According to a person familiar with the situation, Intel CEO Pat Gelsinger and other senior executives are anticipated to present a plan to the board of directors later this month that aims to reduce superfluous businesses and restructure capital spending in an effort to turn around the once-dominant chipmaker’s financial situation.
The strategy will include suggestions on how to reduce total expenses by selling companies that the company is unable to continue to support with its once-substantial earnings, such as its programmable chip firm Altera.
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According to the same source, Gelsinger and other senior Intel officials are anticipated to unveil the concept at a board meeting in mid-September. This is the first place where details of Gelsinger’s plan are reported.
Intel opted not to respond.
The source and another individual with knowledge of the situation claim that the proposal does not currently call for splitting up Intel and selling its foundry, or contract manufacturing division, to a buyer like Taiwan Semiconductor Manufacturing Company
The presentation is not yet finalised and may change before the conference, including the plans about its manufacturing activities.
Since the initial calendar quarter of this year, Intel has already separated its foundry company from its design company and has been disclosing its financial results separately.
To ensure that prospective clients of the design branch would not have knowledge of the technology secrets of clients utilising Intel’s factories, or fabs, to make its chips, the company built a wall separating the development and production companies.
In the AI era, Intel is having one of its hardest times trying to catch up to companies like Nvidia, the market-capitalized $3 trillion AI chipmaker. On the other hand, Intel’s stock has already dropped to less than $100 billion following a dismal second-quarter earnings announcement in August.
Gelsinger and associates’ approach is probably going to contain strategies for further cutting back on the capital expenditures the business makes for plant expansion. The insider claimed that plans to cancel or postpone the company’s $32 billion plant project in Germany may be included in the pitch.
In August, Intel released a lower-than-expected third-quarter projection and stated that it plans to reduce capital investment to $21.5 billion in 2025, a 17% decrease from current year.
According to two people with understanding of the company’s advising plans, Intel has hired Morgan Stanley with Goldman Sachs to assist the board on which businesses to keep and which to sell, as well as to the CEO & executive plans.
The two people who are familiar with Intel’s advising plans say that although the firm has not yet called for offers on the item in question units, it will most likely do so when the board approves a plan.
The board meeting in mid-September is critical for the former chipmaker. In August, Intel released financial results for the second quarter that were so bad that the corporation decided to halt dividend payments and reduce staff by 15% in an effort to save $10 billion.
After months of disagreement about the company’s future, semiconductor sector veteran Lip-Bu Tan left from the board a few weeks later, leaving the board lacking in extensive knowledge of semiconductor sector.
Gelsinger attempted to soothe investors on Thursday on the company’s dismal financial results. “These past few weeks have been challenging,” Gelsinger remarked at the Deutsche Bank seminar. And we’ve been putting a lot of effort into fixing the problems.
Gelsinger stated that Intel is concentrating on the second stage of the company’s turnaround strategy and that the business is “taking seriously” what investors have said.
There are some proposals that won’t be finalized until the meeting in mid-September. The directors of the corporation will then probably have to make important choices regarding which companies Intel will retain and which it’s going to divest.
Altera, a company that makes programmable chips that Intel purchased in 2015 for $16.7 billion, is one possible division the company might try to sell. Intel has stated that it intends to sell a percentage of its ownership in an IPO at some point in the future, although it has not specified when. Intel has already begun efforts to separate it out as a distinct but still fully owned company.
However, according to two persons aware with the firm’s business goals and its advising plans, Altera might also be sold outright to another chipmaker looking to expand its portfolio. The company has reportedly started discreetly investigating the possibility of a sale. According to one source, Marvell, an infrastructure chipmaker, is one potential bidder for such a transaction.
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