Intel Explores Potential Business Split Amid Market Challenges

Intel's future suddenly may be in doubt

Shares of chip giant Intel jumped more than 9% on Friday (Au. 30), but the gains were not because things are going great. Intel (INTC) is having a rotten year, and its stock price reflects the misery. Its shares fell an astounding 28.3% in August, despite the big gain on Friday. The shares are down 56.1% for the year. The shares jumped on a Bloomberg News report that the company and its primary investment bankers are talking about how to fix the mess, the worst the company has experienced in its 56-year history. Related: Veteran fund manager unveils startling Nvidia stock forecast The ideas apparently under discussion include splitting Intel's product design and manufacturing businesses. Another topic: Factory projects might potentially be scrapped, Bloomberg said. The report cited sources who "asked not to be identified because the deliberations are private." Something needs to be done Falling sales in key markets and rising costs for its ambitious manufacturing turnaround have forced Intel to take drastic moves to conserve cash, The Wall Street Journal reported on Aug. 10. On Aug. 1, the company reported disappointing earnings. Then, it said it would lay off 15% of the workforce, cut the capital expenditures used to build and equip production facilities, and it suspended the company's dividend. Intel had been paying a dividend since 1992. The stock fell 26.1% the next day. Intel has even sold its 1.8-million share in Arm Holdings (ARM) , the preeminent chip-design company. Intel's percentage loss in August and its decline for the year are the worst performances of any stock in the Dow Jones Industrial Average. The loss for the month was the fourth worst of any stock in the Standard & Poor's 500 Index, after: To add insult to injury, the year-to-date losses are the worst for any S&P 500 stock except Walgreens Boots Alliance (WBA) . Its shares are down 64.6%. Walgreens was removed from the Dow Jones industrials on Feb. 26, replaced by Amazon.com (AMZN) . There's speculation Intel might be removed from the Dow, possibly replaced by Nvidia (NVDA) . Intel, a critical element in the development of Silicon Valley, was founded in 1968. Under the leadership of the late Andrew Grove, Intel became a major technology force when it joined with Microsoft (MSFT) in creating the chips to power the Windows operations system that powered nearly all non-Apple personal computers in the 1980s and 1990s. Together, they were known as "Wintel." Grove was brilliant, aggressive, and demanding. He was famous for coining the phrase "only the paranoid survive." The world knew the catchphrase "Intel Inside." Between 1992 and 2018, Intel was the biggest semiconductor maker by revenue, until succeeded by Samsung. In January 2020, Intel's market cap hit a record $292 billion. Andy Grove had an obsession Grove, who died in 2016, had an extraordinary ability to detect major shifts in business and technology, and he believed Intel should always be flexible enough to move quickly and make the most of them. But, after he retired, Intel failed to recognize two major developments: Intel still designs and makes chips in factories in Arizona, New Mexico and Oregon, but most of its competitors, including Nvidia, now concentrate on designing chips that are later manufactured by others, especially Taiwan Semiconductor Manufacturing Company (TSM) . Intel CEO Pat Gelsinger is a champion of the factories, known as foundries, with a goal of making Intel the second-biggest foundry by 2030. He's had the help of big investors like Brookfield and Apollo and $8.5 billion in grants and $11 billion in loans from the Biden Administration, which has named Intel "a national champion." Progress is painfully slow, and Gelsinger's vision may be threatened. Intel expects to sell $500 million of its artificial intelligence chips, known as Gaudi, this year, according to The Economist. Nvidia ships $20 billion of its chips each quarter. Related: Veteran fund manager sees world of pain coming for stocks

