Intel To Present Board With Strategic Options – Report

Chip giant Intel is reportedly exploring its strategic options, amid highly publicised setbacks in its long-running turnaround plan.

CNBC, citing a person with knowledge of the matter, reported that Intel executives are working with multiple advisors to formulate strategic options to address its flagging business.

Those advisors reportedly include Morgan Stanley and other bankers, and will likely present Intel’s board of directors with a number of options at its September meeting.

Strategic options

According to the CNBC source, the advisors are considering a full range of options, including splitting off and selling the businesses.

Representatives for Intel and a spokesperson for Morgan Stanley didn’t immediately respond to a CNBC request for comment.

CEO Pat Gelsinger acknowledged publicly on Thursday that the company understood investor scepticism and was working to address it, CNBC reported.

“We realize we have to operate efficiently with nimbleness, with urgency,” Gelsinger was quoted as saying at Deutsche Bank’s Technology Conference.

CNBC previously reported that some advisors, including Morgan Stanley, were helping the company prepare defensive measures against potential activist shareholders.

But this is not the first time that Intel has examined it’s strategic options.

In December 2020 activist hedge fund Third Point LLC had urged Intel’s then management team to explore its strategic alternatives. The hedge fund had asked Intel’s board of directors to consider whether the firm should keep chip design and production under one roof.

Intel troubles

It is fair to say that Intel is currently facing some strong headwinds at the moment.

Earlier this month Intel shocked the world when it revealed disappointing second quarter financial results, which highlighted the scale of the challenge still facing the firm in its turnaround plan.

Pat Gelsinger also confirmed that the chip giant would be cutting 15 percent of its 116,500 strong workforce (roughly 15,000 jobs), after admitting that “costs are too high, our margins are too low”.

That came on top of the 5 percent job losses in 2023, as well as a previous round of job cuts in October 2022.

Gelsinger added to gloomy outlook when he discussed the ongoing struggle to turn around Intel’s fortunes, which involve creating a foundry business, but also carrying on with heavy investments in new plants and R&D.

Stalled turnaround?

Gelsinger had implemented the turnaround plan (called IDM 2.0) in March 2021, designed to regain the company’s competitive edge, and help it focus on revitalising its manufacturing capabilities (including manufacturing chips for other companies), investing in advanced chip technologies, and expanding into new markets.

However industry observers believe it will take years to realise the plan to turn around Intel’s foundry business, and many expect TSMC to maintain its foundry lead in the coming years.

Gelsinger’s confirmation of the problems at Intel in early August, coupled with weak forecasts and the suspension of dividend payments to investors, had triggered the largest single day drop in Intel’s stock price in 50 years, after it plummeted 26 percent on 2 August.

This caused Intel’s market value to sink more than $32 billion in a single day.

Intel’s stock has lost more than 59 percent of its value so far this year.

Board issues?

Consequentially Intel shareholders sued the firm, alleging the chipmaker fraudulently concealed problems that led it to post weak Q2 results, slash jobs and suspend its dividend payment.

Intel also sold its stake in UK chip designer ARM Holdings.

This week it emerged that semiconductor veteran Lip-Bu Tan had resigned “effective immediately” from Intel’s board of directors, amid reports of differences with CEO Gelsinger over what Tan considered Intel’s bloated workforce, risk-averse culture, and lagging artificial intelligence strategy.

Tan’s exit reportedly has left a vacuum of chip-industry technical and business acumen on Intel’s board, which is said to be mostly populated by leaders in academia and finance, and former senior executives from the medical, tech and aerospace industries.

Republican Senator Rick Scott from Florida this week asked Pat Gelsinger for more details on the company’s plans to cut more than 15,000 jobs despite being set to receive nearly $20 billion in US grants and loans.