Intel Spends 10%, 20%, Or 30% On SG&A?

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Intel (NASDAQ:INTC) spent 13% of its money on selling, general & administrative (SG&A) expenses in 2018. It has been spending less money on SG&A in the recent years. In fact, Intel’s SG&A, when looked at as a percentage of its revenue, has declined from 14% in 2016 to <10% in 2018. This can partly be attributed to divestiture of its security business, and an overall reduction in marketing programs. The biggest expense item for Intel is its cost of goods sold (COGS), which accounted for 53% of total expenses in 2018, followed by research & development (R&D) at 27%. In this note we discuss the key drivers of Intel’s expenses. Look at our interactive dashboard analysis ~ INTC Expenses: How Does Intel Spend Money? ~ for more details.

Intel’s Total Expenses Were $50.2 Billion, With Operating Expenses of $47.5 Billion, $2.3 Billion In Tax Expenses, And $0.4 Billion In Non-Operating Expenses In 2018.

Intel’s Net Income Margin Has Fluctuated In The Recent Years. It Declined In 2017, Due To One Time Provisional Charge Related To Tax Reform. The Sharp Jump In 2018 Can Be Attributed To Lower Tax Rates And Tax Benefit From A Divestiture.

Intel’s Total Expenses Have Increased From $49.1 Billion In 2016 To $50.2 Billion In 2018 1. Operating Expenses Have Increased From $46.3 Billion In 2016 To $47.5 Billion In 2018, Primarily Driven By (A) $4.0 Billion Increase In COGS, (B) $0.9 Billion Increase In R&D, (C) $1.6 Billion Decline In SG&A, And (D) $1.9 Billion Decline In Other Operating Expenses. (A) COGS Grew From $23.2 Billion In 2016 To $27.1 Billion In 2018, Driven By Sales Growth. As A % Revenues, COGS Has Declined From 39% to 38% Over The Same Period. However, It Is Expected To Be Higher In 2019, Due To Absence of Grants And Lower ASPs For NAND Products. (B) R&D Expenses Have Increased Slightly From $12.7 Billion In 2016 To $13.5 Billion In 2018, Driven By Increased Investments In Data Centric Business And 7nm Technology. As A % of Revenues, R&D Has Declined From 21% To 19% Over The Same Period. (C) SG&A Expenses Declined From $8.4 Billion In 2016 To $6.8 Billion In 2018, Due To Reduction In Marketing Expenses, And Divestiture of Its Security Unit. As A % of Revenue, SG&A Declined From 14% In 2016 to 10% in 2018. (D) Other Operating Expenses Have Declined From $2.0 Billion In 2016 To $0.1 Billion In 2018, As 2016 Included Restructuring Charges of $1.8 Billion. As A % of Revenues, Other Operating Expenses Have Declined From 3.4% To 0.2% During The Same Period. 3. Intel’s Income Tax Expense Has Fluctuated In Recent Years. Effective Tax Rate Has Largely Declined, Partly Due To Impact of Changes In The U.S. Taxes, And Certain One Time Benefits.

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