Case Study
Describe the characteristics of the industry in which Intel operates. How is Intel positioned in the industry? Intel operates in an industry, which is comprised of products involving high research and development costs, continuous product improvement and new innovations. The companies in the industry are having high economies of scale and are knowledge based. It helps both the service and manufacturing sectors in the growth process. Intel is positioned as a leading company with its ability to adapt to technological changes and its strong relations with other businesses who are major buyers of integrated circuits. The industry in which it operates is very competitive and comes with high risks as …show more content…
In spite of this, it is the most commonly used repurchase method used by the firms in US. Open market share repurchase signals to the market that the company would rather invest in its own company than going for other profitable and riskier investments. Open market repurchase also causes delays and will allow other investors to push up the price before Intel goes in and repurchases making it more expensive for Intel.
In a fixed price tender offer, the firm announces the number of shares it plans to repurchase; the fixed price it is willing to pay per share and the duration till the offer is valid. If the number of shares tendered by the shareholders is more than the number of shares sought by the firm, it will purchase less than all the shares tendered and if the number sought is less than the number tendered then the firm can extend its offer period. This allows the shareholders to tender some or all of their shares at a premium to the current market price. The problem with this approach is that the best price for Intel would be the one (lowest price), which will be worst for its shareholders. In Dutch auction, the firm announces the number of shares it plans to repurchase; price range it is willing to pay for the shares and the offer duration. The shareholders respond with the price and the number of shares they are willing to tender. The firm then creates a demand curve of the stock from