Intel Considers Strategic Overhaul Amid Financial Turbulence

Intel Corp is reportedly considering various strategic options, including splitting its product-design and manufacturing divisions, to cut losses as it navigates one of the most challenging periods in its 56-year history. The deliberations, which remain confidential, include the possibility of scaling back certain factory projects and even a potential merger or acquisition, according to sources who spoke to Bloomberg. Intel's longstanding advisors, Morgan Stanley and Goldman Sachs, are said to be guiding the company through the complex decisions, particularly after a disappointing earnings report that saw Intel's shares plummet to their lowest level since 2013. These options are expected to be presented at Intel's upcoming board meeting in September. A major move, such as the separation or sale of Intel's foundry division -- which was established to manufacture chips for external clients -- would represent a significant shift for CEO Pat Gelsinger. Gelsinger acknowledged publicly on Thursday that the company understood investor skepticism and was working to address it. "We realize we have to operate efficiently with nimbleness, with urgency," Gelsinger said at Deutsche Bank's Technology Conference. Gelsinger, who took over in 2021 with a mission to revive Intel's dominance in the semiconductor industry, has considered the foundry business central to Intel's future. His vision was for Intel to compete with industry leaders like Taiwan Semiconductor Manufacturing Co. However, a more conservative approach, such as postponing expansion plans, seems more likely in the near term. Intel has already taken steps to manage its financial challenges, including project financing deals with Brookfield Infrastructure Partners and Apollo Global Management. Yet, Gelsinger faces increasing pressure as the company continues to struggle with declining sales and rising losses. Intel reported a net loss of $1.61 billion last quarter, and analysts forecast continued losses over the next year. Since returning to Intel after more than a decade away, Gelsinger has been working to restore the company's technological leadership. However, his ambitious turnaround plan has faced setbacks, leading to significant cost-cutting measures, including the announcement of approximately 15,000 job cuts and a reduction in capital expenditures. The company also suspended its dividend, a move that shocked investors. At the Deutsche Bank Technology Conference on Thursday, Gelsinger said it had "been a difficult few weeks." He expressed disappointment in the market's reaction to Intel's recent earnings report, in which the company attempted to clarify its future strategy. "Obviously the market didn't respond positively. We understand that," Gelsinger said. Intel's stock has dropped 60% this year, in stark contrast to the 20% gain seen by the Philadelphia Stock Exchange Semiconductor Index. The company, once a titan in the chip industry, now finds itself trailing significantly behind competitors like Nvidia Corp, which is on track to double Intel's revenue in 2024 as its chips power today's prominent AI models. Just three years ago, Intel's revenue was three times that of Nvidia.

Intel is looking for ways to save its business

After missing earnings expectations and announcing layoffs, chipmaker Intel is reportedly looking for options to fix its faltering business. Intel is working with its longtime investment bankers at Morgan Stanley and Goldman Sachs on options, including splitting its foundry division which designs and manufactures chips, cutting factory projects, and M&A, Bloomberg reported, citing unnamed people familiar with the matter. Potential options will reportedly be presented at a company board meeting in September, however, people told Bloomberg the talks with bankers are in early stages. Intel is more likely to halt expansion projects before splitting its foundry, Bloomberg reported. In March, Intel received $8.5 billion in direct government funding from the CHIPS and Science Act to support the chipmaker's plans to invest more than $100 billion in the U.S. over the next five years. The company plans to expand its U.S. semiconductor industry footprint with chipmaking sites in Arizona, New Mexico, Ohio, and Oregon. Neither Intel nor Goldman Sachs immediately responded to a request for comment. Morgan Stanley declined to comment. After Intel missed revenue expectations for its second-quarter earnings earlier this month, the chipmaker's stock fell 27%. The company reported revenue of $12.8 billion in the second quarter of 2024 -- down 1% from the previous year. Wall Street was expecting $12.9 billion, according to FactSet. Intel also announced it is cutting spending, including by laying off more than 15% of employees. The layoffs are part of Intel's plan to reduce capital expenditures by over $10 billion in 2025. The company's cost-reduction plan is part of moving "toward a sustainable business model" to support its long-term strategy, Intel said. "Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate," Intel chief executive Pat Gelsinger wrote in a memo to employees. "Our revenues have not grown as expected -- and we've yet to fully benefit from powerful trends, like AI. Our costs are too high, our margins are too low. We need bolder actions to address both - particularly given our financial results and outlook for the second half of 2024, which is tougher than previously expected." Intel's shares were up around 7.6% during Friday morning trading, but are down almost 55% so far this year.

