Analysts at Goldman Sachs Group, Inc. (NYSE:GS) Equity Research believes that a significant reduction on Intel Corporation (NASDAQ:INTC)’s capex on its 2013 could boost the performance of the shares of the company. According to them investors would likely view a lower capex positively.

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The analysts cited the shares of the world’s largest chipmaker traded up by 2.91% on 3/26/13 (SOX up 0.91%) as investors focus on the possibility the Intel Corporation (NASDAQ:INTC) would reduce its 2013 capex budget from its initial guidance of $13.5 billion.

According to the three Goldman Sachs analysts, James Covello, Mark Delaney, and Steven Welles, investors would view Intel’s capex cut because it would address the company’s excess supply and positive for cash flow. They noted that Intel used more than 100% of its OCF in seven of the last eight quarters. The company has annual OCF of 19 billion.

According to them the chipmaker used around $11 billion on capex and paid $4 billion I dividends in 2011 and 2012. Intel Corporation (NASDAQ:INTC) also repurchased its stock worth $14 billion in 2011 and another $5 billion in 2012. They emphasized that the company’s net cash balance from $20 billion in 2010 to $5 billion in 2012.

The analysts said they will likely view the stock of Intel Corporation (NASDAQ:INTC) less negative if the company would reduce its capex to around $7 billion to $8 billion. They explained that their sell rating for the stock reflects their view that the robust capex of the company created excess supply. They cited that during 4Q12, Intel’s fab utilization was around 50% and PC OEM inventory was near a multi-year high.

Covello, Delaney, and Welles pointed out, “We do not believe a small capex reduction would be sufficient to fix the supply problem, as Intel already added significant capacity with its capex increase to $11 bn in 2011 and 2012 from about $5 billion on average in 2007-2010. In addition, our hardware team expects 2013 PC units to decline slightly yoy.”

They expect that Intel Corporation (NASDAQ:INTC)’s capex cut would bring negative impact on the SPE stock. However, they believe that Intel’s current orders to the SPE companies are very low, and it would unlikely make any changes. They think the reason why investors are expecting Intel to reduce its capex due to supply chain comments on low logic orders.

The stock price of Intel Corporation (NASDAQ:INTC) is up by nearly 1 percent to $21.92 per share on Wednesday around 11:58 AM.