Intel today (May 2th) released its Form 10-Q for the quarter ended April 2, 2016. While everyone paid attention to other things, the most important number was the current valuation of Intel Capital’s portfolio companies. The valuation of the portfolio decreased by 10% from the quarter ended December 26, 2015.
Inside Intel. Intel Capital’s portfolio was valued at $2.3 billion at the quarter end of April 2, 2016 while the portfolio had a value $2.5 billion at the end of December 26, 2015. Over the quarter, the portfolio declined by $200 million as estimated by Intel. Portfolio companies generally do not trade on public markets. Intel must value their “non-marketable investments” using other valuation methods.
Intel Capital did not make any significant investment in new companies over the quarter ended April 2, 2016. Total amount invested, $1.5 billion, remained the same during the recent quarter.
Power Failure. In addition, there were no write-downs, impairments, of the investments during the current quarter. For accounting purposes, Intel would need to write-down an investment if there were a significant change in the value of an investment. Last year was an exception; Intel wrote-down $160 million of its Intel Capital investments.
Fund companies must also value their investments and some on more frequent basis than Intel. For example, Fidelity updates its holdings on monthly basis. Last week, Fidelity raised the value of its holdings. Like to Intel, Fidelity and other fund companies must value their holding using other methods than market prices.
The difference, between the valuation of Intel and the mutual fund companies, is the life cycle of the company. Intel Capital is investing in early stage companies while the mutual companies are investing at the later stage companies.
More Chips? The chart below reflect the changes in the Intel Capital portfolio’s carrying value (CV) and fair value (FV) over the past two years. Carrying value is the actual amount invested in portfolio companies. The amount invested increased from $1.3 billion at the end of 2014 to $1.5 billion at the end of the current quarter. Intel investments in Cloudera and UniSpreadtrum were excluded from the reported amounts since the two companies not Intel Capital portfolio companies.
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