Everything

$intc earnings manipulation

It’s hard not to look at Intel’s Q3 2014 earnings and not immediately suspect blatant earnings management at the expense of the company’s well-being. Intel spent $4,200,000,000 buying back shares of itself. And the result – estimates were $0.65 per share and Intel just slightly beat them by a penny per share more at $0.66. Way to go! Gold star!

Earnings per share is simply the company’s earnings divided by the number of shares outstanding. There are ways you can make the numerator larger. Intel took the approach of making the denominator smaller to inflate EPS. Simply, when you buy $4.2 Billion dollars’ worth of shares, you make the denominator smaller and the total EPS larger.

Intel Stock buybacks

Is this suspicious? You tell me – look at the chart at the top of this post from ZeroHedge. One of these bars is not like the other. At a time when the tech industry is taking a bit of a beating and the market as a whole is at record high volatility, you have to seriously wonder if Intel could have found a better use for $4,200,000,000. Some of that appears to have come from capital spending (about $.4 BN) Earnings Release Page 4. I haven’t tried too hard to find exactly where this additional cash came from; this was just meant to be a quick post instead of a full analysis.

Good job, Intel. I would say that you’re not even trying to be discrete but apparently the market doesn’t care because as of this writing, Intel is up 213 bps.

And one more thing – they have an additional $16.4 BN authorized for share buybacks.

Sources:

  • http://files.shareholder.com/downloads/INTC/3545557097x0x786397/d4904f61-2f5f-48cc-82e2-21a4d0c49583/Earnings_Release_Q3_2014_final.pdf
  • http://www.intc.com/results.cfm
  • http://www.cnbc.com/id/102086308#
  • http://www.zerohedge.com/news/2014-10-14/intels-wtf-chart