Applied Materials, Inc. (AMAT), Texas Instruments Incorporated (TXN): Is Intel Corporation (INTC) a Cash King?

Intel Corporation (NASDAQ:INTC) has had a harder time leveraging the popularity of smartphones and other mobile devices than some of its competitors due to its limited success in marketing mobile chips and processors, where QUALCOMM, Inc. (NASDAQ:QCOM) dominates the market. Texas Instruments Incorporated (NASDAQ:TXN) faced similar struggles competing in the mobile chip area, and consequently decided to leave that space altogether. Applied Materials, Inc. (NASDAQ:AMAT)’s revenues have been hit hard by a global economic downturn, which has resulted in a decrease in chip orders from major customers Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) and United Microelectronics Corp (ADR) (NYSE:UMC). Also, like Intel Corporation (NASDAQ:INTC), it faces challenges associated with declining PC sales and increasing interest in mobile devices, which reduces the demand for its chips. While AMD suffers from more volatility than its competitors, the company stands to benefit a great deal if Sony Corporation (ADR) (NYSE:SNE) uses AMD’s technology in its latest PlayStation as rumored.

The cash king margin can help you find highly profitable businesses, but it should only be the start of your search. The ratio does have its limits, especially for fast-growing small businesses. Many such companies reinvest all of their cash flow into growing the business, leaving them little or no free cash — but that doesn’t necessarily make them poor investments. Conversely, the formula works better for slower-growing blue chips. You’ll need to look closer to determine exactly how a company is using its cash.

Still, if you can cut through the earnings headlines to follow the cash instead, you might be on the path toward seriously great investments.

The article Is Intel a Cash King? originally appeared on Fool.com and is written by James Royal.

James Royal has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Intel. It also owns shares of Qualcomm.

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