Intel considering business split as earnings plunge

Intel Corp. is working with investment bankers to help navigate the most difficult period in its 56-year history, according to people familiar with the matter. The company is discussing various scenarios, including a split of its product-design and manufacturing businesses, as well as which factory projects might potentially be scrapped, said the people, who asked not to be identified because the deliberations are private. Morgan Stanley and Goldman Sachs Group Inc., Intel's longtime bankers, have been providing advice on the possibilities, which could also include potential M&A, the people said. The discussions have only grown more urgent since the Santa Clara, California-based company delivered a grim earnings report, which sent the shares plunging to their lowest level since 2013. The various options are expected to be presented during a board meeting in September, the people said. Also read: Intel 18A chip production to begin in 2025 No major move is imminent and discussions are still in early stages, the people cautioned. A representative for Intel declined to comment, while Morgan Stanley and Goldman Sachs didn't immediately respond to requests for comment. A potential separation or sale of Intel's foundry division, which is aimed at manufacturing chips for outside customers, would be an about-face for Chief Executive Officer Pat Gelsinger. Gelsinger has viewed the business as key to restoring Intel's standing among chipmakers and had hoped it would eventually compete with the likes of Taiwan Semiconductor Manufacturing Co., which pioneered the foundry industry. But it's more likely that Intel takes a less dramatic step before it reaches that point, such as holding off on some of its expansion plans, the people said. The company has already done project financing deals with Brookfield Infrastructure Partners and Apollo Global Management. Intel's Gelsinger is running out of time to pull off a much-needed turnaround. He's been attempting to expand the chipmaker's factory network at the same time that sales are shrinking -- a money-losing proposition. The company suffered a net loss of $1.61 billion last quarter, and analysts are predicting more red ink for the next year. Also read: We wish to democratize AI: Intel India president Gelsinger, an Intel veteran who left the company for more than a decade, took the helm in 2021 and promised to restore the company's technological edge. Under previous CEOs, the chip pioneer had lost market share and its long-vaunted reputation for innovation. But his comeback plan proved overly ambitious, and the company has had to scale back. When it reported earnings earlier this month, Intel announced plans to cut about 15,000 jobs and slash capital spending. The company even suspended its long-prized dividend. "It's been a difficult few weeks," Gelsinger told investors at the Deutsche Bank Technology Conference on Thursday. The company tried to lay out a "clear view" of its next steps during its earnings report, he said. "Obviously the market didn't respond positively. We understand that." Adding to the upheaval, director Lip-Bu Tan abruptly stepped down from the board last week. The semiconductor veteran, who was brought in two years ago to help with the comeback effort, cited scheduling commitments. But his departure removed one of the few directors with industry knowledge and experience. Intel shares have declined 60% this year, compared with a 20% gain for the Philadelphia Stock Exchange Semiconductor Index, a chip-industry benchmark. Gelsinger's comeback plan hinged on recasting Intel into two groups: one that designs chips and another that manufactures them. The production arm would then be free to seek business from other companies. But the biggest client of Intel's factory network is still Intel. Until the foundry business has more outside customers, it's going to be challenged financially. It reported operating losses of $2.8 billion in its most recent quarter and is now on course to have a worse year than projected. With a market value of $86 billion, Intel has fallen out of the top 10 largest chipmakers in the world ranked by that measure. It's the second-worst performer on the Philadelphia chip index this year and suffers in comparisons with the stratospheric gains of Nvidia Corp., a company that's on course to post double Intel's revenue in 2024. As recently as 2021, Intel was three times the size of Nvidia by revenue. More stories like this are available on bloomberg.com SHARE Copy linkEmailFacebookTwitterTelegramLinkedInWhatsAppRedditPublished on August 30, 2024

