INTEL CEO Pat Gelsinger and key executives are expected to present a plan later this month to the company’s board of directors to slice off unnecessary businesses and revamp capital spending, according to a source familiar with the matter, as they try to revive the once-dominant chipmaker’s fortunes.
The plan will include ideas on how to shave overall costs by selling businesses, including its programmable chip unit Altera, that Intel can no longer afford to fund from the company’s once-sizeable profit.
Gelsinger and other high-ranking executives at Intel are expected to present the plan at a mid-September board meeting, the same source said.
The proposal does not yet include plans to split Intel and sell off its contract manufacturing operation, or foundry, to a buyer such as Taiwan Semiconductor Manufacturing Co., according to the source and another person familiar with the matter.
The presentation, including the plans around its manufacturing operations, is not yet finalized and could change ahead of the meeting.
Intel has already broken off its foundry business from its design business and has been reporting its financial results separately since the first calendar quarter of this year.
The company has erected a wall between the design and manufacturing businesses to assure that potential customers of the design division would have no access to technology secrets of customers using Intel’s factories, known as fabs, to manufacture their chips.
Intel is suffering through one of its worst periods as it attempts to play catchup in the AI era against the likes of Nvidia, the dominant AI chipmaker with a $3 trillion market capitalization. In contrast, Intel’s has now sunk to below $100 billion after a disastrous second-quarter earnings report in August.
The proposal Gelsinger and others will present is likely to include plans to further reduce the company’s capital spending on factory expansion. The pitch may include plans to pause or altogether halt its $32 billion factory in Germany, a project that has reportedly been delayed, the source said.
In August, Intel said it expects to cut capital spending to $21.5 billion in 2025, down 17 percent from this year, and issued a weaker-than-expected third-quarter forecast.
In addition to the CEO and executive plans, Intel has retained Morgan Stanley and Goldman Sachs to advise the board on what businesses Intel can sell and what it needs to retain, according to two sources with knowledge of the company’s advisory plans.
Intel has not yet asked for bids on the product units but will likely do so once the board endorses a plan, according to the two sources familiar with the company’s advisory plans.
The mid-September board meeting is pivotal for the one-time chip-making king. Intel reported a disastrous second quarter in August, which included pausing the company’s dividend payments and a 15 percent staff cut, aimed at saving $10 billion.
Weeks later, chip industry veteran Lip-Bu Tan resigned from the board after months of debate over the company’s future, Reuters reported, creating a vacuum of deep semiconductor business experience on the board.
Last Thursday, after the Reuters report, Gelsinger sought to reassure investors about the company’s weak financial performance.
“It’s been a difficult few weeks,” Gelsinger said at a Deutsche Bank conference. “And we’ve been working hard to address the issues.”
Gelsinger said the company is “taking seriously” what investors have said and that Intel is focused on phase two of the company’s turnaround plan.
Part of those plans will remain unresolved until the mid-September meeting. Then, the company’s directors will likely make crucial decisions about which businesses Intel will keep, and which it will shed.
Be the first to comment