Intel Considers Major Restructuring – Intel Corporation (NASDAQ: INTC) is exploring significant changes as it faces challenges.
The company is reportedly working with investment bankers to consider a potential split of its product-design and manufacturing businesses. This news comes after Intel’s recent earnings report, which revealed a net loss of $1.61 billion last quarter. As a result, Intel’s shares plummeted to their lowest level since 2013.
Intel Considers Major Restructuring – Current Challenges
Analysts predict more losses for Intel in the coming year. The company is considering several options, including selling or separating its foundry division. This division manufactures chips for external customers, which would represent a major shift in strategy. Previously, CEO Pat Gelsinger aimed to make Intel’s foundry business a leading player in the industry. However, sources indicate that Intel may take less drastic actions, such as pausing some expansion plans.
Efforts to Expand
Despite declining sales, Gelsinger has tried to expand Intel’s factory network. The company has entered project financing deals with Brookfield Infrastructure Partners and Apollo Global Management. Nevertheless, analysts believe Intel may need to cut capital expenditures significantly over the next year.
Intel Considers Major Restructuring – Board Resignation
Adding to Intel’s upheaval, director Lip-Bu Tan resigned from the board last week. Tan was one of the few directors with industry knowledge and experience. This departure raises concerns about Intel’s leadership during this critical time.
Proposed Restructuring Plan
Intel’s restructuring plan could involve splitting the company into two groups: one focused on chip design and the other on manufacturing. However, the foundry business relies heavily on Intel for revenue.
As a result, its operating losses have continued to grow. This situation has led to a significant drop in Intel’s market value, causing the company to fall out of the top 10 largest chipmakers worldwide.
Market Comparison
In 2021, Intel’s revenue was three times that of Nvidia Corporation. Now, Nvidia is projected to generate twice Intel’s revenue in 2024. This rapid shift in the market landscape poses a substantial challenge for Intel as it seeks to regain its footing.
Financial Advice
Morgan Stanley and Goldman Sachs Group Inc., Intel’s longtime bankers, are advising the company on its potential restructuring. This process may also involve mergers and acquisitions. Intel expects to announce updates during a board meeting scheduled for September.
Intel Considers Major Restructuring – Stock Performance
Intel shares rose 6.5% in premarket trading following the news. However, they have still declined 60% this year. In contrast, the Philadelphia Stock Exchange Semiconductor Index gained 20% during the same period.
Intel Considers Major Restructuring – Concluding Remarks
Intel is at a crossroads as it navigates a challenging landscape. The potential restructuring may help the company address its financial difficulties and adapt to the evolving market. Investors will be watching closely for updates from Intel in the coming weeks. The outcome of these discussions will significantly impact the company’s future direction and stability in the semiconductor industry.
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