Investors shrug off $7 billion Intel investment

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Intel Corp is planning to invest $7 billion on new U.S. plants, a move the company said will support 7,000 jobs.

The money will be used to upgrade existing facilities in Oregon, Arizona and New Mexico, so they can build smaller, faster and more energy-efficient chips based on Intel's 32 nanometer manufacturing technology.

"We're investing in America to keep Intel and our nation at the forefront of innovation," said Chief Executive Paul Otellini in a press release.

Intel also is trying to spend money at a time when its main competitor, Advanced Micro Devices, has been hobbled by poor earnings. The company, which has lost $7 billion over two years, is expected to report a 33 percent decline in fourth quarter sales when it issues results Thursday.

Despite the losses, Intel continues to be in good financial shape and can easily afford the expansion, said Clyde Montevirgin, an equity analyst with Standard & Poors who rates Intel as a 'buy' and has a $17 target price. At the end of last year, it had nearly $12 billion in cash and cash equivalents.

Intel plans to spend more than $5 billion on capital expenditures this year, in line with 2008. The chipmaker does similar upgrades every two years and is publicizing its move now because of the public's concern about the economy, he said.

"It seems like a shocking thing because they put out a press release but analysts baked it into their numbers," said Montevirgin in an interview with the Daily Finance. "This actually is not much of a surprise to me."

Indeed, Wall Street seemed to shrug off the news. Shares of Intel were down in mid-morning trading. They have slumped by more than 20 percent over the past year amid worries about declining corporate technology spending and lackluster PC sales.

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