allow them to retain a higher portion of the tablet market
share
 Prior to Clover Trail’s release, Intel has already secured deals with Samsung, Dell, Lenovo, HP, Acer,
ASUS and other firms are already in the process of building Clover Trail tablets.
 Clover Trail is already present in hybrid laptop tablets such as the Dell XPS Duo 12 and Samsung
Series 5 Slate. Intel says over 20 tablets are in the works right now, which will greatly increase Intel’
future profits.
 New Architecture for Chip Production: The Haswell release in 2013 could help to greatly increase
efficiency and gross margins for Intel as it releases future platforms and semiconductors
 High FCF & Revenue Growth: Will allow them to produce architecture effective enough to dominate the
smartphone and tablet markets
 Acquisitions: Intel’s recent acquisition of McAfee gives them access to a brand new sector of revenue, as
they can continue to expand their presence in the security software market with various forms of integrated
platforms
Risks
 High start-up costs with Haswell Architecture: Initial start up costs with the 14nm ramp, capital
expenditures costs associated with the Haswell microarchitecture and the release of Clover Trail
 Market Forces: Material slow-down in data centre demand could lead to reduced profits
 Cannibalization: Increasing tablet cannibalization of the PC market, specifically tablets running ARM
microprocessors and architecture
 ARM: Competing with ARM, who still dominates both the smartphone and tablet market, could lead to
degrading margins and profits or an inability to effectively enter the market
Overview Thesis Macro/Micro Catalysts/Risk Valuation
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7. 6 Valuation
Large Cap Semiconductors Comparables Universe
($ in millions, except per share data)
Current Enterprise Value /
Share Equity Enterprise LTM 2013E LTM 2013E LTM 2013E
Company Ticker Price Value Value Sales Sales EBITDA EBITDA EBIT EBIT
Intel Corporation NASDAQ:INTC $ 21.48 $ 107,466 $ 100,979 1.9x 1.9x 4.2x 4.7x 5.9x 10.4x
Advanced Micro Devices, Inc. NYSE:AMD $ 2.74 $ 1,939 $ 2,381 0.4x 0.5x 25.1x 6.4x nmf nmf
Micron Technology Inc. NASDAQ:MU $ 5.67 $ 5,769 $ 7,189 0.9x 0.8x 5.4x 3.2x nmf nmf
NVIDIA Corporation NASDAQ:NVDA $ 12.63 $ 7,824 $ 4,566 1.1x 1.0x 5.8x 4.3x 8.0x 9.6x
QUALCOMM Inc. NASDAQ:QCOM $ 58.89 $ 100,310 $ 88,289 4.8x 4.3x 13.1x 10.4x 15.1x 15.2x
Texac Instruments Inc. NASDAQ:TXN $ 27.28 $ 31,038 $ 33,408 2.5x 2.5x 7.9x 8.6x 11.1x 15.3x
Overall
Mean 1.9x 1.8x 10.3x 6.3x 10.0x 12.6x
Median 1.5x 1.4x 6.9x 5.6x 9.6x 12.8x
High 4.8x 4.3x 25.1x 10.4x 15.1x 15.3x
Low 0.4x 0.5x 4.2x 3.2x 5.9x 9.6x
Implied Valuation From Comparables
($ in millions, except per share data)
Multiple Implied EV Equity Value Price/Share
LOW HIGH METRIC LOW HIGH Debt Cash LOW HIGH S/O LOW HIGH
EV/LTM Sales 1.5x 1.9x 58,199 87,299 112,518 5650 7331 88,980 114,199 5019 $ 17.73 $ 22.75
EV/2013E Sales 1.4x 1.8x 62,727 89,699 114,267 5650 7331 91,380 115,948 5019 $ 18.21 $ 23.10
EV/LTM EBITDA 5.5x 6.9x 23,929 132,206 163,911 5650 7331 133,887 165,592 5019 $ 26.67 $ 32.99
EV/2013E EBITDA 5.6x 6.3x 25,814 143,269 161,770 5650 7331 144,950 163,451 5019 $ 28.88 $ 32.56
