INTERSIL FISCAL YEAR 2010

Intersil Corporation Latisha Ewell Professor Kouprianova November 27, 2011 Accounting 206

INTERSIL CORPORATION

Intersil Corporation is an American company that is known for designing, developing and manufacturing high-performance analog semiconductors. Its serves four main markets segments namely; computing, communications, industrial and high-end consumer markets. The company has two main divisions; the mixed signal division headed by Susan Hardman and power management division headed by Peter Oaklander. Its mission is to provide high-performance mixed-signal and analog Integrated Circuit systems that exceed customer expectations (Intersil 2011). Intersil came into being in 1999 following the acquisition of Harris Corporation, subsequent acquisition of Elantec Semiconductor, Inc and its divestiture of its wireless business (Intersil, 2011). The company issued its first initial public offering in 1999 and adopted a strategy of growth through acquisitions. This marked a change in strategy from its former CEO who used a strategy of slow growth and high margins. The present CEO Dave Bell has prioritized growth and scaled down gross margins to impress the stock market. To date, Intersil is the fastest growing company in the analogue market in both market share and profitability (Intersil, 2011). The company has a lean corporate governance team led by the CEO Dave Bell. Under him are the two divisional heads Peter Oaklander and Susan Hardman. The company has a product organization structure and aims to continue pursuing acquisitions that enhance its position as the market leader in its product categories. For the last 3 years, the company has had growing cash balance at the end of the year. This is impressive given the string of acquisitions that it has embarked on. Most of its cash has been used in these acquisitions. Also, the company has acquired long term debt financing in 2010 to offset its cash commitment in the acquisitions. The result has been a significant rise in

INTERSIL CORPORATION leverage to approximately 60% of equity in the year. High gearing augers well in times of high growth in sales since interest on loan is fixed unlike dividends (Bodie, Kane & Marcus, 2008). Also, a significant portion of the firms cash was raised from internal operations. Only in year 2008 did the company use its funds to finance a share repurchase scheme.

The company paid dividends to its shareholders amounting to 0.48 per share for the year. In determining the dividends payable, the management took into account the companys future capital requirements especially on research and development, creation of new as well as expansion of existing sales distribution channels, share dilution management, acquisitions, capital repurchase scheme and legal, liquidity and profitability risks (Intersil 2011). Besides, the company has a covenant with its loan financiers not to pay annual dividends exceeding $70 million in the year 2010 and $75 million after 2010 to the time when the loan is paid in full (Intersil, 2011). Intersil offers a good bet for both long and short term investment. As reported in its financial presentations, the company has had a gross margin of 58-62%. Though it is below the pre-2008 level of 70%, its string of acquisition of firms in high growth potential markets offers great hopes for high return. The current price of $10.33 gives a dividend yield of 4.5%. This compares favorably with that of the market leader Texan instruments Inc at 2.3% and Analog Devices Inc at 2.9%. Besides, the company is in its early growth phase meaning that a lot is yet to be realized as a result of synergistic effects of the newly acquired entities (Bodie, Kane & Marcus, 2008) . This makes the company a nice investment both in short and long term.

INTERSIL CORPORATION

References Bodie, Z., Kane, A. Marcus, A. (2008). Investments. New York: McGraw-Hill/Irwin Intersil Corporation (2011). Financial statements. Accessed 23rd November from the link http://ir.intersil.com/phoenix.zhtml?c=69281&p=irol-irhome