Intel Explores Business Split Or Sale Amid Woes: Reports

The options could also include M&A or selling or splitting its foundry division, according to Bloomberg. Intel executives will consider splitting and selling a business unit as part of a turnaround strategy as rival chipmakers capture a greater share of the artificial intelligence wave, according to media reports. The Santa Clara, Calif.-based vendor has enlisted Morgan Stanley and other advisers to present options to Intel's directors in September, according to CNBC. The options could also include mergers and acquisitions or selling or splitting its foundry division, which makes chips for outside customers, according to Bloomberg. Intel is more likely to halt some expansion plans before ditching a business. Intel's stock price shot up more than 7 percent early Friday afternoon Eastern Time to $21.68 on news of a potential business split. Intel's challenges at a time when an AI gold rush has a variety of organizations hunting for chips include a plan to eliminate more than 15,000 jobs, or 15 percent of its total workforce, and reduce overall costs by more than $10 billion. CRN has learned that the plan includes a directive to slash costs at the partner-centric Sales and Marketing Group (SMG) by more than 35 percent by the end of the year - although the vendor plans to give thousands of dollars in market development funds (MDF) and other incentives to partners who develop compelling proofs of concept for AI PCs in a new contest, the semiconductor giant unveiled the AI PC Innovation Challenge Intel is making deep cuts across the company in response to what Intel CEO Pat Gelsinger has described as worsening financial conditions. "Our revenues have not grown as expected -- and we've yet to fully benefit from powerful trends, like AI. Our costs are too high, our margins are too low," he said in a public letter to employees on Aug. 1. The semiconductor giant has been facing intensifying competition across multiple fronts, including the data center and cloud infrastructure markets, where Intel is facing pressure from Advanced Micro Devices (AMD), companies developing Arm-based CPUs like Ampere Computing and Amazon Web Services (AWS) as well as AI chip leader Nvidia. The PC market is heating up too, with AMD taking CPU market share and Qualcomm making a revitalized push. At the same time, Intel has sought to expand its chip manufacturing footprint with new factories in the West and compete with Asian foundry giants Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung through a revitalized contract chip-making business called Intel Foundry. These efforts have required significant investments, including millions in subsidies from the U.S. government's Chips for America program and money from investment firms.

Intel working with bankers to present board with strategic options

Pat Gelsinger, CEO Intel, speaking on CNBC's Squawk Box at the WEF Annual Meeting in Davos, Switzerland on Jan. 16th, 2024. Intel executives are working with multiple advisors to formulate options to address its flagging business, according to a person with knowledge of the matter. Those advisors, which include Morgan Stanley and other bankers, will likely present Intel's directors with options at an upcoming board meeting in September, said the person, who requested anonymity to discuss confidential matters. The advisors are considering a full range of options, including splitting off and selling businesses, the person said. Bloomberg News first reported that the company was working with its advisors to come up with strategic options. Representatives for Intel and a spokesperson for Morgan Stanley didn't immediately respond to a CNBC request for comment. CEO Pat Gelsinger acknowledged publicly on Thursday that the company understood investor skepticism and was working to address it. "We realize we have to operate efficiently with nimbleness, with urgency," Gelsinger said at Deutsche Bank's Technology Conference. CNBC previously reported that some advisors, including Morgan Stanley, were helping the company on activism defense. Intel remains on track to launch its next iteration of its laptop central processor, Lunar Lake, Gelsinger said at the appearance. But investors don't see a turnaround on the horizon, and have pushed the stock down almost 60% this year. The once-dominant company has been trounced primarily by Nvidia, which produces the graphics processing units (GPUs) that are are the heart of today's prominent AI models. Alongside a disastrous earnings report earlier this month, Intel announced it would lay off 15,000 workers. The job cuts, part of a broader focus on slashing expenses, did little to assuage investor dismay. And while Gelsinger said Thursday that the company's foundry business had roughly a dozen interested customers, the buildout remains costly for Intel.

