Intel's $7 Billion Can't Purchase 'Buy' Rating

The chipmaker's plan to add jobs and new factories hasn't helped its shares.
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It remains to be seen whether the government stimulus package will help the nation spend its way back to prosperity. But


(INTC) - Get Report

$7 billion plan to add jobs and new plants has failed to lift its share price.

Despite a bleak outlook for computer hardware at both the consumer and corporate levels, Intel Chief Executive Officer Paul Otellini said the company would spend $7 billion over the next two years to build better chip factories in the U.S. It would be Intel's largest investment in new manufacturing facilities.

The chipmaker's shares have been trading for $12 to $15 for weeks. The announcement hasn't pushed them out of that range.

Intel shares are richly priced at more than 38 times this year's estimated earnings.'s quantitative evaluation model gives Intel a "risk grade" of D on a scale of A to E.

Analysts expect the tech giant's earnings to rebound to 76 cents a share next year after falling to an estimated 39 cents this year. Last year, the company earned 92 cents. Ratings gives Intel a C-plus "reward grade," reflecting potential earnings growth.

Intel received an overall grade of C, a "hold" recommendation. The shares, which have fallen to as low as $12 in the past year, are down from more than $70 in 2000, when the technology bubble burst.

Intel shares haven't benefited from the struggles of main rival,

Advanced Micro Devices

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. AMD, which suffered nine straight quarterly losses, failed to get enough investor approval to spin off its chip production business.

Intel makes microprocessor chips using 45- and 65-nanometer process technology. The $7 billion expansion will result in smaller, faster, more energy-efficient chips using 32-nanometer manufacturing technology.

Although Intel's plan is targeted at the U.S., where 75% of its manufacturing and research and development occurs, more than 75% of the firm's sales come from abroad.

Intel dominates the market for the ubiquitous X86 processors used in most computers. The firm's chips also are used in servers, handheld devices, networking and data communication applications. Intel also offers flash-memory products and wireless devices.

Richard Widows is a senior financial analyst for Ratings. Prior to joining, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.