Intel Weighs Strategic Options Amid Financial Struggles
Intel Corporation is collaborating with investment bankers to negotiate what is described as the most challenging era in its 56-year history.
According to sources familiar with the matter, Intel Corp. is working with investment bankers to navigate what is being described as the most challenging period in its 56-year history.
The company is currently discussing various strategic scenarios, including a potential split of its product design and manufacturing businesses and the possibility of scrapping certain factory projects. These discussions occur as Intel faces increasing financial pressures and seeks to realign its business strategy.
Possible Outcomes and Deliberations:
Morgan Stanley and Goldman Sachs Group Inc., Intel’s longtime advisors, are reportedly involved in these deliberations. The scenarios under consideration include a potential separation or sale of Intel’s foundry division, which is focused on manufacturing chips for external customers. This move would mark a significant shift in strategy for CEO Pat Gelsinger, who has considered the foundry business crucial to Intel’s revival and its efforts to compete with industry leaders like Taiwan Semiconductor Manufacturing Co.
However, sources indicate that a less drastic approach may be taken initially, such as scaling back on Intel’s expansion plans. The company has already entered into project financing deals with Brookfield Infrastructure Partners and Apollo Global Management, signaling potential adjustments to its growth strategy.
Urgency Grows After Disappointing Earnings:
The urgency of these discussions has increased following Intel’s recent disappointing earnings report, which resulted in a significant drop in its share price to levels not seen since 2013. The various strategic options are expected to be presented during a board meeting in September, although no major decisions are imminent, and the discussions are still in the early stages.
Challenges Facing CEO Pat Gelsinger:
Intel’s CEO, Pat Gelsinger, is under increasing pressure to deliver a turnaround for the company. He has been attempting to expand Intel’s factory network while grappling with shrinking sales, which has led to financial losses. The company reported a net loss of $1.61 billion last quarter, and analysts are predicting continued losses over the next year.
“It’s been a difficult few weeks,” Gelsinger acknowledged during Thursday’s Deutsche Bank Technology Conference. He noted that Intel had attempted to provide a “clear view” of its strategy during the earnings report, but the market’s negative reaction highlighted the challenges ahead.