Intel may split its foundry business and cancel future factories as it faces 'most difficult' period in history - Times of India

After layoffs, Intel is exploring further measures, including potentially splitting its chip design and manufacturing businesses, as the semiconductor giant grapples with mounting losses, increasing pressure from investors, and scrutiny from lawmakers. The company is working with investment banks to navigate what could be the most challenging period in its 56-year history, sources familiar with the matter have told Bloomberg. The chipmaker is reportedly discussing the possibility of separating its product-design operations from its manufacturing arm, as well as evaluating which future factory projects might be scrapped. Long-time advisors Morgan Stanley and Goldman Sachs are said to be providing guidance on these options, which could also include potential mergers and acquisitions. The potential separation of Intel's foundry division, which manufactures chips for outside customers, would mark a significant shift in strategy for CEO Pat Gelsinger. Since taking the helm in 2021, Gelsinger has viewed the foundry business as crucial to restoring Intel's standing in the chip industry. However, Intel's recent financial performance has intensified the urgency for change. The company reported a net loss of $1.61 billion in the second quarter of 2024, with analysts predicting continued losses in the coming year. Intel's stock price plummeted 26% following the earnings report, its worst single-day performance in over 50 years. This strategic review comes in the wake of Intel's recent announcement of significant cost-cutting measures. Earlier this month, the company revealed plans to lay off approximately 15,000 employees, representing about 15% of its workforce. The majority of these job cuts are expected to be completed by the end of 2024, as part of a broader initiative to reduce costs by $10 billion annually by 2025. The company also took the unprecedented step of suspending its long-standing dividend. "It's been a difficult few weeks," Gelsinger acknowledged at the Deutsche Bank Technology Conference earlier this week. "We understand that," he added, referring to the negative market reaction to Intel's recent announcements. The potential restructuring and job cuts have drawn scrutiny from lawmakers. Reuters reports that Republican Senator Rick Scott has pressed Intel CEO Pat Gelsinger for more details on the company's plans, particularly in light of the nearly $20 billion in US grants and loans Intel is set to receive to boost chip production. In a letter, Scott questioned whether the Commerce Department's planned awards had failed to include adequate safeguards to protect taxpayer dollars and ensure job creation. The pressure on Intel has been compounded by its struggles in the artificial intelligence chip market, where competitors like Nvidia have gained significant ground. However, Gelsinger expressed optimism about future products, including "Lunar Lake," which he described as "the most compelling AI PC product ever." The Intel board is expected to meet in September to discuss these options, though no major moves are imminent and discussions are still in early stages. As Intel faces critical decisions that could reshape its future, the outcome of these deliberations will be closely watched by industry observers, investors, and government officials alike. The TOI Tech Desk is a dedicated team of journalists committed to delivering the latest and most relevant news from the world of technology to readers of The Times of India. TOI Tech Desk's news coverage spans a wide spectrum across gadget launches, gadget reviews, trends, in-depth analysis, exclusive reports and breaking stories that impact technology and the digital universe. Be it how-tos or the latest happenings in AI, cybersecurity, personal gadgets, platforms like WhatsApp, Instagram, Facebook and more; TOI Tech Desk brings the news with accuracy and authenticity.

Intel considers splitting off foundry business, scrapping factory plans- Bloomberg By Investing.com

Investing.com-- Intel Corporation (NASDAQ:INTC) is considering options to weather a historic slump, which include potentially splitting off its foundry business and scrapping plans for new factories, Bloomberg reported on Thursday. The chipmaker is in talks with investment bankers over potential options and has met with Goldman Sachs Group Inc (NYSE:GS) and Morgan Stanley (NYSE:MS) over a path forward, Bloomberg reported, citing people with knowledge of the matter. Intel had earlier in August suspended its dividend and slashed about 15% of its workforce, as it struggled to catch up with rivals in the foundry space, chiefly Taiwan's TSMC (NYSE:TSM). Once the world's leading chipmaker, Intel fell on hard times in the 2000's, amid increased competition from rivals such as Advanced Micro Devices Inc (NASDAQ:AMD), and as it struggled to keep pace with demands from the smartphone and mobile computing industry. Apple Inc's (NASDAQ:AAPL) decision to develop its own silicon and stop using Intel chips was also a major blow to the chipmaker. Intel's challenges came to a head in recent years, with NVIDIA Corporation's (NASDAQ:NVDA) dominance in artificial intelligence further cutting Intel's sales. The Bloomberg report showed that Intel was now considering separating its product design and foundry business, while also scrapping plans for expansion as it seeks to streamline its operations. The company could not be immediately reached for comment.