EV/LTM EBIT 7.7x 10.0x 17,667 136,475 177,109 5650 7331 138,156 178,790 5019 $ 27.52 $ 35.62
EV/2013E EBIT 9.6x 11.2x 19,065 182,074 212,769 5650 7331 183,755 214,450 5019 $ 36.61 $ 42.72
IMPLIED SHARE PRICE $ 28.78
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8. 7 Valuation: Discounted Cash Flow
Mid-Year Convention Historical Period Projection Period
2009 2010 2011 2012 2013 2014 2015 2016
Sales $35,127.0 $43,623.0 $53,999.0 $57,647.8 $61,659.3 $66,061.4 $70,778.9 $75,834.5
% growth - 24.2% 23.8% 6.8% 7.0% 7.1% 7.1% 7.1%
COGS 15,566.0 15,132.0 20,242.0 23,788.2 25,443.6 27,260.1 29,206.8 31,293.0
Gross Profit $19,561.0 $28,491.0 $33,757.0 $33,859.6 $36,215.7 $38,801.3 $41,572.1 $44,541.6
% margin 55.7% 65.3% 62.5% 58.7% 58.7% 58.7% 58.7% 58.7%
R&D 5,653.0 6,576.0 8,350.0 313.4 313.6 313.7 313.9 314.0
SG&A 7,931.0 6,309.0 7,670.0 9,847.1 10,532.4 11,284.3 12,090.1 12,953.7
EBITDA $5,977.0 $15,606.0 $17,737.0 $23,699.0 $25,369.8 $27,203.3 $29,168.1 $31,273.8
% margin 17.0% 35.8% 32.8% 41.1% 41.1% 41.2% 41.2% 41.2%
Depreciation & Amortization 4,744.0 4,398.0 5,141.0 6,202.6 6,634.2 7,107.8 7,615.4 8,159.3
EBIT $1,233.0 $11,208.0 $12,596.0 $17,496.4 $18,735.6 $20,095.5 $21,552.7 $23,114.5
% margin 3.5% 25.7% 23.3% 30.4% 30.4% 30.4% 30.5% 30.5%
Taxes 1,335.0 4,581.0 4,839.0 6,123.8 6,557.5 7,033.4 7,543.5 8,090.1
EBIAT ($102.0) $6,627.0 $7,757.0 $11,372.7 $12,178.1 $13,062.0 $14,009.3 $15,024.4
Plus: Depreciation & Amortization 4,744.0 4,398.0 5,141.0 6,202.6 6,634.2 7,107.8 7,615.4 8,159.3
Less: Capital Expenditures (4,515.0) (5,207.0) (10,764.0) (8,241.8) (8,815.3) (9,444.7) (10,119.1) (10,841.9)
Less: Increase in Net Working Capital 330.0 (501.0) 213.0 (8,474.3) (553.7) (607.6) (651.2) (697.8)
Unlevered Free Cash Flow $457.0 $5,317.0 $2,347.0 $859.1 $9,443.3 $10,117.6 $10,854.4 $11,644.0
WACC 9.62%
Discount Period 0.50 1.5 2.5 3.5 4.5
Discount Factor 0.96 0.87 0.79 0.73 0.66
Present Value of Free Cash Flow $820.6 $8,228.2 $8,042.3 $7,871.0 $7,702.8
Enterprise Value Implied Equity Value and Share Price
Cumulative Present Value of FCF $68,763.7 Enterprise Value $157,116.2 NOTE
Less: Total Debt 7,331.0
Projections for cash flows
Terminal Value Less: Preferred Securities -
have been made for 10
UFCF 2021 $16,526.9 Less: Noncontrolling Interest -
Perpetuity Growth Rate 2.00% Plus: Cash and Cash Equivalents 5,065.0
years, the first five are
shown in the model
Terminal Value $221,310.6
Discount Factor 0.40 Implied Equity Value $169,512.2 above. WACC is based
Present Value of Terminal Value $88,352.4
on comparable
% of Enterprise Value 56.2% Basic Shares Outstanding 5,003.0 companies used in the
Fully Diluted Shares Outstanding 5,019.4 comparables analysis.
The bear case is shown. 8
Enterprise Value $157,116.2 Implied Share Price $33.77

9. 8 Valuation: Recommendations
Football Field Implied Valuation
Analysis Price
Comparables $28.78
DCF $33.77
Analyst Recommendations
Analysis Target Price
RBC Capital Markets $24.00
Wells Fargo $39.00
Maxim Group $29.00
JPMorgan $19.00
Recommendation, Entry & Exit Strategy
Entry Price: Market Price
Target Price: $30.00
Time Horizon: 12 Months
Stop Loss $20.00
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