Intel Hires Morgan Stanley Amid Activist Investor Concerns and AI Market Challenges

Intel hires Morgan Stanley to protect itself against activist investors

Intel is collaborating with Morgan Stanley to prepare for potential activist investor challenges, reports CNBC. Although no formal activist campaigns have been launched, Intel is taking steps to protect itself amid intensified competition with AMD, Arm, and Nvidia and financial struggles. An avid reader would ask, what is the point of protecting Intel against activist investors now? A short talk within our team on Sunday quickly revealed that we do not know the short answer, so let us just mention what could possibly be on the table for Intel. The elephant in the room is, of course, Intel's manufacturing division and its potential spinoff, something that chief executive Pat Gelsinger strongly opposes. Technically, it is the second largest foundry in the world in terms of revenue (simply because it produces all of Intel's processors), a world behind TSMC, but it is well ahead of Samsung Foundry and SMIC. With a potential 'Intel product company' as its main customer and a number of external clients, this is a strong contender in the contract manufacturing market. But Intel's foundry division lost some $2.8 billion in the second quarter alone. One may argue that Intel essentially reassigned all the losses to the foundry division outside of its product division. Furthermore, that unit invested heavily in ultra-expensive High-NA EUV tools. Intel's data center and AI business generate just a little more sales than the data center business of its arch-rival AMD, which holds a considerably lower data center market share by volume. Given the aforementioned factors, Intel's manufacturing unit looks like an attractive investment. Considering this fact, we can only wonder whether an activist investor would ask to spin off the manufacturing unit to potentially get a higher valuation of the two separate companies. In response to the current challenges, Intel has initiated significant cost-cutting measures, including reducing its workforce by 15%, which amounts to approximately 15,000 jobs. These cuts are part of its $10 billion savings plan that involves keeping the company and its product development and manufacturing unit together.

Is Intel gearing up for activist investor? Analysts say what to do with the stock By Investing.com

According to a CNBC report last week, Intel (NASDAQ:INTC) has enlisted the help of advisors, including Morgan Stanley (NYSE:MS), to prepare for potential challenges from activist investors, as CEO Pat Gelsinger works to revitalize the struggling chipmaker. Although Intel has dealt with activist investors in the past, there is no indication of a new campaign at this time, the report states, and it remains uncertain whether an activist investor has approached the company's board. "I guess when your stock is down 57% YTD, peers have seen their market caps surge, you stop paying a dividend, and you continually find new ways to disappoint investors, you start looking over your shoulder," Bernstein analysts commented on the report. Although Intel is no stranger to cooperating with an activist shareholder, the question that arises is what will an activist do to help Intel stage a turnaround, analysts noted. "Given that Intel has already slashed costs and cut headcount, I don't see cost-cutting as a clear activist focus," they continued, given that the company has already reduced expenses and workforce under CEO Pat Gelsinger. They also doubt that a capital return strategy would be feasible, as Intel has halted dividend payments and lacks the flexibility to repurchase stock. The analysts acknowledge that spinning off Intel's loss-making manufacturing business could improve value but note that this move might face resistance from governments and private equity partners involved in Intel's manufacturing expansion. On the other hand, the analysts suggest that improving investor communication could be a key area where an activist might have an impact. They highlight that Intel has repeatedly set expectations too high, leading to investor disappointment. Better communication could help stabilize the stock and set clear markers for progress as the company navigates a challenging period, which some estimate could last another six or more quarters. "At the same time, Intel can remind investors that CPUs are not going away (even if they are losing share to AMD (NASDAQ:AMD) in servers and overall CPUs may be losing share to GPUs)," analysts noted. "While it's not the most exciting activist angle, it could at least help to potentially put a floor in the stock and provide some markers to watch for progress." As for what to do with the stock, Bernstein suggests INTC's downside may be limited, but the path to a substantial turnaround remains unclear and unlikely to materialize soon as the company faces challenges in achieving aggressive targets, remains behind competitors like TSMC, and lacks strong momentum in key areas like AI and its CPU segment.

Intel wants to stay ahead of activist investors as it struggles against Nvidia

How will Disney replace Bob Iger? A Morgan Stanley exec is leading the search for a replacement The Santa Clara, California-based semiconductor giant has hired Morgan Stanley and other advisors to help fend off activist investors, CNBC reports, citing unnamed sources familiar with the matter. While no sharks have been circling the company just yet, Intel (INTC) is reportedly trying to get ahead of potential interest. The move comes as Intel, which was once a leading manufacturer of chips, has lost 57% in market value year-to-date, trading at $20.54 at market close Friday. The chipmaker has struggled to keep up with growing AI demand, and the rapid pace of evolution in the chips industry. That has caused it to fall behind competitors, including Nvidia (NVDA), whose market capitalization exceeds $3 trillion (compared with Intel's roughly $88 billion). It has also lagged well behind smaller rivals, such as Advanced Micro Devices (AMD), Broadcom (AVGO), Qualcomm (QCOM), and Texas Instruments (TXN). Read more: How activist investor Elliot became the shark that transforms giants like Starbucks and Southwest Intel missed profit and revenue expectations last quarter. CEO Pat Gelsinger blamed the weaker-than-expected results partly on Intel's decision to "more quickly ramp" its Core Ultra artificial intelligence CPUs, or core processing units, that can handle AI applications. The chipmaker set third-quarter revenue expectations at between $12.5 billion and $13.5 billion. As of the end of June, Intel had cash and cash equivalents of $11.3 billion and total liabilities of $32 billion. Last quarter, the chipmaker also dumped its stake in British semiconductor firm Arm Holdings, a move that potentially brought in $147 million as Intel seeks to shed excess costs. But it's looking to mount a turnaround. Earlier this month, Intel announced that it would embark on a plan to save $10 billion in 2025. That includes reducing its headcount by roughly 15,000 roles, or 15% of its workforce, as well as suspending its stock dividend and reducing capital expenditures by more than 20%. Gelsinger said at the time that these were the "most consequential changes" in the company's history.