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Tech Industry

The Starting Line: Investing with Intel

The chipmaker has acquired a quirky portfolio, which includes a bunch of pharmaceutical companies, a few media holdings and even shares of its archrival AMD.

Investors could learn a thing or two from Intel about investing.

Through its various funds, the chipmaker has acquired a quirky portfolio, which includes a bunch of pharmaceutical companies, a few media holdings and even shares of its archrival Advanced Micro Devices.

Turns out Intel actively manages a lot of stocks. How can Intel possibly own 80,858 shares of AMD through March 31?

It's a quirk. To save money, Intel manages its own pension fund used for profit sharing. The portfolio is designed to mirror the Standard & Poor's 500 index. When the S&P 500 index is rejiggered, Intel follows suit. While most companies outsource pension fund management, Intel says it can save management fees by running its own fund.

Toss in the venture capital funds that Intel runs to create an "ecosystem" around new chips such as its Itanium, and you've got a portfolio with more than a few anomalies. Notably, shares of BackWeb Technologies are listed right below Avon Products, and shares of AOL Time Warner ride shotgun with Anheuser Busch.

"We have to list every stock we own so it's all there," said Tom Beermann, a spokesman for Intel.

The only reason investors can see which stocks Intel owns from quarter to quarter is that a Securities and Exchange Commission rule mandates that any company managing more than $100 million in marketable securities has to file a report listing the stocks it owns. Intel files every quarter; its latest filing came in May.

As it turns out, few companies have to list the stocks they own. Microsoft doesn't file a form "13F" because it doesn't have a pension fund or venture capital funds, said a Microsoft spokeswoman. Hewlett-Packard files with the SEC, but its portfolio is chock full of tech companies. Through the first quarter, HP owned more than 2.7 million shares of Divine Interventures, an Internet incubator. It also owns shares of Crossroads Sytems and Openwave Systems.

Other tech giants own stakes in strategically important companies, but they are often restricted and don't warrant a separate SEC filing. Only when you get to Intel's portfolio do you wind up with shares of Bed Bath & Beyond, Tiffany and Home Depot.

Intel does have a few positions that'll be eliminated. Through March 31, the company owned 150,000 shares of Agency.com, which is going private, and more than 3.56 million shares of eToys, which is now bankrupt.

With its venture investments and dot-com holdings losing value, the stocks Intel owns have an increasingly Old Economy ring to them.

According to regulatory filings, Intel:

• Boosted its shares of Bed Bath & Beyond from 26,000 shares on March, 31, 2000 to 73,800 in a year later, while shares of Black & Decker were upped from 18,800 to 20,800.

• Raised its shares of Citrix from 34,400 in 2000 to 47,900 in 2001.

• Dumped shares of Covad Communications. On March 31, 2000, Intel owned 5,563,863 shares, but pared its holdings to 327,651 shares as of March 31, 2001.

• Eliminated its holdings in Critical Path.

• Bought more shares of Dell Computer and owned 667,800 through March 31, up from 486,900 a year ago.

• Owned more than 6.3 million shares of Red Hat through March 31.

• Owned 478,543 shares of Ford Motor, up from 231,478 a year ago.

• Fell in love with retailing stocks and raised its stake in Gap, Home Depot and J.C. Penney.

• Added 37,000 shares of Tiffany to its portfolio, up from nothing a year ago.

• Boosted its stake in McDonalds, Maytag and Pfizer.

• And like many investors, Intel got burned by Nortel Networks, holding 821,336 shares through March 31, up from 255,968 a year ago.

Beermann said Intel will most likely file an updated filing that will eliminate some dot-com bombs and tweak some holdings based on the recent S&P 500 reweighting. There may even be a little more AMD in there.

Beermann noted that Intel's portfolio looks a little strange on paper, but "you can't say that it's not diversified."